Fixing the bloated Medicaid program has long been a conservative goal. But in failing to pass the American Health Care Act, House Republicans have blown one of their best chances in years to finally reform Medicaid.

There was a lot not to like in the American Health Care Act. From the way it was rushed through various committees, to the way it maintained some of the key regulatory planks of Obamacare, the bill was imperfect and fell short of the ultimate goal of providing patient-centered, market-driven healthcare for all. But then again, we were never going to enact all of the market forces needed in one stand-alone bill, a point that even House Republican leaders selling the American Health Care Act were quick to make.

Which is why Speaker of the House Paul Ryan kept stressing over and over that this was always a three-prong strategy of passing a reconciliation bill (not subject to a filibuster in the Senate), empowering the Health and Human Services to enact regulatory changes and finally passing an additional bill(s) to gut or amend the remaining elements of Obamacare.

Not soon enough for some Republicans. Besides, according to many of these same critics, the American Health Care Act would amount to no more than another entitlement program.

Not quite. Besides, what about a key feature of the American Health Care Act completely devoted to reforming Medicaid — a huge entitlement that has outgrown from its original intended goal of insuring only the truly destitute and needy. Today, the program insures nearly one out of every five Americans and is already exceeding $500 billion in spending.

Beyond outgrowing its original goal, Medicaid is a basket case of government inefficiency, political favoritism and fiscal recklessness. To start, it's helpful to understand that Medicaid, unlike other federal programs, is funded not by grants or a fixed dollar amount every year, but by a complex formula that actually rewards states that spend more on Medicaid. That's right, the feds give you more dollars, for being profligate. If only the real world worked that way.

Of course, this perverse funding structure is ripe for fraud and abuse. The Center for Medicare and Medicaid Services recently estimated that there was more than $17.5 billion in improper Medicaid payments in 2014 alone.

As for Medicaid abuse, Joe Antos, a healthcare expert at the American Enterprise Institute explains in a recent interview, the current program structure makes it all too inviting for big states that can afford an army of expensive lawyers, like New York, to extract more money from the feds in what is known as creative financing – a fancy term to describe gaming the system. What's more, "with this kind of a system, there is less pressure on states to run a system that is more efficient and effective," Antos explains.

The American Health Care Act would have radically reshaped Medicaid, bringing it down to size by shrinking this gargantuan entitlement program. It would have accomplished this by immediately preventing further Medicaid expansion and would have forced states to choose between a per-capita allotment or a traditional block grant. Either way, states would have to spend federal dollars more wisely, and the federal government would have returned more healthcare decision-making back to the states.

Unfortunately, the opposite is happening. In the wake of the Obamacare repeal and replace debacle, a number of Republican states, including Kansas, are pushing to expand Medicaid. How's that for irony?

In Washington, rarely do stars align in a way to enact bold and transformative legislation (Just ask President Obama). But if there was ever a time to reform Medicaid, then it's hard to think of a better time. Republicans had a chance to lay the groundwork and begin this long and politically fraught process under the American Health Care Act. But in the end, it just wasn't good enough for some.

Still, there is renewed interest to take up this issue once again. Perhaps the reality of letting slip one of the best opportunities to reshape the healthcare system and the entitlement state is dawning on some of the Republican hold-outs.

But if they don't, future calls about the entitlement crisis from the party of fiscal responsibility will ring hollow.

Israel Ortega (@IzzyOrtega) is a contributor to the Washington Examiner's Beltway Confidential blog. He is a senior writer for Opportunity Lives, an online news publication.

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