As a fiscal policy wonk, my usual concern about Medicaid (the government health problem for low-income people) is that it is a huge – and rapidly increasing – fiscal burden.

As captured by this chart.

But sometimes I get agitated not by how much is being spent, but by how it is being spent.

Consider these excerpts from a news report by Elaine Mallon about how California has bee squandering Medicaid funds.

Medi-Cal’s spending practices have faced growing scrutiny as California’s Medicaid spending has more than doubled since 2019, rising from roughly $100.7 billion to a projected $222 billion in 2026. Just last week, the Trump administration suspended $1.4 billion in federal funding for California home health and hospice programs after Vice President JD Vance’s anti-fraud task force identified an estimated $600 million in suspected fraud within the state’s Medicaid system. …In March 2025, Medi-Cal expanded coverage for recipients seeking traditional healers and natural helpers within tribal communities. Services covered by taxpayer dollars include music therapy and spiritual interventions such as ceremonies, rituals and herbal remedies, according to a press release from Gov. Gavin Newsom’s office. …Newsom said this expansion of coverage for tribal medicine was made to assist in “helping heal the historical wounds inflicted on tribes.”

I’ll confess up front that I’m skeptical about the value of “spiritual interventions” and “exorcisms,” but my policy focus is whether taxpayers should be financing such practices.

Moreover, if taxpayers are going to pick up the tab, I’d much rather it be California taxpayers (Medicaid is a joint federal-state program, with national taxpayers paying the largest share).

Which is why federalism (not centralization!) is part of the solution to the Medicaid mess. We should copy the success of Bill Clinton’s welfare reform by getting rid of the federal entitlement program and replacing it with block grants to the states.

Hopefully, over time those block grants would be phased out so that states would then have the responsibility of figuring out the best way to both finance and deliver health care to the indigent.

With this approach, Gavin Newsom’s California could fund native healing and Tim Walz’s Minnesota could fund fraudulent centers and taxpayers in other states wouldn’t be victimized.

And we would also get rid of the absurd gimmicks that state politicians use to scam the federal program.

In other words, the answer to the question in the title is “all of the above.”

P.S. The entire D.C.-based welfare state should be eliminated and transferred to the states.