The United States is navigating an increasingly dangerous security environment. The recent fighting involving Iran may have subsided for now, but it demonstrated how quickly a regional crisis can test both U.S. military preparedness and the medical infrastructure that supports it. Pentagon planners are also war-gaming a Chinese invasion of Taiwan that could produce casualty levels not seen since World War II.

Washington should be strengthening its domestic medical readiness because, in any serious armed conflict, the burden of war does not end on the battlefield. It extends into the American healthcare system that must receive, transport, stabilize, and treat wounded service members once they return home.

Rather than strengthening wartime medical readiness at home, Washington continues to tolerate a state-level Medicaid financing scheme that is steadily eroding the civilian emergency transport network the military would rely on during a major crisis. California is one of only five locations in the country whose civilian healthcare systems are designated by the National Disaster Medical System (NDMS) to receive military casualties during a large-scale conflict. That makes what happens to its emergency transport infrastructure a matter of national consequence, not merely state fiscal policy.

Those concerns have now been reinforced by the Centers for Medicare & Medicaid Services itself. A newly proposed CMS rule seeks to rein in what the agency describes as the misuse of Medicaid dollars by tightening limits on state-directed and targeted payment arrangements that can drive reimbursements far above normal levels, including for ambulance providers. Key phase-down provisions would begin in 2028, with broader restrictions extending into 2029.

Put simply, the federal government is finally acknowledging that some Medicaid financing arrangements have drifted away from paying for patient care and toward maximizing federal reimbursements. That is precisely why California’s ambulance reimbursement policy deserves immediate scrutiny. It is not merely an unusual funding mechanism but a distortion that weakens a civilian medical transport system the nation may one day depend upon during war.

California operates a program under which local governments transfer funds to the state in order to claim federal Medicaid matching dollars. The state then reimburses public ambulance providers—primarily fire departments—at rates that dramatically exceed those paid to private operators. Public providers have recently received roughly $1,168 per transport, while private ambulance companies were reimbursed just $339. Governor Gavin Newsom’s administration is now seeking to raise reimbursements for public providers to nearly $1,600 per transport.

Between April 2023 and December 2026, this mechanism was or will be used to draw down more than $19 billion in federal funding. Washington supplies the federal match, government providers retain the surplus, and private ambulance companies are increasingly squeezed out of the market.

This is not merely a fiscal distortion. Viewed through the lens of the recent Iran conflict and continuing international instability, it is also a military readiness issue.

The National Disaster Medical System was established in 1984 to care for U.S. military casualties returning from major overseas conflicts. It mobilizes civilian hospitals, medical personnel, and ground transportation networks to support wounded service members. That dependence on civilian capacity is substantial. Emergency medical service agencies respond to more than 40 million calls each year, and most ambulance services are operated by small, non-governmental providers. Private ambulance companies are therefore not peripheral to the system. They represent a critical component of the reserve surge capacity that would be required during a large-scale military emergency.

The implications extend well beyond California. If the conflict involving Iran reignites, or another overseas crisis draws U.S. forces into sustained combat, wounded service members evacuated from the region will depend on America’s civilian ambulance networks for transport from military airfields to civilian trauma centers.

A Taiwan contingency presents another set of serious challenges. Defense planners have increasingly warned about the possibility of a Chinese invasion of Taiwan triggering a broader regional conflict. An Army Medical Concept report concludes that, in a large-scale Indo-Pacific war, domestic civilian medical networks will become critical to casualty care. California’s military installations and hospital systems form the backbone of that reception chain. A weakened emergency medical system in California is therefore not an abstract policy concern but a genuine vulnerability with life-and-death consequences.

Behind those reimbursement figures are service members—wounded, evacuated, and dependent on an ambulance network Washington is simultaneously funding to fail. The bill comes due twice: first through Medicaid subsidies flowing to California’s government providers, and then through additional defense spending needed to repair the readiness gap those same subsidies create.

The policy solutions are straightforward. The Centers for Medicare & Medicaid Services should reject California’s pending State Plan Amendment, which would further widen this reimbursement disparity. Congress should require reimbursement parity and prohibit states from paying materially higher Medicaid rates to public providers than to private operators providing equivalent services. And the Trump administration’s Task Force to Eliminate Fraud should treat this $19 billion diversion as a priority for investigation—not only as a matter of fiscal accountability but also as a potential wartime readiness risk.

Military readiness is usually discussed in terms of troop strength, weapons systems, and the nation’s ability to deter or defeat adversaries. Yet readiness also means ensuring that a wounded Marine evacuated from combat arrives home to a dependable ambulance system waiting when the aircraft lands in California. California’s reimbursement policy is steadily weakening that system. Correcting it is not simply a matter of fiscal integrity. It is a national security imperative.