Seventeen House Republicans gave California Democrats a late Christmas present this month when they crossed the aisle to vote for extending enhanced Obamacare premium subsidies for another three years. Not only did they move these massive handouts one step closer to permanent entitlement status, but they failed to advance reforms that would actually lower health care costs, like closing the Intergovernmental Transfer loophole that has cost taxpayers tens of billions over time. The Senate should stop this bill in its tracks and—in anticipation of pushback from those who have never seen a government expansion they didn’t like—prepare to argue to the public why propping up a broken system won’t reduce health insurance premiums. As I argued in The Hill, these subsidies just mask the true cost of government distortion. Since the Affordable Care Act passed, average family premiums have exploded to more than $25,000 per year. Government subsidies haven’t stopped that rise. They’ve enabled it—by insulating insurers from competitive pricing and reducing any pressure for meaningful reform. And while Washington debates whether to extend temporary tax credits, states like California are quietly siphoning off billions in federal Medicaid dollars through legalized budget fraud tied to the Intergovernmental Transfer loophole. It works like this: State-run hospitals or county agencies send funds to the state Medicaid program. The state counts those as its own Medicaid spending, uses them to trigger a higher Federal Medical Assistance Percentage match from the federal government, and then sends most of the money back to the local provider—often with a bonus. No new services are delivered. No patients are helped. But billions in federal money change hands—and California is the poster child for using this racket to cover its budget gaps it. The Paragon Institute calls this the “Local Loop.” I call it Medicaid fraud with federal approval. And it’s not new. The Government Accountability Office warned Congress about these tactics in 2004. Back then, Medicaid was a fraction of its current size. In March 2025, Paragon estimated that improper Medicaid payments totaled $1.1 trillion between 2015 and 2024—double what the federal government officially reports. California leads the pack. Gov. Gavin Newsom just introduced a $348 billion state budget, despite running a $3 billion deficit—again. His administration continues to lean on Medicaid Intergovernmental Transfer schemes to extract more money from Washington instead of enacting real fiscal discipline. This scam doesn’t just fleece taxpayers. It undermines care. In California, public ambulance providers that participate in funding transfer schemes are reimbursed more than $1,000 per Medicaid transport. Private ambulance services often receive a quarter of that. The result? Private providers leave the market, rural patients suffer, and public-sector monopolies get even stronger. The real path forward is not more subsidies, whether via the Affordable Care Act or Medicaid. It’s structural reform. We should start by shutting down Intergovernmental Transfer abuse—ending circular transfers, enforcing transparency in Medicaid financing, and tying federal dollars to real services delivered to real patients. Then we need to empower patients directly. In my Empower Patients Initiative with Dr. Deane Waldman, we propose giving Medicaid recipients no-limit Health Savings Accounts, funded through state block grants. These accounts allow individuals to pay providers directly, shop for care, and make health care decisions on their terms. Paired with time limits and work incentives for work-capable adults, this model would reduce dependency, lower costs, and improve outcomes. It would also inject long-overdue competition and price transparency into a system that’s been shielded from both. We shouldn’t spend another dollar on expanding a broken health care system where waste, fraud, and restricted access are the norm. The Senate has a chance to do something the House didn’t: say no to making pandemic subsidies permanent. Say no to another taxpayer-funded bailout for insurers. And say yes to fixing the corruption and distortion that actually drive- up health care costs. Let the subsidies expire. End the Medicaid shell games. And finally start empowering patients—not bureaucracies—to take charge of their care. We publish a variety of perspectives. Nothing written here is to be construed as representing the views of The Daily Signal.    The post 17 House Republicans Cave on Subsidies While California Loots Medicaid appeared first on The Daily Signal.