Congress has a lot to tell their constituents about while they’re back home over the August recess. Republican members especially will be bragging about the Medicaid reforms they secured in President Trump’s One Big Beautiful Bill Act to reduce fraud and abuse, such as enrollment changes and work requirements for beneficiaries.
But one thing members can’t brag about is the failure to address one very ugly – and very expensive – intergovernmental transfer loophole that is just begging for attention when they return to Washington in September.
Known as IGTs, intergovernmental transfers are payments made by the federal government to state and local healthcare agencies when those agencies provide medical services to Medicaid recipients. Increasingly, some states like California are using IGTs to commit a kind of legalized Medicaid fraud, inflating the costs of things like ambulance services way beyond their market prices, using the difference to pad their budgets.
States like California are requesting what are known as State Plan Amendments from the federal government – waivers to ostensibly go above and beyond the normal services provided by Medicaid. However, the only thing above and beyond about these plans are the costs paid by federal taxpayers.
In California, the state is charging the federal government as much as $1,400 for an ambulance ride given by a public provider, something Medicaid would pay only about $118 for if it paid a private ambulance service – an increase of more than 10 times. Add in the fact that California often contracts ambulance services out to those same private providers (and pockets the difference), and the scheme becomes even more obvious.
And just to remove any doubt, the city of San Diego spelled out explicitly how this scheme works. Calling it an “alliance” with the City’s ambulance provider, Falck Mobile Health, the City said that it won’t actually be providing any new ambulance services – just receiving millions in new revenue.
But don’t worry, it’s not fraud – it’s an “Alliance Model,” where “ambulance bills for patients enrolled in Medi-Cal (California’s Medicaid program) are paid a base rate of $118.20, plus the new add-on amount of $946.92, for a total reimbursement of $1,065.12.”
All told, San Diego expects this new arrangement to generate a profit of $13.2 million over three years. None of that money is likely to go toward helping poor people get better health care, of course. Taxpayers across the country are paying for cities and the state putting the money back into their general funds, where it can be used for anything and everything that Democrat legislators can dream up!
Meanwhile, private providers are squeezed, leaving patients at risk of delayed care.
And make no mistake: if a private medical provider did what states like California are doing with IGTs, the federal government would put them in jail. That’s what happened this year in my home state of Arizona. Here, some dishonest nurses and medical clinics were billing Medicaid for medical services they either weren’t actually providing or were providing in excess of clinical recommendations.
The solution to state IGT fraud is simple: pay everyone the same, private or public. There is no reason the federal government should be paying 10 times the market price for something like ambulance services, especially when states like California are subcontracting these services out anyway.
Congress can act in two ways when it returns to DC. First, through an independent piece of legislation that should be a shoo-in for conservative Members. The other option is to mandate Medicaid payment parity between private and public providers in any future omnibus bills. Parity would remove the incentive for states like California to inflate the costs of services like ambulance rides so they can line their pockets with federal taxpayer dollars because state-owned providers would have to charge the same amount that private providers charge.
Legislation would also make it harder for a future administration to continue to grant the kind of administrative exceptions that currently allow some states to abuse the IGT process.
Republicans have rightly pushed hard and fast to help President Trump make important changes to how the federal government operates. Reforming IGTs to require cost parity with private providers is an easy fix that would save Medicaid tremendous amounts of money without putting vulnerable patients at risk – a truly beautiful thing.
