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During the last two decades, Medicaid outlays have grown at a rate that is unsustainable

over the long term requiring large tax increases and crowding out other programs to

remain viable.

Cato Senior Fellow Jagadiz Gokley describes the trouble we're running into and how to get out of it.

Where is Medicaid headed in the next 25 years?

Well, the best way to gauge the likely future course of Medicaid is to evaluate how the program

was shaped in the past, and none of those forces have changed significantly during recent years,

so one can only expect Medicaid

expenditures to grow rapidly in the future as they did in the past. It's been growing

fairly rapidly since 1975 if you look at the annual growth rate the number of

enrollees have grown at about 3% per year and costs by enrollee have grown about 4%

per year so the total program as old has been growing at more

than 7% per year. And there are many reasons why that's happened. First, Medicaid

is essentially a program that's operated by states and is

federally subsidized through matching grants. That is the federal government

provides about 59 cents for every dollar of state Medicaid spending.

So states don't have a very strong incentive to control Medicaid costs because if they cut Medicaid

spending, they'd lose the federal dollars.

Second, medical providers, that is doctors and hospitals and pharmaceutical companies and so on,

...