This is what I don't understand either. I understand the desire to cut medicaid to reduce taxes and the size of government argument. But weren't there free market incentives they could have done as well?

Here's one: tax cuts to insurance companies based upon the number of people they insure over time, to help offset the cost of insuring sick people.

This seems like a no-brainer republican solution, which probably would have gotten a fair number of democrats on board.