Medicaid’s Transformation into an Unsustainable Entitlement Amid a $36 Trillion Debt Crisis
Federal Medicaid spending has surged from $206 billion in 2000 to $919 billion in 2024
The United States faces a fiscal reckoning, with the national debt surpassing $36 trillion and annual deficits projected to near $3 trillion within a decade. At the core of this crisis is the unchecked growth of federal entitlement programs, particularly Medicaid, which has evolved from a targeted safety net into a sprawling entitlement over the past generation. This transformation, driven by policy expansions and soaring real-dollar costs, fuels the federal deficit and threatens economic stability. Without reform, Medicaid’s trajectory will deepen the debt crisis, undermining the nation’s fiscal future.
Enacted in 1965 to provide healthcare for the poorest Americans—low-income families, the elderly, and the disabled—Medicaid was a focused safety net. Over decades, legislative expansions, rising healthcare costs, and shifting demographics have reshaped it into a program covering 25% of the population. Federal Medicaid spending has surged from $206 billion in 2000 to $919 billion in 2024, a fourfold increase in nominal terms. In real 2025 dollars, this reflects a 150% rise, far outpacing GDP growth. The federal share has grown fivefold, with projections estimating $8.6 trillion in outlays over the next decade. It’s not hard to find credible analysis of the ballooning of Medicaid spending where nearly two-thirds of spending funds optional expansions rather than core services for the most vulnerable.
This shift from safety net to entitlement stems from deliberate policy choices. In the 1980s and 1990s, Congress expanded eligibility to include pregnant women, children, and certain low-income adults, broadening the program’s scope. The 2010 Affordable Care Act (ACA) was a turning point, incentivizing states to cover non-disabled, non-elderly adults with incomes up to 138% of the poverty line. This added millions to the rolls, with enrollment soaring from 34 million in 2000 to over 90 million by 2025—a 164% increase. The adult expansion population, often able-bodied and without dependents, now accounts for 40% of enrollees in expansion states, diverting resources from Medicaid’s original focus.
Costs have skyrocketed in tandem. The average cost per enrollee has risen from $2,400 in 1986 to $10,700 in 2025 (in real 2025 dollars), driven by higher medical prices, advanced treatments, and increased service utilization. Long-term care, once Medicaid’s cornerstone, now constitutes less than 20% of spending, while optional benefits like prescription drugs and dental care consume growing shares. Policies extending coverage to undocumented immigrants in some states add further strain. Improper payments, estimated at $80 billion annually, compound inefficiencies. Cumulatively, federal Medicaid spending from 2000 to 2025 exceeds $10 trillion in real dollars, with the ACA’s expansion contributing nearly $2 trillion since 2014.
This cost explosion drives the federal deficit, which hit $1.8 trillion in 2024. Medicaid now claims 10% of the federal budget, up from 7% two decades ago, outstripping other programs’ relative growth. The Congressional Budget Office projects public debt will reach 165% of GDP by 2054, with interest costs—already $881 billion annually—potentially consuming half of federal revenues by 2035. Medicaid’s growth crowds out infrastructure, education, and defense investments, deepening the debt spiral.
Politically, expanding Medicaid is seductively easy. Beneficiaries—now 90 million strong—enjoy the benefits and quickly come to feel entitled to them, creating a powerful constituency that resists cuts. Meanwhile, the taxpaying public feels no immediate pain, as the costs are buried in the federal deficit and added to the $36 trillion debt. This disconnect allows politicians to champion expansions for votes without accountability for the fiscal consequences. Reducing Medicaid spending, however, demands rare political courage. Proposals like capping federal contributions or tightening eligibility, which could save $500–$870 billion over a decade, face fierce opposition from entrenched interests. Yet, with interest costs projected to hit $1.8 trillion annually by 2035, every dollar spent on Medicaid’s expanded scope is borrowed, burdening future generations. With costs soaring in real dollars, Medicaid’s evolution from a safety net to entitlement epitomizes the entitlement crisis driving the debt. Only bold reforms can realign the program and avert fiscal collapse.
As Congress considers passing President Trump’s “one big, beautiful bill” on a partisan vote, the purpose of which is to extend the Trump tax cuts, and reduce the deficit, it is important to remember that you cannot bring federal spending down in a meaningful way without spending reductions in the areas where federal spending has grown the most.