Today, Medicaid is one of the fastest-growing drivers of federal-state spending, with annual costs exceeding $800 billion. As the program balloons and oversight falters, it's rightly under scrutiny. The real question is what Washington does next: tackle the structural problems head-on, or fall for a shortcut that shifts costs without fixing them.
One path is a serious plan led by conservatives in Congress. It would restore fiscal integrity to Medicaid without sacrificing access or innovation. These targeted reforms would realign incentives, tighten eligibility, and curb state-level abuse -- saving taxpayers over $1 trillion in the next decade. And they're backed by a strong majority of voters.
The other is a budget stunt: a "Most Favored Nation" (MFN) drug pricing scheme that would hand U.S. pricing authority to foreign governments. It's pitched as a sensible shortcut to savings -- but it's really socialist-style price controls pulled straight from Sen. Bernie Sanders' playbook. MFN dodges meaningful reform now and guarantees long-term harm, distorting market incentives and undercutting the innovation patients rely on.
There's genuine reform on the table -- and a big-government gimmick. The moment calls for clarity, discipline, and conservative leadership.
Among the targeted reforms proposed by conservatives is establishing work requirements for able-bodied adults. More than 60 percent of this group report no work activity. Requiring part-time employment, job training, or volunteer service isn't punitive -- it reflects the principle that public assistance should be tied to personal responsibility. This reform alone could save up to $287 billion and enjoys support from 73 percent of voters.
Conservatives are also calling for stronger eligibility enforcement. Currently, states can verify eligibility only once a year and must enroll applicants before confirming immigration status. The result? Improper payment rates top 20 percent. Requiring states to verify eligibility more frequently -- and upfront -- could save up to $282 billion. Voters get it: 78 percent back this fix.
Recommended
Another critical reform would correct the federal funding bias that favors able-bodied adults over the truly needy. Under current law, states receive a 90 percent federal match for able-bodied adults covered through the Obamacare expansion, but only an average of 60 percent for children, seniors, and people with disabilities. Conservatives propose phasing down the enhanced match beginning in FY 2027 until it aligns with each state's standard Medicaid funding rate by FY 2034. This shift -- supported by 78 percent of voters -- would eliminate a skewed incentive and could save up to $219 billion.
Then there's the provider tax shell game. Some states tax hospitals and managed care organizations (MCOs) and then recycle those dollars through Medicaid to inflate their federal match. Conservative reformers propose freezing provider tax levels at 2024, blocking new taxes on providers and MCOs, and phasing out the federal "safe harbor" that enables the scheme. The fix is simple and long overdue -- and it could save up to $404 billion, with 63 percent of voters on board.
Finally, conservatives are calling for the repeal -- or at least a pause -- of two costly Biden-era regulations: one that weakened eligibility verification and another that artificially inflated payment rates. Undoing them would restore essential guardrails and save up to $271 billion. Seventy-eight percent of voters favor this course correction.
These reforms are precise, market-based adjustments to a program that has drifted far from its mission. They target inefficiency, uphold state flexibility, and strengthen Medicaid's ability to serve the people it was meant to help. And across the board, they have strong public backing.
MFN, by contrast, is a destructive budget gimmick disguised as Medicaid reform. It takes real frustration with foreign freeloading and turns it into a top-down price-fixing scheme that would backfire on American patients. MFN would tie U.S. drug prices to the lowest rates in countries like France and Germany -- where bureaucrats impose artificial price ceilings and restrict access.
It's the type of disastrous centralized planning conservatives are usually first to condemn -- except this time, it's coming from our side.
Medicaid already gets the best deal in the U.S. market. Its pricing structure isn't flawless, but it's still tethered to competitive dynamics -- not socialist price controls. Under the current "best price" rule, manufacturers must offer Medicaid the lowest price available, plus steep mandatory rebates. The typical reduction exceeds 50 percent. In some cases, it's 100 percent of a drug's cost, meaning that manufacturers effectively pay the government when patients fill their prescriptions. MFN would anchor those rebates to even lower foreign prices, pushing more drugs into negative-pricing territory.
No system can survive that math. Companies would be forced to pull out of Medicaid -- slashing access and gutting investment in future cures. And because Medicaid participation is tied to Medicare Part B, the fallout wouldn't stop there. MFN is a short-term stunt with long-term consequences.
Other nations do game the system -- capping prices at home while relying on U.S. investment to fund innovation. But the answer isn't to follow the lead of government-run healthcare systems. It's to confront the problem directly, with trade pressures and policies that project strength, not surrender.
Republican policymakers should be clear-eyed about their next move if they're serious about fixing Medicaid. There's a market-based, voter-backed reform plan on the table that reins in spending, protects access, and ensures continued innovation.
Anything less is politics. This is substantive policy.
Ryan Ellis is president of the Center for a Free Economy and an IRS enrolled agent.
Join the conversation as a VIP Member