States Brace for Rising Medicaid Pressure as Policy Experts Call for Reform

As states confront the growing cost of caring for an aging population, one question is looming large: how will they afford the rising number of residents relying on Medicaid for long-term care? It’s a challenge that has policymakers searching for answers. One expert says it’s time to rethink how the program works. 

Brian Blase, president of the Paragon Health Institute, has spent much of his career studying the mechanics of government health programs. For him, the problem is straightforward: Medicaid has drifted far from its original purpose. “It was meant to help the most vulnerable: low-income children, seniors, and people with disabilities,” he explained. “But over the years, it’s become the main vehicle for expanding government health coverage.” 

That shift accelerated after the Affordable Care Act, which allowed states to cover able-bodied, working-age adults with a far more generous federal match. Under today’s formula, the federal government pays about 90% of the cost for expansion enrollees roughly seven times more per dollar than it pays for traditional beneficiaries. According to Blase, that mismatch has created “perverse incentives” that encourage states to prioritize the expansion population over those the program was originally designed to serve. 

The result, he says, is that vulnerable patients in expansion states have a harder time accessing care. Studies show that traditional Medicaid enrollees in those states experience significantly more difficulty securing medical appointments, while emergency room use has surged among Medicaid recipients overall. 

Blase also highlights another rarely discussed issue: the rise of “provider taxes” financial arrangements he likens to “money laundering.” In these schemes, states tax hospitals, return the money to those same hospitals as higher Medicaid payments, and then claim the inflated spending to draw down more federal funds. “It’s corrosive,” he said. “States can essentially balance their budgets on the backs of federal taxpayers without putting in real dollars.” 

Despite those concerns, Blase points to recent congressional action as a promising step. New federal reforms will cap excessive Medicaid payments to hospitals and tighten rules around provider taxes. And starting in 2027, able-bodied adults enrolled through expansion will need to work or volunteer 80 hours a month to maintain coverage. 

He believes these changes combined with stricter eligibility reviews will help rein in costs while refocusing Medicaid on those who need it most. Still, he argues that long-term, Congress should consider block-granting the program to give states predictable funding and stronger incentives for responsible management. 

At a time when budgets are stretched, the stakes couldn’t be higher. “We’re a generous country,” Blase said. “We’re always going to have a safety net. The question is whether it’s sustainable and whether it actually serves the people it was created for.”