Established in 1965, Medicaid is a joint federal-state program created to provide health care to low-income individuals. Each state administers its own Medicaid program (e.g. California has “Medi-Cal”) while the federal Centers for Medicare and Medicaid Services monitors its efforts. The programs are funded by both states and a federal matching formula that ranges as a high as 83% for poorer states. Preserving the integrity of these matching funds is essential to getting the best health care results for low-income individuals.

For almost 15 years now the independent Government Accountability Office (GAO) has been issuing reports on certain behaviors by state governments that manipulate these funding formulas to the detriment of low-income beneficiaries everywhere. Past GAO report titles include:

• Medicaid: States Use Illusory Approaches to Shift Program Costs to Federal Government ( ^[1]August 1994) ^[1]
• Medicaid: Questionable Practices Boost Federal Payments for School-Based Services ( ^[2]June 1999) ^[2]
• Medicaid: Intergovernmental Transfers Have Facilitated State Financing Schemes ( ^[3]March 2004) ^[3]
• Medicaid Financing: States’ Use of Contingency-Fee Consultants to Maximize Federal Reimbursements Highlights Need for Improved Federal Oversight ( ^[4]June 2005) ^[4]
• Medicaid Financing: Long-Standing Concerns about Inappropriate State Arrangements Support Need for Improved Federal Oversight ( ^[5]November 2007) ^[5]

To combat these abuses, the Centers for Medicare and Medicaid Services issued regulations ^[6] that would end some of the most common questionable practices, including:

• Intergovernmental transfers: Caps the amount states could pay certain providers at actual cost and enable the federal government to recoup overpayments.
• Targeted case management: Clarifies which services are not medically necessary and end federal payments for those that did not qualify.
• Administrative costs: Ends federal payments for excessive administrative overhead and for certain transportation services outside the scope of Medicaid.
• Graduate medical education: Since supporting graduate medical education is not a direct Medicaid service, payments for these activities would be eliminated.

Unfortunately, the House moved last week to block these efforts to save Medicaid, passing a bill forbidding the Centers for Medicare and Medicaid Services from adopting its proposed regulations. While it looks like conservatives in the Senate may act to save these regulations ^[7], Congress ought to show it is serious about saving this program by honestly tackling these issues.

If Congress does not allow the administration’s regulations to become law, then it should at least pass its own legislation that addresses the very real waste, fraud and abuse issues raised in the GAO reports. For liberals who want to dramatically expand the government’s role in providing health care, reining in these abusive costs is a threshold issue of credibility. For the rest of Congress, this is a critical test to see if lawmakers are serious about entitlement reform and the long-term fiscal health of this country.

Quick Hits:

• According to Gallup ^[8], 46% of Americans report that recent food price increases are causing them financial hardship — but the burden is not being felt by Al Gore and other ultra-wealthy environmentalists who support government mandates on ethanol. Instead it is disproportionately felt by those earning less than $30,000 a year.
• Justice John Paul Stevens, who saw voter fraud first hand growing up in Chicago ^[9], wrote the majority decision in yesterday’s Supreme Court case affirming Indiana’s voter identification law.
• The Washington Post ^[10] urges Congress to reject “partisan gamesmanship” and instead “respect the judgment of District leaders in giving parents a choice in one of the most crucial aspects of their children’s lives” — the D.C. Opportunity Scholarship Program, which provides grants for low-income children to attend private schools.
• Hillary Clinton has requested nearly $2.3 billion in federal earmarks for 2009, almost three times the largest amount received by any other single senator this year ^[11].
• Despite the fact that gray wolf populations have grown beyond the Fish and Wildlife Service’s goal ^[12] of 300 to 1,500, a dozen environmental groups sued the federal government Monday to return the gray wolf back to the endangered species list.