Decoded- Medicaid Makes us Ask: Who Owns the American Safety Net
By Andrés Argüello, Director of Narrative Intelligence
Debates over privatization of services are missing the shift to delegation of policymaking decisions to private actors.
Who owns the American safety net?
That question should have a seemingly simple answer: the public.
That makes intuitive sense because the systems built to safeguard children and families are financed, governed, and legitimated by the people they serve.
Yet across child and family programs– from Medicaid to early care and education to child welfare– public dollars increasingly flow through private intermediaries.
Privatization is not new. What is new is the extent of the scope of activities this encompasses, and the growing way it touches on policy decisions.
The pattern raises a deeper question: what does it mean for the safety net when the power to decide, design, and deliver public services moves outside the public itself?
And if the safety net no longer belongs wholly to the public, can it still fulfill its promise as a collective guarantee?
This matters more than ever, particularly as states face growing fiscal pressure and new federal budget constraints that make these tradeoffs grow in salience.
This public delegation of policy to the private sector is a key trend to watch. Ongoing trends in Medicaid illuminate the issue.
Medicaid: The Private-Sector Entitlement
Nearly three-quarters of Medicaid beneficiaries receive care through managed-care plans—private insurers that receive a fixed monthly payment per enrollee and assume responsibility for delivering all covered services.
Medicaid managed care was supposed to save state resources while maintaining quality.
After decades of implementation across most states, the evidence tells a different story.
The Cost Savings That Weren’t?
Peer-reviewed research generally finds little to no savings at the national level, with most studies concluding that managed care is cost-neutral or more expensive than fee-for-service.
While a few states and programs have achieved modest savings—often through reduced inpatient utilization—these gains are not consistent across states.
Research suggests that any savings tend to come from lower provider payment rates rather than improved care management, and in some cases higher administrative costs or reduced access to care have led to increased spending.
The Quality Problem
The evidence on quality raises deeper concerns.
Medicaid has long struggled to ensure adequate access to providers, and research indicates that contracting with private insurers has not resolved these challenges.
Beneficiaries continue to face narrow provider networks, high provider turnover, and significant administrative barriers to care.
All these factors especially matter in pediatric care, which faces structural barriers to sustainable payment.
More importantly, several rigorous studies actually link the transition to insurer-managed Medicaid with worse health outcomes, including deteriorations in maternal and infant health, and increased mortality among beneficiaries—particularly those who were sickest at baseline—after a state transitioned this population to managed care.
While one recent study finds improvements in health and well-being among disabled Medicaid beneficiaries following their move to private insurers, the authors attribute these gains primarily to the simultaneous elimination of a restrictive prescription drug cap rather than to managed care itself.
From Cost Management to Policy Control
Beyond the questions of cost and quality lies a deeper structural issue.
Public delegation of policy to private actors represents something different than traditional privatization of services.
It's the transfer of control over public functions, and particularly policymaking, to private, for-profit entities.
In these systems, private actors don’t just execute programs, they decide policy—their work includes designing eligibility rules, building the infrastructure families navigate, and making operational decisions that shape who gets services and how.
This trend did not appear overnight. It emerged over four decades of political and economic change that reshaped the American state under the banner of efficiency and market discipline.
Beginning in the late 1970s and accelerating through the 1980s, a growing bipartisan consensus redefined public services, from collective goods the state must provide to cost centers to be managed efficiently and effectively.
Contracting and outsourcing became synonymous with modernization as public agencies, under fiscal and political strain, turned to private partners for tools, talent, and technology they lacked.
What began with the execution of functions public sector actors had exclusively performed eventually grew to encompass decision making as well.
The Trade-Offs of Delegation
The allure of outsourcing for public agencies is understandable: in an era of constrained budgets, contracting can seem pragmatic—a way to buy capacity and technical expertise that governments lack.
Strategic contracting can bring in firms that have perfected specialized processes.
But the trade-offs matter and merit deeper consideration.
Firms that take on public functions make consequential decisions once confined to public delivery, and the margins they require to make their work sustainable create incentives that can diverge from the public mission.
And that’s the friction point.
Markets reward scale and selectivity; public systems, by design, must guarantee reach, even when reach is costly.
It’s the difference between FedEx and the Postal Service: one optimizes for efficiency, the other for universality.
Both deliver, but only one delivers everywhere, regardless of the return on investment needed to do it.
Even the most capable contractor eventually swims against incentives that privilege efficiency, predictability, and growth over access and equity.
This shift, often invisible to families, fundamentally redistributes power.
Decisions once made by elected officials and accountable public administrators move to corporate boardrooms.
This dynamic appears across the safety net landscape– from child welfare, to early care and education, to SNAP and TANF.
But nowhere is this redistribution of power clearer than in Medicaid—the nation’s largest child and family program and the most corporatized child and family policy public entitlement.
The Public Role Ahead
The lesson for policymakers is not that private actors have no role in public systems.
Contracting is, and will remain, a feature of modern governance, and can come with important efficiencies and quality.
But contracting delegates execution authority, not outcome responsibility or policymaking authority.
Effective stewardship of contracted systems requires substantial public capacity: the ability to set terms, monitor performance, enforce accountability, and intervene when public goals are not being met.
When that capacity erodes, contracts become substitutes for governance rather than tools of it—and public purpose gives way to private logic.
Ownership of the safety net is ultimately about power: who decides, who benefits, and who is accountable when systems fail.
As pressures on public budgets and administrative systems continue to grow, these questions will only become more urgent.
Whether the American safety net can continue to function as a shared guarantee—rather than a collection of privatized transactions—depends on how policymakers answer them.
The deeper question for decision makers, then, is not whether states should work with private firms. It’s:
Which functions can successfully be made private?
What functions hold seemingly anodyne decisions that are actually setting policy?
What capacities are necessary to oversee and manage contractual services, and which ones are essential to retaining public sector ownership of policymaking authority?
Rising budgetary headwinds and the shifting sands of fiscal federalism will increase the tensions on leaders making these decisions.
Clarity about first principles and the purpose behind these programs can keep the focus on what matters most.