The Great Medicaid Unwinding
A “great unwinding” is very much underway in Medicaid programs nationwide, representing the most notable reversal of a government expansion since the welfare reforms of the 1990s.
From March 2020 to March 2023, Medicaid enrollment soared by more than 22 million people, a surge even larger than the Medicaid expansions brought on by the Affordable Care Act (ACA). This was primarily due to “continuous coverage” provisions in the coronavirus response that prevented states from conducting routine eligibility reviews—what bureaucrats call the redetermination process—which would ordinarily remove recipients who no longer qualify based on the objective, pre-established standards of need. At its recent peak, Medicaid covered almost 95 million Americans, a far cry from the original intent of protecting the most vulnerable.
This expansion of Medicaid was never meant to be permanent. Yet, in the context of a growing acceptance among Americans of broader welfare coverage and the popularity of prior Medicaid expansions—since 2014, 40 states and the District of Columbia have expanded under ACA provisions—it seemed like a plausible scenario, especially if you’re familiar with the work of economist Robert Higgs.
In 1987’s “Crisis and Leviathan,” Higgs showed how government expands during crises but often fails to retract fully once the crisis passes, leading to an ever larger state. The pandemic-era growth of Medicaid risked becoming a textbook case of this “ratchet effect,” potentially transforming temporary relief measures into permanent entitlements.
A few months have passed since most states restarted redeterminations in June and July. While it’s still early—the unwinding is expected to take 12 to 14 months—the data that’s come in already defies the Higgsian prediction: 10.6 million people have been removed from Medicaid, an unprecedented number and orders of magnitude greater than any previous episode in its history. Barring major policy changes, we can expect most, if not all, of the pandemic-era growth in our largest safety-net program to be rolled back in the coming months.
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