Is it considered “waste, fraud or abuse” if state governments do it?
That’s a question we could ask about Montana legislators’ recent decision to divert federal Medicaid funds from their intended purpose to instead explore ways to expand access to private pre-schools (“House votes to charge hospitals for pre-schools,” AP in Missoulian, April 26).
While expanding access to early childhood education is a worthy goal, albeit controversial among some state legislators, it hardly meets Medicaid’s purpose of helping lower income people with medical costs. This misuse of funds also drives up federal Medicaid spending, with no benefit to intended recipients.
It’s ironic that many of the same legislators who decried the potential for abuse of Medicaid funds by beneficiaries — and who fought successfully in 2015 to add a work requirement and minimum co-payments — evidently see no problem in diverting federal funds to non-medical programs, with the “excess” of such diversion flowing into the state’s general treasury.
Montana has joined a growing list of states using the same dubious technique to bolster state revenues. Here’s how it works.
Medicaid is a federal-state partnership, under which the federal government reimburses states for a portion of their Medicaid spending — from a minimum of 50 percent up to 100 percent for newly enrolled beneficiaries under the Affordable Care Act, or “Obamacare”.
These federal matching funds are intended to encourage states to provide health care for their lower income citizens, at a lower cost for states.
States use different approaches to obtain higher Medicaid matching funds to divert to non-medical uses. The most common method is to make large payments to hospitals, nursing homes or other eligible institutions in excess of the cost of medical services these institutions provide, and then to take back those increased payments through taxes or other means.
Some states even hire consultants who specialize in crafting ways for states to maximize revenues from federal Medicaid funds.
In Montana’s case, according to AP, state officials obtained a higher Medicaid reimbursement rate for hospitals to the tune of $212 million over three years. Legislators then voted to impose a “temporary hospital community benefit assessment” on the state’s largest 14 hospitals.
This temporary tax — whoops, “assessment” — will increase state coffers by about $13 million over three years, of which $6 million is targeted for studying pre-school access.
Everybody wins, right? Well, maybe not.
As the U.S. Congress’ investigative arm, the General Accountability Office, noted in a 2004 report, “these state financing schemes undermine the fiscal integrity of the Medicaid program because they enable states to make to providers payments that significantly exceed their costs. In our view, this practice is inconsistent with the statutory requirement that states ensure that Medicaid payments are economical and efficient.”
Because this practice uses hospitals and other Medicaid providers as mere pass-throughs for federal funds, perhaps we should label it “official money laundering.”
Congress has been aware of the problem for decades and has made efforts to fix it, but creative new schemes continue to emerge in states determined to augment their share of Medicaid funds.
One way to fix this increasingly popular state practice would be to mandate that states can’t reimburse hospitals and other entities receiving Medicaid funds for more than they actually spend for medical purposes. However, this solution would entail even more bureaucracy and red tape than currently saddles states and Medicaid providers.
Medicaid accounts for roughly 10 percent of all federal spending. And, according to the Robert Wood Johnson Foundation, Medicaid is the single largest source of federal funding for Montana, accounting for one-third of all federal funds flowing into our state budget.
But as pressure builds to reduce spending at the federal level, rising Medicaid costs figure prominently in fiscal conservatives’ sights. Depriving lower income citizens of affordable health care would be an unfortunate outcome in the face of ongoing state misuse of Medicaid funds, estimated to be in the billions of dollars.
Any way you look at it, using Medicaid funds for their intended purpose really is a win-win proposition, as tax revenues are used efficiently and more people gain access to affordable health care.
Is anyone in Congress listening?
As a parenthetical note, I was dismayed to find while researching this column that historical federal budget information previously available on the website of the White House’s Office of Management and Budget no longer appears. Is this part of the administration’s wider war on facts? Whatever the motivation, it is, to quote our president, “Sad!”