Why Medicaid Reform Is Needed—And Why It’s Political Dynamite

Rep. Chip Roy isn’t calling for Medicaid cuts. He’s calling out the broken math that turns a safety net into a voter turnout engine.

What to Know

  • $9 for every $1: States receive nine federal dollars for every dollar they spend on able-bodied adults under Medicaid expansion.

  • 50% to 70% match: Traditional enrollees—low-income seniors, children, pregnant women—receive far less federal backing.

  • 10 GOP-led states have not expanded Medicaid under Obamacare. That firewall may soon crack.

  • States use provider tax gimmicks to inflate reimbursements and bypass real investment.

  • Medicaid enrollment is tied to higher Democratic voter turnout, particularly in urban centers.

Every few years, lawmakers revisit the question of how to improve Medicaid. With budget reconciliation underway and a Republican-controlled House, some members—including Rep. Chip Roy—are urging Congress to use this moment to address what they view as long-standing structural issues in the program.

A key concern centers on the current federal match rates established under the Affordable Care Act. The federal match for states that decide to expand Medicaid is 90% for working-age, able-bodied adults and between 50% and 70% for more traditional enrollees, including pregnant women, low-income seniors, and children with disabilities. Critics argue that this funding structure creates incentives for states to prioritize expansion populations over the most medically vulnerable.

The Provider Tax System is Lawful, Profitable, and Steady

Rep. Chip Roy and others have raised concerns about the role of Medicaid provider taxes in driving up federal costs without corresponding state investment. Under current law, many states impose taxes on hospitals and insurers and then use that revenue to increase Medicaid payment rates to those same entities. These inflated payments trigger higher federal matching funds, allowing states to draw down additional federal dollars.

Source: Press Office of U.S. Representative Chip Roy via Wikimedia Commons

This practice—though legal and widely used—is controversial because it can create a feedback loop where states recycle money through the system to maximize federal reimbursements. Critics argue that this mechanism allows states to access more federal funding without a proportional financial commitment of their own.

In some cases, such as in California, this funding model has been used to extend Medicaid coverage to noncitizens. Opponents of the practice argue that the structure shifts financial responsibility away from the states and encourages expansion without full transparency or accountability.

Expansion Comes With Political Strings Attached

Rep. Chip Roy has argued that the current Medicaid structure, particularly under the enhanced ACA match rate, has extended the program’s influence beyond healthcare delivery into the realm of political mobilization. In a May 2025 “Dear Colleague” letter, he pointed to how enrollment efforts often intersect with nonprofit networks engaged in civic outreach, particularly in urban areas aligned with Democratic turnout operations. Roy states:

"Medicaid has become a massive, bloated, fraud-ridden program that increasingly drives fiscal irresponsibility, subsidizes able-bodied adults and non-citizens, and serves as a political machine for the left."

He further emphasized that federal financial incentives are pushing states toward unchecked enrollment growth, without sufficient focus on fiscal discipline or medical necessity.

"In states that have expanded Medicaid, there is no check on the rapid growth of spending or enrollment."

According to Roy, these expansion dynamics also play a role in bolstering civic participation infrastructure, particularly through organizations that support both benefit outreach and voter engagement.

"Medicaid increasingly acts as a voter mobilization and registration tool in urban areas via leftist non-profits—an effort now codified in President Biden’s Executive Order 14019."

This, in his view, has led to the entrenchment of programs that serve not just public health goals but long-term political advantage for one party.

"Expansion creates an ever-growing constituency for more government—and more leftist power."

By framing Medicaid reform as both a fiscal and civic imperative, Roy calls for Congress to address what he sees as the dual risks of budgetary overreach and unintended political empowerment through health policy.

Why Republican States Are at Risk of Caving

As of now, 10 Republican-led states—including Texas, Florida, and South Carolina—have chosen not to expand Medicaid under the Affordable Care Act. However, those decisions are under growing pressure from multiple directions. Healthcare providers and hospital systems often advocate for expansion due to the potential for increased federal funding and reduced uncompensated care. 

Rep. Chip Roy and other critics of expansion have raised concerns that if Congress passes a reconciliation bill that preserves the current 90% federal match for able-bodied adults and maintains provider tax practices while only adding limited measures such as work requirements, it could encourage further expansion. In such cases, policymakers might present the move as a conservative redesign rather than a full embrace of the original ACA framework.

The Congressional Budget Office (CBO) generally does not account for future political shifts at the state level in its cost projections. However, some observers argue that the continuation of current financial incentives could lead to more states choosing to expand Medicaid. As an example, they point to Indiana, where Medicaid was expanded under a Republican governor using a customized model. Without deeper structural changes, similar policy adaptations may emerge in other states that have not yet adopted expansion.

Work Requirements: Popular but Powerless?

Work requirements are frequently proposed by Republicans as a key reform to Medicaid, and polling consistently shows that voters across party lines support the idea of tying benefits to employment, job training, or volunteer work—particularly for able-bodied adults. Their practical impact, however, might be limited in the absence of corresponding structural changes, such as modifications to Medicaid's funding model.

Work requirements apply only to a subset of Medicaid enrollees—specifically, able-bodied adults without dependents. As long as states continue to receive a 90% federal match to cover this population, there may be limited motivation to enforce the requirements rigorously. States can seek waivers, create broad exemption criteria, or delay enforcement through administrative processes. In some cases, legal challenges have stalled or blocked implementation altogether.

Policies that lower enrollment may also encounter resistance from hospitals and healthcare providers, many of whom favor Medicaid expansion due to its ability to increase patient volumes and decrease uncompensated care. This creates political and economic pressure on states to keep rolls high, even when new eligibility rules are introduced.

As critics like Rep. Roy argue, implementing work requirements without addressing these underlying financial incentives may result in changes that are largely symbolic—visible in legislation but ineffective in practice.

The Numbers That Should Scare Taxpayers

The current Medicaid funding structure gives states a powerful financial incentive to prioritize expansion. For every dollar a state spends to cover able-bodied adults, the federal government contributes $9, compared to far less for traditional enrollees. This imbalance in reimbursement has helped push Medicaid’s projected annual cost to $734 billion by 2026, and there is little indication of that growth slowing without reform.

Although there are ten states that have resisted expansion so far, that resistance is under strain. If Congress leaves the current incentives intact, it’s likely more of those states will adopt expansion in the coming years, potentially adding millions of new enrollees to an already stretched system. Many of those would fall under the high-match category, amplifying the fiscal burden on the federal government.

Meanwhile, some hospitals are now receiving Medicaid reimbursements that exceed 120% of Medicare rates, driven in part by inflated payment schemes tied to provider taxes. Yet despite the widespread use of these financial strategies, zero states face penalties for gaming the system to maximize federal payouts.

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Add to this the aspect of border security: in April of 2025, encounters at the southern border fell to 92,000, a significant decrease from the year before. Still, some states have continued to use Medicaid to extend benefits to noncitizen populations through creative financing, raising further concerns about how costs are being managed and who ultimately bears the burden.

Structural Fixes Are What Meaningful Medicaid Reform Requires

Rep. Chip Roy and aligned policy experts aren’t calling to dismantle Medicaid—they’re advocating a return to its original mission: providing a stable safety net for the most vulnerable, not a backdoor to mass expansion and fiscal distortion. For reform to have a lasting impact, Congress needs to focus on the core mechanics that drive enrollment growth and rising costs—not just the visible surface-level policies.

That means more than inserting work requirements or tweaking eligibility thresholds. Real reform demands addressing the incentives that have allowed states to grow the program aggressively with minimal accountability. Here's what that looks like:

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Taken together, these changes don’t shrink Medicaid—they stabilize it. The goal is not austerity, but realignment: ensuring taxpayer dollars go where they’re needed and that political incentives no longer drive program design. For reformers like Roy, this is the only path that can preserve Medicaid’s mission while protecting the federal budget and reining in unintended consequences.

Wrap Up

Medicaid reform is no longer a back-burner policy debate—it’s a defining test of whether Republicans can govern with discipline and foresight. For Rep. Chip Roy and others, the issue isn’t about cutting healthcare benefits; it’s about restoring balance to a system whose incentives have quietly shifted the program’s purpose and political function.

The current system is unsustainable due to its unclear eligibility requirements, unregulated provider tax recycling, and $9–$1 federal match. If Congress chooses cosmetic changes over structural ones, it won’t reduce the deficit or preserve the safety net. It will entrench a system that grows without guardrails and empowers political actors who benefit from that growth.

The reconciliation process unfolding in 2025 is more than a budget opportunity—it’s a last chance to address the forces that have quietly transformed Medicaid into both a fiscal liability and a political engine. If Republicans miss this window and deliver a weak bill that keeps the current incentives intact, they won’t just lose leverage—they’ll have written the rules for the next wave of unchecked expansion.

The choice ahead isn’t easy, but it is clear: pursue real reform now, or accept long-term consequences—ballooning costs, diminished credibility, and a political infrastructure subsidized by the very program they failed to fix.

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