Medicaid’s billions attract fraudsters and profiteers
by Grover Norquist and Patrick Gleason · The Washington TimesOPINION:
“That’s where the money is” was 20th-century outlaw Willie Sutton’s reply when asked why he robbed banks. That same rationale explains why Medicaid, the largest and fastest-growing spending category for state governments, is a magnet for fraudsters.
The extent to which Medicaid has become a vehicle for looting government coffers began garnering national attention earlier this year, after citizen journalist Nick Shirley started posting footage from his firsthand investigations into suspicious recipients of Medicaid funds.
“Medi-Cal (Medicaid) program budget has more than doubled by $114 BILLION while enrollment has only gone up by 0.72% over 4 years,” Mr. Shirley pointed out in a post on X. “Prime example of fraud, waste, and abuse of taxpayers dollars.”
Although the extent of Medicaid fraud is likely greater in deep-blue states such as California, Minnesota and New York, it is also a problem in red states.
Centers for Medicare & Medicaid Services Administrator Mehmet Oz and CBS News followed Mr. Shirley’s lead with similar investigations into the apparent hive of shady Medicaid service providers operating in Los Angeles. More recently, the White House and CMS announced that they are conducting a 50-state audit of Medicaid providers, which will provide Americans with a better sense of the scope of Medicaid fraud occurring and how it varies from state to state.
However, illegitimate healthcare providers scamming billions of taxpayer dollars out of Medicaid are only part of the story. Arguably, just as scandalous are the shady but technically legal maneuvers performed by state and local officials aiming to ratchet up Medicaid spending to subsidize general spending with more federal dollars. Here, too, California is an egregious offender.
A new Paragon Health study examines the problem, looking at “how states use Medicaid financing schemes to shift costs from state budgets to federal taxpayers, escalating healthcare costs and distorting the program’s purpose.”
An example of this in the Golden State is how local governments have been taking over EMS systems and using associated intergovernmental transfers to pad local budgets with more federal dollars.
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A complaint filed with the U.S. Department of Health and Human Services Office of Inspector General on June 8 sheds light on “the financing structure used to generate federal Medicaid matching funds for ground ambulance transport services in Orange County, California”:
“Municipal fire agency ambulance providers simultaneously participate in two intergovernmental transfer financing mechanisms for the same covered Medicaid transport services: the statewide Public Provider Ground Emergency Medical Transportation Intergovernmental Transfer program (PP GEMT IGT) administrated by DHCS and the CalOptima-administered Voluntary Rate Range Intergovernmental Transfer (VRR IGT) program operating within Orange County.”
That June 8 complaint documents how local officials concurrently operate redundant financing mechanisms “to receive multiple Medicaid-linked payments for the same covered transport service.” Medicaid-linked reimbursement for government-owned ambulance service, the complaint adds, “materially exceeds reported provider cost and approaches or exceeds commercial insurance charges for identical ambulance transports.”
Although Medicaid pays private ambulance providers a fixed $339 per transport, local-government-run ambulance providers are paid $1,636.81 per transport.
“In Huntington Beach, aggregate reimbursement reaches approximately $3,226.15 per Medicaid transport against a reported cost of $676.44,” the complaint notes. “In Newport Beach, total Medicaid reimbursement approaches or exceeds the City’s commercial charge when both programs are included.”
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In addition to outlining how Medicaid is overpaying for local-government-run ambulance services, the June 8 complaint documents “substantial and unexplained variation in reported cost per transport across neighboring cities operating in the same regional labor market, as well as significant inconsistencies within individual cities’ cost reporting across Medicaid cost reports and state law-based rate-setting studies.”
The complaint filed with HHS on June 8 is perhaps the most comprehensive documentation of this creative scheme, in which local governments exploit Medicaid’s overly generous payments for government-run ambulance service to prop up higher levels of spending.
As the complaint notes, the goal is to make it so Medicaid-linked payments “are treated as general fund revenue and used for capital purchases, personnel costs, pension obligations, and service expansion.”
As obscure and convoluted as this IGT-focused transfer scheme is, comments made by Mr. Oz in late April indicate that this problem is on the Trump administration’s radar. The complaint filed with HHS suggests that schemes such as this “warrant CMS review,” which is exactly what they will get as part of CMS’s ongoing 50-state audit.
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• Grover Norquist is president of Americans for Tax Reform, an organization founded in 1985 at the request of President Reagan. Patrick Gleason is vice president of state affairs at Americans for Tax Reform and a senior fellow at the Beacon Center of Tennessee.