Each state runs its own Medicaid program and funds it in conjunction with the federal government. The feds give each state a different amount of money, called the "federal medical assistance percentage," or FMAP.
By law, the federal government must cover at least 50% of a state's Medicaid expenditures. In most states, it covers more, up to a maximum of nearly 77% in Mississippi. Wealthy states are supposed to get less federal assistance than poorer states.
Healthcare providers have figured out how to take advantage of this system. They lobby states to impose "provider taxes." Under these schemes, states "tax" providers and then send the money right back to them as higher Medicaid reimbursement rates. The federal government counts those dollars as additional state Medicaid expenditures—and then sends more money under the terms of the FMAP.
Under the standard FMAP, $100 of financing gimmicks yields $150 in federal funds for the state.
But the states that expanded Medicaid to able-bodied adults making up to 138% of the federal poverty level under Obamacare—now 40 states and the District of Columbia—can use provider taxes to extract much more from the federal government.
By law, the federal government must cover at least 50% of a state's Medicaid expenditures. In most states, it covers more, up to a maximum of nearly 77% in Mississippi. Wealthy states are supposed to get less federal assistance than poorer states.
Healthcare providers have figured out how to take advantage of this system. They lobby states to impose "provider taxes." Under these schemes, states "tax" providers and then send the money right back to them as higher Medicaid reimbursement rates. The federal government counts those dollars as additional state Medicaid expenditures—and then sends more money under the terms of the FMAP.
Under the standard FMAP, $100 of financing gimmicks yields $150 in federal funds for the state.
But the states that expanded Medicaid to able-bodied adults making up to 138% of the federal poverty level under Obamacare—now 40 states and the District of Columbia—can use provider taxes to extract much more from the federal government.
End Medicaid Money Laundering
A new Paragon Health Institute study on Medicaid financing exposes how state governments use provider taxes to extract much more from the federal government.
www.forbes.com
