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Stop Another Major Medicaid Money-Laundering Scam Before It’s Too Late

States are abusing intergovernmental transfers at patients’ and taxpayers’ expense.

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Dr. Oz, the Administrator at the Centers for Medicare and Medicaid (CMS), has been laser-focused on combatting Medicaid waste, fraud, and abuse. Over the past month, he has travelled to Minnesota and California to highlight egregious home health and hospice schemes. One often overlooked scheme is the abuse of intergovernmental transfers (IGTs). CMS should put a stop to how states use IGTs to favor government-operated providers at patients’ and taxpayers’ expense. 

Congress created Medicaid to help America’s most vulnerable access health and long-term care services. Both the federal government and the state were always meant to share financing responsibility. But states have long taken advantage of the federal government’s open-ended Medicaid matching structure by using payment schemes to maximize federal funds and finance corporate welfare for politically favored providers. In one common Medicaid money-laundering scheme, states tax providers, send that money right back to them to trigger federal matching funds, split the proceeds with the providers, and then repeat the cycle — all without meaningfully contributing their own funds.

As an illustration of how provider taxes work, let’s say a state imposes a $1 million tax on hospitals. The state then takes that same $1 million and spends it........

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