GOP targets Medicaid loopholes used by 49 states to grab federal money
In 1989, New Hampshire Republican Governor Judd Greg had a big budget hole that he didn’t know how to fill. His health secretary came up with a solution: the tax manipulation he learned through Grapevine would force Washington to send millions of states with additional Medicaid funds.
It was called the Medicaid Provider Tax and New Hampshire was one of the first states to try it. New Hampshire taxed hospitals and returned them dollars as a high payment for the care of Medicaid patients. On paper, taxes have inflated state Medicaid spending and allowed them to raise more matching funds from the federal government.
“That’s basically because it’s a state’s way of betting the federal government and there’s no better term,” Greg said recently.
What began as a creative budgeting in New England has snowballed over 40 years into the mainstay of Medicaid fundraising. 72 million American. It is located in all states except Alaska At least one Such a tax. In some states, provider taxes and related payments provide more than a third of the overall federal funds for the program.
Once these taxes took hold, Congressional Republicans are now considering cutting or terminating them as one way to achieve the sudden federal spending cuts proposed in the House budget. If so, it will save the federal government Approximately $600 billion Most of the chunks over the next decade $880 billion cut A House Committee overseeing Medicaid has been charged with discovery.
As Medicaid budgets tend to rely on provider tax strategies, this change could hit the most difficult states in Republican-led states, a recent analysis shows.
Still, the idea gained traction among conservative think tanks and Congressional Republicans. gimmick, scam and”Money laundering. ”
“This is how states can basically create federal money from thin air,” said the president of Paragon Institute. Recent papers It analyzes some of the most elaborate ways that states exploit loopholes. In Arizona, lawmakers set up hospital taxes in 2020, which allowed them to increase hospital payments. Over $1 billionwithout spending additional state funds. Blase encourages lawmakers to reform the system as part of the budget bill.
In its simplest form, tax operations work as follows: When Medicaid patients go to hospital, the federal government and state usually share the costs. The ratio varies from state to state, but depending on the poor state of the state, the federal government often pays about 60% of the bill.
States that use provider taxes to get more money usually start by paying more to hospitals. If the federal government pays 60% and the state pays 40% if the state pays between $1,000 and $1,030, the federal government is tipping at $618 instead of $600.
Taxes allow the state to actually make money and also raise hospital payments. Even if the state fully refunds the amount of taxes to hospitals, there’s an extra extra because new federal money has more than covering the differences.
Medicaid spends $870 billion Each year, states can generate tens of millions or hundreds of millions of dollars like this.
Over time, the rules became more complicated and as consultants developed new strategies, the funding mechanism became more complicated and it became more difficult to track money. However, measurements show that federal totals are increasing despite the official match rates not changing.
The government doesn’t know exactly how much money the state has raised through these tax and related strategies. The Centers for Medicare and Medicaid Services, which pay a federal share of the program, do not track all revenue related to provider tax. There is also no Medicaid Payments Advisory Committee, an organization created by Congress to analyze Medicaid spending.
For years, the use of provider taxes in New Hampshire was openly described as “.Mediscamby state officials. In other states, there is no very colorful e-musical representation like “.Matched with tax“Maine.”Maximizing Medicaid” was a broad term of office in the early 2000s when taxes fell off the ground.
The federal government is not intended to apply to all providers, not to wind drops to hospitals that treat many Medicaid patients, but to allow states to have provider taxes unless a certain percentage is exceeded. With government blessings, there are 19 different healthcare providers that can tax, not just hospitals. Dentists and even chiropractorsand many approved ways to repay them.
“It’s absolutely legal, and that’s the problem,” said Rodney Whitlock, vice president of McDermott+Consulting and a longtime Republican Senate employee who has worked on repeated, almost unsuccessful efforts to keep taxes under control.
The proposals spreading to Capitol Hill to ban taxes do not include provisions to replace lost dollars with new sources of funding. In some places, more than a third of federal Medicaid spending will disappear. Some people probably cut Medicaid compensation for working-age adults to reduce the amount of money they come in. Others look into other parts of the state budget for cuts in payments to hospitals and nursing homes, or for cuts like public education. Some may raise taxes.
“If you take away this money, it’s a policy decision,” said Robin Ludwitz, director of the Medicaid program at KFF, Health Research Group’s Health Research Group. “That’s not a problem of cracking down on fraud.”
The federal government usually spends greater distributions in poor states that tend to be in the South, with many of the states that aim to lose most from policy being controlled by Republicans.
With no accurate federal estimates of tax impact, a team of researchers at the Hilltop Institute in Baltimore County, University of Maryland, piecing together data from various sources to provide a rough calculation of how much taxes are currently being generated by the nation.
Using conservative assumptions, this analysis found that this change could mean at least $2.7 billion in budget holes for South Carolina next year. In Mississippi, where the Medicaid program also relies heavily on provider taxes, the state could lose about $2.1 billion in federal government.
Other cuts that lawmakers are considering – like Reducing spending Obamacare’s Medicaid expansion will be cut more disproportionately from rich states led by Democrats. However, these policies may not have the same rhetorical appeal as cracking down on provider taxes.
The federal government has repeatedly tried and failed provider taxes, both Democrats and Republicans. In 2006, federal officials tried to do that through regulations, and Congress largely blocked efforts in the face of lobbying from governors and hospitals. In the 2010s, President Obama issued two budgets suggesting restrictions on use, but Congress refused to pursue the idea.
Hospitals continue to discourage Congress from making cuts. “For those who specifically suggest that these are illegal, we can’t go far from the truth,” said Stacey Hughes, executive vice president of the American Hospital Association. “These supplementary payments are scrubbed and we have done substantial regulatory scrutiny.”
The government’s watchdog agency has also prepared detailed reports and recommendations on reform. a 2020 Report The government’s Office of Accountability estimates that states, on average, use taxes to force the federal government to pay an extra 5% of Medicaid bills. Inspector’s office investigation In 2018, the government recommended that the current regulations be “reevaluated.” The Biden administration has created regulations prohibiting pooling arrangements that shift funds to ensure that all hospitals recover their providers’ taxes. It will not start until 2028. The Trump administration is working on regulations that curb some Medicaid taxes, but the full language has not yet been released.
“This is the overall issue of the conversation here: we were supposed to have it in the early ’90s,” said Andy Schneider, a longtime Democratic Congress staff member who is now a professor of public policy research in Georgetown.
After his stint as Governor of New Hampshire, Greg was elected to the Senate, where he chaired the Budget Committee. When he first encountered Medicaid provider tax as governor, his state was in a deep financial hole. When he arrived at Congress, he began to see them differently. But they were so entrenched that it was difficult to reform.
“We were in crisis at the time, so we were happy to be able to film the federal government in the game,” he said. “I always thought it would go away. It wasn’t. It continued and became a communist of fait, which has been going on over and over.”
Additional tasks Gilbert Gates and Alicia Parapiano.
