Occasionally uncircumcised babies and toddlers DO get infections. Again, most middle-class moms would run their kids right to the pediatrician, and treating the infection would be no problem. Welfare mothers, on the other hand, would most likely let the infection get quite extreme before showing up at the emergency room, which ultimately costs the state more.
The final issue is the link between no circumcision and cervical cancer in women. Right now there's an indication that lack of circumcision leads to cervical cancer in the female partner. This is a significant public health problem in and of itself, and if the woman who gets cervical cancer is also on Medicaid, then there's just more public health cost down the line. While no one should be *forced* to have their boy circumcised, on the other hand it seems that paying for it for the poor would be justfied as a public health measure.