NCPA - National Center for Policy Analysis


February 20, 2006

Hurricane Katrina motivated Senators Charles Grassley (R-Iowa) and Max Baucus (D-Mont.) to propose the Grassley/Baucus bill, which will give $9 billion to 29 states to fund costs related to uninsured evacuees. Unfortunately, this will increase federal spending on Medicaid, and thus contribute to the negative aspects of the program, say Michael Tanner and Michael Cannon of the Cato Institute.


  • The money would last for only about five months, after which, states would have to pressure Congress to keep the money flowing.
  • The new bill forces states to expand Medicaid eligibility in order to spend all the funds. As a result, some people who are privately insured can enroll in Medicaid.
  • New enrollees will be entitled to the full Medicaid package, including services now considered optional, as well as additional new benefits such as broad mental health benefits.

The real purpose of the bill is not just to help with Katrina, but to expand the Medicaid program dramatically, say Tanner and Cannon. An expansion of Medicaid may seem like a good idea to some, but when it comes to high quality and affordable medical care, Medicaid is the problem, not the solution:

  • Overwhelming evidence from other nations, and Medicaid itself, shows that government involvement leads to poor-quality medical care.
  • As Medicaid grows, it makes private medical care more expensive and even crowds out private health insurance.
  • Medicaid creates a serious disincentive to work, save and escape poverty.

Source: Michael Tanner and Michael Cannon, "Another Medicaid Boondoggle," Oklahoma Council of Public Affairs, No.12, December, 2005.


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