In 2010, both health care reform and the need for deficit reduction gained the policy spotlight. What was largely neglected as a crucial part of both of these discussions, however, is the need to reform Medicaid, the federal–state health program for low-income Americans.

Recommendations to put the nation’s fiscal house back in order have come from the President’s deficit commission and other serious commentators, and have sparked a serious debate over how best to close growing budget gaps. Long-term deficits are almost completely the result of unsustainable growth in entitlement spending. Before passage of Obamacare, Medicare, Medicaid, and Social Security alone were on track to consume all federal revenue by 2052. The new health law only accelerates the process.

Unfortunately, as Heritage health policy expert Nina Owcharenko writes in a recent piece for Kaiser Health News, the commission’s final report “took a pass on offering any concrete, long-term recommendations” for Medicaid reform.

Medicaid adds an unsustainable level of spending to both state and federal budgets. Total spending on the program this year alone was $430 billion. The program also fails to provide those it serves with adequate coverage in far too many cases.

Representative Bill Cassidy, M.D. (R–LA), writes in Politico, “Medicaid is an illusion. It is the appearance of coverage—without the power of access.” Medicaid pays providers significantly less than private insurers do, and in many states, reimbursement does not even cover the cost of used services. This creates a barrier to access, since many providers can afford to see only a small number of Medicaid enrollees. Cassidy describes a teaching hospital in Baton Rouge, where, despite having been created for those without insurance, more than half of the patients treated are covered by Medicaid. The reason, according to Cassidy, is that Medicaid “does not provide access to health care anywhere else.”

Obamacare did little to solve the issues afflicting current Medicaid beneficiaries or put the program on a fiscally sustainable path. It will actually put Medicaid in worse shape by adding nearly 18 million Americans to this poorly performing program.

If Washington won’t take the lead in Medicaid reform, states should. In a recent paper, Owcharenko outlines the way forward after Obamacare, writing that states should begin by assessing the specific needs for change within their own Medicaid programs. They should then challenge the one-size-fits-all approach of Obamacare and demand more flexibility to implement reform, moving toward a system that is both sustainable and provides low-income Americans with the same quality of care available to the privately insured.

By taking a bottom-up approach to reform, states can lead the way to transforming Medicaid into a sustainable program that better serves its beneficiaries.