Without strong rules, states milk Medicaid

Posted: Friday, September 08, 2000

The following editorial appeared in today's Washington Post: The states are forever complaining about excessive federal regulation. Federal aid comes wrapped in too many rules, the governors say; why not just give us the money and get out of our energetic way? But the answer is, in part, that without the rules the states will rip off the federal programs. The record is clear; the latest example involves, once again, Medicaid, by far the largest of the grant programs.

The federal government reimburses the states for a little over half the cost of Medicaid, the health care program for the poor. What the states have once again done is find a legal way to pad their bills. They overstate their costs, the feds pay half the overstated amounts, and the states walk away with a dividend that they can use for other purposes. Sometimes those involve health care, even health care for the poor, but sometimes not. In effect, the accountants have converted Medicaid into a form of general revenue sharing.

No one knows the full extent of the phony billing, but more than half the states are either using the current ploy or preparing to do so. The extra cost to the feds is currently estimated to be between $3 billion and $4 billion a year, and rising. The cost of Medicaid has continued to rise in recent years even as the caseload has declined; the increase in phony billing is thought to be the principal reason why.

The administration will shortly publish a proposed regulation to stop what amounts to theft on the part of the states. But if past is prologue this sort of thing has happened before it will take awhile to cut off the funds. The states use the poor as pawns; they warn that an end to their scheme will have dire consequences for the health care of the poor. No politician, nor administration, is eager to have those laid at its doorstep, least of all in an election season.

At a Senate Finance Committee hearing the other day, Chairman William Roth said the health care program for the poor has been turned into "a bank account for state projects having nothing to do with health care." The practice "cannot . . . continue," he intoned. But it's unlikely that Congress will take action; too many members, including many who deplore the cost of the program, come from states that benefit. The administration should use its regulatory powers, said the chairman. No matter that he and others who feel the same way are normally foes of regulation. What are regulators for, if not to be heavies while politicians flee?

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