Public Health: Medicaid's Maladies

In theory, the four-year-old Medicaid program gives states what amounts to a blank check from the U.S. Treasury. In practice, the program—designed to finance medical care for the needy—has proved to be a tremendous drain on state treasuries as well. Even though federal handouts cover at least 50% of the costs, several leading Medicaid states —including New York, California and Michigan—have been forced to slash aid to their "medically indigent" because the runaway rise in hospital, drug and doctors' bills threatened to engulf their budgets in red ink. Now Medicaid's first state dropout has taken place.

Faced with the spiraling...