Getting the States to Pay for Health Care: Use Vinegar or Honey?
PUBLISHED August 19, 2026
One of the more enduring features of All-American Care is self-interest. People will want to sign up for it because it is in their best interests. It just makes sense.
This will be especially true when it comes to persuading states to pay part of its costs. In 2024, states contributed $859.7 billion (16.3 percent) to our nation’s health care system.1 Without that funding, any universal health care plan starting off would require the federal government to either raise taxes or borrow money.
Today, states have the wind at their back. In 2010, Congress required states under the Affordable Care Act to expand their Medicaid programs by 2014 to cover all adults under the age of 65 with incomes up to 133 percent of the federal poverty level. Starting in 2020, states would have to pay 10 percent of the expansion costs.
Twenty-six states, in turn, sued the federal government. They said that Congress had exceeded its constitutional powers under the Spending Clause, which allowed the federal government to provide for the general welfare of the United States. They claimed that Congress threatened to withhold existing Medicaid funds from any state that decided not to go along. In short, Congress was coercing the states to accept policy changes they did not want.
Court Decision
The Supreme Court agreed. Congress was putting “a gun” to their head, it said. The Court noted that Medicaid spending accounted for over 20 percent of the average state’s total budget, with federal funds covering 50 to 83 percent of those costs. States would have no choice but to acquiesce because they could lose over 10 percent of their overall budget. That would adversely affect state sovereignty.
So the Court ruled.
The opposing argument was that Congress could spend federal revenues as it saw fit. Congress, under the ACA, was doing what it had long done: requiring states to comply with the conditions it stipulated if they wanted to receive additional Medicaid funding.
That said, All-American Care takes the approach that the federal government can get states to cooperate more if it uses honey instead of vinegar. Make the states a deal they cannot refuse.
Using Honey
In 2024, state health care expenditures increased 12.1 percent. In 2023, they increased 11.1 percent.2 The federal government could say to the states: contribute what you paid in 2024 (or a three-year average) to our new health care plan. In return, you can pay that same amount for four years straight. After that, your contribution will be capped at a three percent increase per year.
The federal government should feel confident that it can afford this deal. By offering the public a standard health care policy and having primary care physicians act as gatekeepers for access to most specialist care, the U.S. should be able to rein in health care costs. As in the Dutch system, consumers, insurance companies, and providers would be working as a unit, not as silos in their own world.
From the states’ perspective, not only would this give them budget certainty, but it would also mean an influx of federal funding coming back to the states. Recall from an earlier blog that All-American Care would have a long-term care component.
The federal government would have an additional $220 billion each year to disburse among the states to build up a home- and community-based care infrastructure. That would help achieve America’s goal of bringing dignity to those in need of long-term care support and ensure that they can live independently for as long as possible.
Self-interest
In 2024, New York spent $2,104 per person on Medicaid. Utah, on the other hand, spent $406.3 Under the above arrangement, New York would have to pay five times more per capita than Utah. New Yorkers may feel like they are being taken advantage of.
But New York will have to look at the big picture. The state’s goal is to “deliver high quality, affordable insurance statewide.” If it goes along with the deal, it can provide 100 percent of its population with affordable, high-quality health insurance. Plus, it will receive an additional $12.8 billion each year for long-term care planning.
The alternative is to keep paying 12 percent increases in health care spending each year, receive no additional funding for long-term care, and leave a large segment of the population uninsured.
Self-interest should rule the day.
1Centers for Medicare & Medicaid Services, National Health Expenditures, Table 5-4 (2024).
2Ibid.
Arthur’s Calculations
3To find out how much New York and Utah spent per capita on Medicaid, I used MACStats: Medicaid and CHIP Data Book. Exhibit 16, on pages 45-47, tells how much each state paid for Medicaid in 2024. I divided the amount each state spent on Medicaid by the state’s population.
New York ($41,810,000,000/19,867,248 = $2,104)
Utah ($1,421,000,000/3,503,613 = $406)
References
Centers for Medicare & Medicaid Services. National Health Expenditure Accounts: Table 5-4, National Health Expenditures by Source of Funds and Type of Expenditure, Calendar Year 2024. 2024.
Medicaid and CHIP Payment and Access Commission (MACPAC). (2026, February). MACStats: Medicaid and CHIP Data Book. Exhibit 16, “Medicaid Spending by State, Category, and Source of Funds, FY 2024.”
National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012). Retrieved from Cornell Legal Information Institute, https://www.law.cornell.edu/supremecourt/text/11-393
New York State Department of Health. (2024, April 1). New York State Department of Health and NY State of Health announce the Essential Plan expansion increasing access to affordable health insurance begins today.
U.S. Census Bureau. (2024). Annual estimates of the resident population for the United States, regions, states, District of Columbia, and Puerto Rico: April 1, 2020 to July 1, 2024 (NST-EST2024-POP). Population Division.