Gavin Newsom’s Big Ambulance Scam

In the wake of a late 2025 report finding that Medicaid fraud in Minnesota alone has cost taxpayers approximately $9 billion since 2018, members of Congress have shown strong interest in further investigating the extent of Medicaid fraud across all 50 states. “The fraud in California, New York, and Illinois is far greater than in Minnesota,” Elon Musk recently posted on X, and federal and state government leaders are keen to learn about how bad the damage truly is. With Medicaid now the largest and fastest-growing category of state government spending, governors and state legislators have a major stake in this effort.

While blue-state governors and legislators have echoed congressional Democrats’ calls for the repeal of Medicaid spending reductions enacted by Congress last year, those demands are now being undercut — not only by the Minnesota fraud scandal, but also by the way in which officials across the country are gaming Medicaid in order to draw down more federal tax dollars. Consider the way in which some state and local governments, particularly in California, are inflating ambulance service reimbursements to take in more federal taxpayer dollars.

It is well documented that intergovernmental transfers (IGTs) from local governments to state governments are being used to increase the reimbursements paid out by the U.S. Centers for Medicare and Medicaid Services (CMS). In California, a state policy change approved by CMS in 2022 allowed California to nearly triple Medicaid reimbursement rates for ambulance services operated by government-run providers. In the aftermath of that change, the rates charged by private ambulance providers stayed consistent at $339, while the reimbursement rate for the same service provided by a public provider exceeded $1,000.

Some local governments in California that took over ambulance services to game the reimbursement disparity between public and private emergency medical transport (EMT) providers ended up subcontracting the work back to private ambulance service providers. Such a maneuver allows state and local governments to keep the difference between the $339 rate still charged by the private ambulance provider and the more than $1,000 the federal government reimburses California for that same service.

In 2023, the first year that this public-private ambulance reimbursement disparity was in effect, the federal government paid $1,065 per transport for ambulance service from a local government-run provider in California. That rose to $1,168 in 2024 and will rise again to $1,597 if California’s most recent request to CMS, which was sent in August 2025, is granted.

The way in which California is gaming the CMS reimbursement disparity for ambulance services will strike some as fraudulent, but the real scandal is that it’s totally legal. Congress could — and ought to — change that. When it comes to reforms that would reduce health-care spending without diminishing quality of care, federal legislation to bar public-private EMT provider reimbursement disparities like those in California should be seen as low-hanging fruit. In addition to being a cost-saving reform that doesn’t affect quality of care, Senate and House members from the other 49 states have an interest in preventing their constituents’ federal tax dollars from being used to subsidize Sacramento’s massive spending appetite.

The California press corps is unlikely to press Gavin Newsom on his use of IGTs and inflated ambulance service reimbursements to drain more money from a federal government that is already more than $30 trillion in debt. But should he run for president, it’s something that a primary opponent or member of the national media should press him on.

Federal legislation requiring payment parity for public and private ambulance service providers would save taxpayer dollars by ending the IGT/CMS reimbursement scheme weaponized by California. Congress and the Trump administration could rectify the perverse incentives built into the existing system by stipulating that, when it comes to accessing federal dollars, public EMT providers cannot have an advantage over private sector competitors.

The One Big Beautiful Bill Act that President Donald Trump signed into law last July included a provision restricting state lawmakers’ ability to game the federal Medicaid matching fund system by raising hospital provider taxes. Unfortunately, the bill did not also crimp states’ ability to pull down more federal dollars through other schemes involving IGTs. Whether as part of a future reconciliation package or through stand-alone legislation, that is a step that House Speaker Mike (R., La.) and Senate Majority Leader John Thune (R., S.D.) should consider taking while they still have the majorities to do so.