Why Democrats' New Walmart Medicaid Fine Plan Is Misguided and Risky

New Jersey Governor Mikie Sherrill addresses the Assembly Chamber of the New Jersey State House in Trenton on March 10, 2026. | Heather Khalifa/Bloomberg via Getty Images

For years, Democrats have criticized profitable corporations like Amazon, Walmart, and McDonald’s for employees relying on Medicaid benefits. The logic seems straightforward: If workers at highly profitable companies need safety-net programs, why aren’t those companies paying living wages or providing health benefits?

Sen. Bernie Sanders famously called the Walton family’s wealth ‘living off corporate welfare from the federal government’ in 2020, reflecting a common progressive argument. While intuitive, this claim is flawed—and dangerously so. Now, Democrats are turning this flawed idea into policy. Lawmakers in New Jersey and Colorado are pushing bills to fine companies for each Medicaid-receiving employee on their payrolls, aiming to fund Medicaid expansions amid Republican budget cuts. Other states may soon follow.

This approach is a mistake. It would harm low-income workers while reinforcing the employer-based health insurance system that progressives have long opposed.

Medicaid Is Not ‘Corporate Welfare’

There are two major flaws in framing Medicaid as corporate welfare that subsidizes low wages at big companies.

First, the claim lacks evidence. In 2014, the Affordable Care Act expanded Medicaid eligibility, giving researchers a chance to study its economic effects. Studies found no evidence that Medicaid expansion led employers to cut wages. If anything, the opposite occurred: Workers gained bargaining power.

Second, the theory doesn’t hold up. Standard welfare economics suggests that when the government provides health insurance and food assistance, workers have more—not less—leverage in wage negotiations. Without these safety nets, unemployed individuals may accept any job out of desperation. But with Medicaid and food stamps, workers can afford to hold out for better pay.

In short, programs like Medicaid and SNAP (food stamps) subsidize workers, not employers. Framing them as corporate welfare is both inaccurate and politically risky. If progressives want to reduce reliance on employer-based health insurance, attacking Medicaid is the wrong strategy.

Why the Proposed Fines Could Backfire

The new fines targeting companies with Medicaid-receiving employees would:

• Increase costs for low-wage employers, potentially leading to layoffs or reduced hiring.
• Discourage hiring from vulnerable populations, as companies may avoid workers who rely on public benefits.
• Reinforce the employer-based health insurance model, which progressives argue is inefficient and inequitable.

Instead of penalizing companies, policymakers should focus on expanding Medicaid and other safety-net programs to reduce financial pressure on workers—not punish the businesses that employ them.