New Report: Medicaid is Distorting and Diluting the Safety Net

NEW YORK, NY – America spends more than $1 trillion each year on its “social safety net” of government programs for low-income households. That total has quadrupled since 1975, with the overwhelming majority of increases going to health care—mostly to Medicaid.

A new report by Manhattan Institute Senior Fellow Oren Cass argues that the current allocation of safety net spending is not an effective way to combat poverty. He shows that the over-emphasis on health care is not a rational policy choice, but rather an accidental result of bad program design; that it does not reflect the spending patterns or needs of low-income Americans; and that it fails to even deliver as effectively on health outcomes as other spending could.

Cass finds that if states with above-median enrollment rates or spending per enrollee returned their spending to median levels, more than $100 billion per year could be redirected toward other anti-poverty programs. By maintaining spending levels but spending more effectively, America can significantly improve its safety net at no additional cost to taxpayers.

Cass suggests several options to improve the efficiency and effectiveness of the safety net, including:

• Consolidating anti-poverty funding streams and allowing states to design programs that best suit their residents’ needs
• A “universal matching” structure for federal funds to remove the incentive to overinvest in Medicaid to receive more federal funding
• As a pilot approach, expanding the use of waivers for redirecting Medicaid funding toward other uses like the Earned Income Tax Credit

Click here to read the full report.