The feds should treat known waste and ineligible spending that state agencies refuse to clean up the same way they treat fraud.
The feds should treat known waste and ineligible spending that state agencies refuse to clean up the same way they treat fraud.
A merica’s entitlement programs are becoming unsustainable, with a mounting debt that carries around $1 trillion in yearly interest payments. Medicaid is a major contributor, both having the fastest growth of any entitlement program and, unlike Social Security and Medicare, lacking a trust fund to back it. As the recent hiccups in the bond markets made plain, the United States may soon reach a day when it can’t borrow nigh-unlimited amounts of money to fund entitlements.
Medicaid’s spending growth outpaces nearly every other federal program. An astonishing one in four federal Medicaid dollars is believed to be wasted.
In addition, Trump’s Centers for Medicare and Medicaid Services (CMS) under Mehmet Oz is tightening fiscal rules on state-level spending. This includes targeting fraud as CMS threatens to withhold funding from blue states such as Minnesota that refuse to protect Medicaid from criminals.
All this is delivering results — the Trump administration notes that its anti-fraud efforts alone have saved $5.6 billion in just six months.
Medicaid is a federal program, but it’s administered by the states. Each state sets benefit and eligibility limits, devises its own funding formulas, and oversees the bureaucracy that provides health-care coverage to tens of millions of low-income Americans. With Covid, the federal government dramatically increased its share of funding, setting off a spending-growth run by free-riding states.
It’s not just the feds and fraudsters who are bankrupting Medicaid; it’s these administrators at the state level. A recent drama in Florida shows just how bad these state bureaucracies can be.
It began when, despite Governor Ron DeSantis’s best efforts to root out Medicaid abuse, Florida’s Agency for Health Care Administration (AHCA) — which oversees the state’s Medicaid funding — decided to cover so-called behavior analysis services (BAS) under Medicaid’s traditional coverage.
The problem is that BAS is intended specifically for (and used almost exclusively by) children with autism and developmental delays, yet the AHCA, when devising its funding formula, assumed it applied evenly across Florida’s regions and demographics.
In other words, a service for kids was funded as though it also covered adults and seniors. This drove a significant over-subsidizing of BAS that drained money from the general Medicaid fund for pediatrics in Florida.
As this illustrates, small bureaucratic calculations can cause big chaos; we’ve seen this many times before. Yet — and this is where the true bureaucratic folly comes in — the AHCA has yet to correct its mistake.
Despite being repeatedly apprised that BAS was defunding children’s health care — despite being taken to court over its blunder — the agency has crossed its arms and refused to act.
Some of this can be chalked up to the usual bureaucratic inertia. But some of it is also that the states aren’t properly incentivized to crack down on lousy funding formulas and runaway Medicaid spending.
Medicaid currently operates on a matching grant system where, for every dollar spent by a state, the federal government matches with a dollar — or as high as $9. This gives free-riding states an incentive to operate leaky ships, assuming Washington will foot the bill for whatever they claim to need.
It’s time for the Trump administration to leverage this generous federal spending so the states clean up their act. CMS should take a fine-tooth comb to states’ funding formulas and threaten to withhold federal matching until they cut out the excess.
States are already required to submit their payment rates to CMS for review and approval. This gives Dr. Oz all the authority he needs to make sure their funding formulas are above board.
The feds should treat known waste and ineligible spending that state agencies refuse to clean up the same way they treat fraud. Both are a disservice to the taxpayer — and with the national debt having just hit $40 trillion, both are unsustainable.
The Trump administration deserves credit for finally rooting out the rot in our entitlements system. For the behavior analysis services program in Florida, this would mean making sure Florida’s children have a fiscal future — and the pediatric care they need.