Tony Soprano would be outraged; Governor Chris Christie and New Jersey’s congressional delegation should be. Every year, the state of New Jersey loses enormous wealth through the Medicaid program. As it happens, its neighbor to the north is gaining almost exactly that amount through its enormous Medicaid program—one full of waste and bloat. It’s fair to think of this Medicaid financing scheme as one that simply takes dollars out of New Jersey and gives them to New York.
Washington provides an open-ended reimbursement of state Medicaid spending. More than 60% of state Medicaid spending is paid by the federal government, which is another way of saying that the bulk of each particular state’s Medicaid spending is financed by taxpayers dispersed throughout the entire country. Because Medicaid spreads the burden of state spending decisions in this way, many states grow inefficiently large programs and create numerous accounting gimmicks to access as much federal money as possible. After all, every extra dollar that they spend is largely coming out of the pockets of people outside their jurisdiction.