Stopping California’s Shell Game
This shell game has widened for years, but California’s recent scheme has exposed the extent to which states have gone to abuse provider taxes. California tripled the provider tax it imposes on Medicaid managed-care plans beginning in 2023, then recycled every penny through higher capitation payments to those same plans. Because the inflated payments looked like legitimate Medicaid spending, Washington reimbursed about sixty cents of every dollar, leaving the state with a multibillion-dollar windfall it could spend on providing Medicaid to illegal immigrants and eliminating the asset test for Medicaid, thus providing access to wealthy Californians. Across the four fiscal years that run from April 2023 through December 2026, the maneuver will pour more than $19 billion from the federal government into California coffers without a dime of real state contribution.
For those who care about fiscal responsibility, constitutional government, and the integrity of the safety-net, the restrictions placed upon the provider tax money laundering is a milestone. The nation’s fiscal condition and Medicaid program will be stronger. That, in my view, is a beautiful outcome indeed.