Medicaid Cuts? Cue the Fainting Spells and Press Releases
How Will Hospitals Survive Without a Supplemental Champagne Fund?
The Wall Street Journal just handed the hospital lobby its fainting couch. Recently, the Journal wrote, “How Healthcare Cuts in the ‘Big, Beautiful Bill’ Will Affect Americans: Millions will lose coverage, hospitals’ uncompensated work will increase and insurers will lose big business.”
Apparently, modest Medicaid cuts and the radical notion that able-bodied adults should work, volunteer, or go to school in exchange for taxpayer-funded healthcare is enough to trigger mass hysteria in the land of limitless entitlement, crony capitalism and hospital price gouging.
We are now to believe, with a straight face, that asking a healthy 30-year-old to clock 80 hours a month of anything before enrolling in a taxpayer-funded benefit is “cruel,” “dangerous,” and will single-handedly collapse the U.S. healthcare system. Never mind that this same system has somehow managed to fund Botox, Birkenstocks, and billion-dollar hospital expansions under the guise of “safety net” care.
Let’s widen our stance, place our hands on our knees and breathe through the hysteria. I think we’ll survive.
Medicaid Was Never Meant to Be This
When Medicaid was signed into law in 1965, it was sold as a program for the truly needy, covering around 2% of the population. Today?
1 in 3 Americans is on Medicaid in blue states.
4 in 10 babies are born into the program.
In states like New Mexico and West Virginia, over 40% of the population relies on it.
What truly originated as a safety net has morphed into a much larger governmental hammock: a taxpayer-funded, commercial-grade hammock that’s far too fragile to expect any personal responsibility in return.
As Thomas Sowell says, “you cannot subsidize irresponsibility and expect people to become more responsible.”
Hospitals Cry Poor—While Building Monuments to Themselves
The same hospitals sobbing about $665 billion in “cuts” over the next decade (in reality: a reduction in projected increases, not actual slashed budgets) are the ones that:
Collect $28 billion/year in supplemental Medicaid payments to begin with. What are “supplemental Medicaid payments”? Glad you asked, because hospitals would rather you didn’t.
These aren’t your standard reimbursements for services rendered. They’re lump-sum subsidies that states distribute to hospitals in addition to regular Medicaid rates. The rationale? Medicaid “doesn’t pay enough,” so states created a workaround: tax the hospitals, then funnel that money through complex schemes to draw down more federal funds, ultimately returning more than they gave. It’s nothing more than taxpayer money laundering.
There are two primary types of these:
Fee-for-Service Supplements. Payments made directly by state Medicaid programs.
Managed Care Directed Payments. States instruct managed care plans to pay hospitals additional amounts, often based on commercial rates.
By fiscal year 2022, these side payments ballooned to more than $55 billion annually, accounting for about half of all Medicaid hospital payments. Yet hospitals still cry poor. Why? Because the supplemental game is profitable, opaque, and primarily benefits the politically connected. The new law clips this back, capping payments at Medicare levels and closing the backdoor money-printing operation.
Hospitals call it a “cut.” But any honest observer would call it rational alignment.
Operate as nonprofits, yet rake in billions in annual profits. Take nonprofit Kaiser Permanente. The California-based system pulled in $4.1 billion in net income in 2023, then $12.9 billion in 2024. It must be exhausting being that charitable.
Spend millions on “community benefit” reports flogging how generous and altruistic they’re being while simultaneously suing patients over $500 unpaid bills.
More than 60% of U.S. hospitals are tax-exempt nonprofits. They don’t pay property tax, income tax, or even sales tax on many purchases. In return, they’re supposed to provide charity care, and yet, according to a 2023 Lown Institute study, 77% of nonprofit hospitals spent less on charity care and community investment than they received for those nonprofit tax breaks.
That amounts to billions in foregone tax revenue while hospitals parade themselves as the battered victims of fiscal oppression. It reminds me of this meme I recently saw on X:
The tatted-armed bloke would be the taxpayers in this example, while our nefarious redhead is a nonprofit hospital.
Medicaid Reimbursement: The Scam Behind the Sobbing
Let’s not ignore the loudest trope in the room: “Medicaid doesn’t pay enough!”
Then why, dear hospitals, do you lobby to expand it?
Why do private equity-backed for-profit hospitals buy up rural facilities and target Medicaid expansion states? Why do insurance companies like Centene and Molina build entire business models around Medicaid enrollees if the margins are so thin?
Spoiler alert: It’s not for the patients.
The real answer lies in provider taxes and supplemental payments, backdoor federal matching schemes that allow states and hospitals to launder money through CMS. It’s the Medicaid version of Ozark. These state-directed payments have supercharged Medicaid reimbursements to 150%, 200%, and even 300% of Medicare rates in some states.
And now, finally, the new law caps those at 100–110% of Medicare.
Cue the fireworks and the crying rooms.
Work Requirements: The Horror of Expecting Effort
The Journal’s piece glosses over what’s truly horrifying here: able-bodied adults might have to do something to stay on Medicaid. Again, Medicaid was designed to cover 2% and it now covers 25% to 40% depending on the state. Just marinate on that a moment.
These aren’t single mothers, seniors or the disabled. We’re talking about 19–64-year-olds with no dependents and no medical excuse for staying home and smoking jazz cabbage in their parents’ basement while paying on their Xbox. Roughly 14 million able-bodied adults without dependents are enrolled today, and about 4 million of them aren’t working, volunteering, or attending school even 80 hours a month. That’s the real crowd the new work requirements actually target.
Apparently, asking able-bodied adults to work or volunteer 80 hours a month is now considered Dickensian cruelty.
We’re coming up on renewal season in the employee benefits space. I’ll log multiple 80-hour weeks (not months) during this time. So, pardon me if I’m not curled up in the fetal position, weeping over the new standards for taxpayer-funded healthcare.
Cutting Bloat ≠ Cutting Care
I reject the framing that this bill “slashes care.” Nope. It doesn’t. It reins in the gaming of provider taxes, limits fake reimbursement escalators, and redirects Medicaid to its original purpose of providing for the truly needy, not the merely disinterested.
We’ve allowed this program to metastasize beyond recognition, all while hospitals cry foul from the helipads of their newest pediatric wings.
Final Thought: No, the Sky Isn’t Falling
The new reforms are not a “double-whammy.” They’re a long-overdue, modest first step in recalibrating a bloated entitlement that’s become a cash cow for the cartel-like, medical-industrial complex.
Yes, insurers like Centene and Elevance may lose a few million involuntary customers. Yes, hospital lobbyists may have to get creative to replace their 300%-of-Medicare backroom deals.
But let’s not pretend that forcing able-bodied adults to take a class, get a job, or lend a hand at the food pantry before receiving unlimited, taxpayer-funded medical coverage is some apocalyptic death blow.
After 60 years of mission creep, it’s time for Medicaid to remember its mission.