Medicaid Financing: States’ Increased Reliance on Funds from Health Care Providers and Local Governments Warrants Improved CMS Data Collection

Source: U.S. Government Accountability Office (GAO), GAO-14-627, July 29, 2014

From the summary:
GAO found, based on a questionnaire sent to state Medicaid agencies, that states financed 26 percent, or over $46 billion, of the nonfederal share of Medicaid expenditures with funds from health care providers and local governments in state fiscal year 2012. State funds were most of the remaining nonfederal share. Nationally, states increasingly relied on funds from providers and local governments in recent years to finance the nonfederal share, based on GAO’s analysis (see figure). In the three selected states this increase resulted in cost shifts to the federal government. While the total amount of funds from all sources, including state funds, increased during state fiscal years 2008 through 2012, funds from providers and local governments increased as a percentage of the nonfederal share, while state funds decreased. GAO’s review of selected financing arrangements in California, Illinois, and New York illustrates how the use of funds from providers and local governments can shift costs to the federal government. For example, in Illinois, a $220 million payment increase for nursing facilities funded by a tax on nursing facilities resulted in an estimated $110 million increase in federal matching funds and no increase in state general funds, and a net payment increase to the facilities, after paying the taxes, of $105 million….