Dear Chairman Guthrie, Chairman Carter, Chairwoman Kiggans:
In the wake of President Donald Trump’s sweeping mandate to increase efficiency in government, I am writing to highlight a concerning increase in state abuse of Intergovernmental Transfers (IGTs) to bail out state budgets with federal Medicaid dollars, and to urge you to conduct substantial oversight of this abusive and illegal practice.
States that are incapable of proper fiscal management due to their own overspending addictions continue to look for new revenue streams (usually tax hikes) rather than making the difficult decisions necessary to prioritize spending without harming taxpayers and the broader economy.
The newest gimmick that unsurprisingly comes from California has saddled American taxpayers in every corner of the country with additional debt. California and many of its localities are quietly bilking the Centers for Medicare and Medicaid Services (CMS) by artificially increasing the cost of certain Emergency Medical Services (EMS) to receive larger IGTs from the federal government for budget items unrelated to healthcare.
In 2022, CMS approved a drastic increase for Ground Emergency Medical Transportation (GEMT) reimbursement in California for public providers. Since then, fire departments that have never provided ambulance services have started to aggressively enter the marketplace in search of a financial windfall to paper over budget shortfalls of their own creation, using these excess dollars from the increased IGTs, not to provide better care, but to backfill their underfunded pensions.
In Marin County, California, for example, cost reports show that one ambulance ride was almost $20,000, while even California’s own Legislative Analyst office said that the cost per ride should be $750. What does this mean? California fire departments are willfully increasing GEMT costs so they can receive additional Medicaid funds from the federal government, ripping off taxpayers across the nation in the process.
Medicaid is jointly administered by the federal government and the states. The federal government provides at least $0.50 in federal matching funds, or “FMAP,” for every dollar in coverage provided by the states. It is easy to see a perverse incentive for budget-strapped states when higher healthcare costs somehow become economically advantageous.
In 2023, the Health and Oversight Subcommittees rightly opened an investigation involving the Department of Health and Human Services (HHS) and Centers for Medicare and Medicaid Services (CMS) regarding improper Medicaid payments. In April of last year, Rep. Brett Guthrie’s opening remarks on legislation that will improve Medicaid integrity addressed the rising costs of the program and the need to ensure that federal reimbursements to the states go where they are meant to. I couldn’t agree more.
CMS also knows this is a problem. In August of 2022, CMS sent out a letter to “remind states of existing federal requirements relevant to payment for GEMT services in Medicaid to assist them in developing state plan amendments (SPAs) and other proposals that are consistent with such federal requirements.” Further, CMS says states "should not shift costs to the Medicaid program that are not related to a Medicaid-covered service, such as GEMT, or allocate costs to Medicaid without using an appropriate allocation statistic to identify the portion of GEMT costs eligible for Medicaid payment."
Artificially inflating healthcare service costs and burdening unsuspecting taxpayers in other states with those expenses constitutes a deeply dishonest misuse of power. When healthcare costs are at historic highs, inflation is still out of control, and our federal debt is over $31 trillion, Americans quite literally cannot afford to subsidize California’s budget shenanigans while the U.S. government stands by, unconcerned. As an advocate for free markets and small government, a transparent government, and government spending that falls in line with economic reality, I am questioning whether CMS had noticed the increased cost for California’s Medicaid reimbursement, or if then-Secretary Xavier Becerra had decided to turn a blind eye to help his fellow Californians fill holes in their budget.
With Medicaid spending cuts all but assured, these fraudulent IGTs should be the first to go. Congress must investigate whether California has continued to request an inflated federal reimbursement rate for GEMT, and whether CMS should take a more active role in policing such behavior, especially given the Centers’ own guidance regarding what is and is not permissible within the federal Medicaid reimbursement framework. If such an investigation uncovers an abuse of federal tax dollars, California’s local governments should be required to return Americans’ money and implement measures that focus on government transparency and sound fiscal policy.
Sincerely,
Ryan Ellis
President
Center for a Free Economy
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