Congress Can Rein in Medicaid Spending
We learned in civics class that Congress has the power of the purse—the authority to decide how to spend taxpayers’ money. But a recent Congressional Budget Office report illustrates how the Biden administration increased federal spending for one of the nation’s largest healthcare programs largely without congressional approval. It also provides a road map for Republicans to undo such unilateral actions.
In its update of the nation’s fiscal outlook Friday, the CBO outlined a series of “technical” policy changes since its assessment in June. The budget gnomes increased their estimates of federal Medicaid spending by $817 billion over the coming decade—a 12% rise. Most of that additional spending didn’t come through acts of Congress but from Biden-era regulations.
The biggest factor: “In 2024, enrollment in Medicaid and actual outlays for the program were significantly greater than expected, causing CBO to increase its projections.” The office now estimates 84 million people will enroll in Medicaid this year, compared with the 79 million it assumed in June, and that these enrollees will have more health conditions, and therefore cost more, than previously thought.
The CBO cited five reasons for the enrollment rise. First, the administration kept renewing the Covid public-health emergency throughout 2022 because states couldn’t remove ineligible people from Medicaid while the “emergency” continued. While states have now completed this “unwinding” process, a separate rule published in April prohibits them from taking actions—determining eligibility more than once a year, requiring in-person interviews or imposing enrollee waiting periods—that help ensure program integrity. The net effect of these administrative actions: higher Medicaid enrollment and higher federal spending.
Second, the CBO increased its estimates of Medicaid spending on prescription drugs, “particularly the use of anti-obesity medications known as glucagon-like peptide-1 agonists, or GLP-1s.” Just before Thanksgiving, the Biden administration proposed requiring all Medicaid programs, most of which don’t currently cover GLP-1s for obesity, to do so, increasing federal spending by $11 billion over 10 years while placing a $4 billion unfunded mandate on states.
Third, the budget office increased spending projections for Medicaid managed-care plans, reflecting in part a rule the Biden administration released in May. That rule, by blessing payment plans that had been legally ambiguous, gives states an incentive to raise payments to hospitals and other medical providers to get more federal matching funds. The Biden administration estimated this provision would increase federal spending by at least $17.6 billion, and as much as $83.9 billion, by 2028.
Fourth, the CBO “increased projected spending to account for a modest increase in expected coverage expansions under the optional eligibility category.” The CBO’s belief that more states will accept ObamaCare’s expansion of Medicaid to able-bodied adults reflects provisions that Congress enacted in 2021 increasing payments to states that take up expansion.
Fifth, more Supplemental Security Income beneficiaries qualify for Medicaid, as a result of a series of Biden-era rules expanding SSI eligibility.
Except for the increased payments for states embracing ObamaCare’s Medicaid expansion, none of this new spending ever received congressional approval. Lawmakers can restore both fiscal discipline and Congress’s constitutional role in directing federal spending by repealing all these rules, as I outline in a new paper for the Paragon Health Institute. The money saved can go toward a permanent extension of the Tax Cuts and Jobs Act. Congress can restrain federal spending and encourage economic growth by reasserting its power of the purse.
This post was originally published at The Wall Street Journal.