'The Great Medicaid Bait-and-Switch' by Steve

Senator John Kennedy (R-Louisiana) recently made headlines asserting that $1.2 trillion has been "stolen from Medicaid" over the last decade. This figure represents his synthesis of cumulative improper payments, wasteful spending, and alleged fraud across the Medicaid system—much of it fueled by expansive state policies, particularly in California and Minnesota. While the Government Accountability Office (GAO) estimates annual improper Medicaid payments at approximately $33 billion (with the overall improper payment rate around 5.1%-10.5% depending on reporting methodology), Kennedy's larger number reflects not just paperwork errors and outright fraud, but what he characterizes as systemic abuse of Medicaid by states that treat federal funding as "free money," using creative interpretations of health care to cover services far removed from medicine. Over ten years, even conservative estimates of combined fraud, waste, and policy-driven diversion of Medicaid funds could plausibly approach Kennedy's figure.
 
In California, Medicaid operates under the name Medi-Cal, and it is colossal. Covering approximately one in six Californians, the program accounts for nearly one-quarter of the state's entire budget and receives billions in federal matching funds. Under Medicaid's structure, the federal government pays approximately 67% of costs, while states cover the remainder. Kennedy argues this matching system creates a perverse incentive: for every dollar California expands its program, the federal government contributes roughly two-thirds. This dynamic, he contends, encourages states to creatively broaden eligibility and benefits far beyond Medicaid's original scope.
 
Kennedy has publicly highlighted a startling list of items he claims California's Medicaid program reimburses:
 
Kennedy referred to this catalog of benefits as "spending porn" and argued that items like exorcisms and music lessons have no legitimate place in a medical assistance program. To the senator, these expenditures represent Medicaid's abandonment of its historical mission and its transformation into a general welfare catch-all.
 
To understand Kennedy's outrage, one must revisit Medicaid's statutory roots. Enacted by Congress in 1965 alongside Medicare, Medicaid was designed as a health care safety net for specific vulnerable populations: low-income Americans who are aged, blind, disabled, or low-income families with children. It is a joint federal-state program, meaning each state administers its own program within broad federal guidelines.

The program's explicit statutory purpose was to provide medical and health-related services: doctor visits, hospital care, prescription drugs, nursing home care for the elderly, and treatment for those with disabilities. Unlike Medicare, which is solely federally funded and covers the elderly regardless of income, Medicaid is means-tested. Its entire architecture was built around the principle that the very poor and the medically vulnerable should not go without health care because they cannot pay for it.

The legislative history clearly shows Congress intended Medicaid as a medical program, not a housing program, not a food program, and certainly not a source of recreational or spiritual benefits. Kennedy and other critics argue that by blurring these lines, states like California are not merely expanding Medicaid—they are hijacking a program intended for the destitute and disabled to subsidize a broader social agenda.
 
The core of Kennedy's concern—and the concern of many program integrity advocates—is **diversion of finite resources**. Medicaid is already financially strained. As one of the largest mandatory federal spending programs, it competes for taxpayer dollars with other priorities while states face perpetual budget pressures.

When Medicaid pays for exorcisms, housing, or music lessons, the money for those reimbursements is fungible. It comes from the same pot that is supposed to pay for **cancer treatments for poor children, insulin for diabetics, wheelchairs for the paralyzed, and nursing home care for impoverished seniors**. Every dollar redirected toward an in-home chef or a student's tuition is a dollar not available to a disabled adult desperately needing specialist care or a working-class parent whose child has a chronic illness.

Furthermore, the more expansive the benefit package, the more people are drawn into the program—some of whom may not meet the traditional eligibility profile. This crowds the system. Providers face administrative burdens navigating creative benefits, while patients with genuine, urgent medical needs compete for appointment slots, hospital beds, and specialist attention alongside those accessing social services wrapped in a health care veneer.

California has also made headlines for shocking outright fraud cases. In April 2026, a California man pleaded guilty to submitting $270 million in fraudulent claims to Medi-Cal over eleven months alone—claiming reimbursement for expensive prescription drugs that were medically unnecessary and, in many instances, never even dispensed to patients. Such incidents underscore how weak oversight and enormous program scale create environments ripe for criminal exploitation.

Moreover, by stretching Medicaid into domains like housing and nutrition, policymakers risk masking the failure of other government programs to address poverty. Rather than fixing systemic housing shortages or broken welfare systems, advocates simply route those needs through a health care program, using its funding mechanisms to paper over cracks elsewhere in the social safety net—while the truly ill and disabled watch their health care program become diluted.

Senator Kennedy's $1.2 trillion figure is best understood as a political distillation of a decade's worth of fraud, improper payments, and mission creep in a program originally created to serve America's most medically vulnerable citizens. His targeting of California reflects the state's aggressive expansion of Medi-Cal benefits into territory that Medicaid's 1965 architects never envisioned.

The fundamental question Kennedy raises is whether Medicaid should remain a health care program for the poor and disabled, or whether it should be transformed into an all-purpose mechanism for government-funded social services. For critics, the answer is clear: when a medical safety net is turned into a vehicle for housing, exorcisms, and recreation, the people who suffer most are those who needed medical care in the first place.
If Medi-Cal et al are permitted to transform into an all-purpose social services vehicle, it effectively becomes a perpetual bailout mechanism—one that rescue states from the consequences of their own policy failures without ever demanding accountability. When California finds itself grappling with an unaffordable housing crisis, spiraling homelessness, crumbling social services, and a cost-of-living that drives working families into poverty, it does not address these failures through housing reform, zoning deregulation, welfare overhaul, or economic competitive policy. Instead, it simply launders these mounting crises through Medicaid's expansive reimbursement structure, using federal matching dollars to subsidize housing, meals, student debt, and recreational goods under the guise of "health-related" spending. The federal government—meaning us taxpayers in fiscally responsible states—thus becomes the backstop for California's systemic dysfunction, quietly bailing out decades of mismanagement while the underlying problems fester unresolved. This is not health policy; it is a fiscal transfusion, enabling states to paper over broken governance by expanding a program never designed to carry such weight, all while the genuinely sick and disabled watch their lifeline dissolve into a general-purpose subsidy for failed progressive experiments.

Editorial comments expressed in this column are the sole opinion of the writer