The Wall Street Journal Editorial Board: The Great California Medicaid Grift
WASHINGTON, D.C. —An opinion piece released last week from the Wall Street Journal Editorial Board argues that while the Trump Administration’s crackdown on Medicaid fraud is a critical first step, the deeper problem is a broken Medicaid financing system that rewards states for spending more and provides little incentive for states to combat fraud.
WORD ON THE STREET
From the Wall Street Journal Editorial Board:
"Centers for Medicare and Medicaid Services Administrator Mehmet Oz said this week that the feds have suspended payments to 800 hospice and home healthcare agencies suspected of fraud in Los Angeles. That’s good to hear. But the underlying problem is that Medicaid’s design rewards states with more money when they waste money.
"Since 2019, California’s Medicaid spending has more than doubled to $220 billion. The federal share is projected to total $138 billion in the coming fiscal year. That’s a $32 billion increase from two years ago and more than the general fund budget of every other state.
"For every dollar California spends on traditional enrollees (i.e., sick and disabled), it receives another dollar from the feds. For healthy adults covered by the ObamaCare expansion, it gets $9. This system is a disincentive to police fraud and an incentive to add nonmedical benefits that are susceptible to fraud.
"In the name of identity politics, California pays for “traditional health care practices,” including tribal prayers, exorcisms and herbal medicines. Yes, exorcisms. Apparently the need is great in the state.
"The state also uses Medicaid dollars to subsidize housing, meal deliveries and in-home chefs for patients with chronic diseases. Thousands of businesses have popped up that literally cater to Medicaid patients.
"California also allows Medicaid dollars to subsidize activities “that support an eligible member’s inclusion in the community,” including sports club fees, gym memberships, bicycles, scooters, music and art lessons.
"The state has even used Medicaid funds to repay student loans for healthcare workers—as much as $120,000 for “wellness coaches” and “peer support specialists”—under the guise of recruiting to the field. Is it any surprise that healthcare and social assistance account for all of the state’s net job growth since the start of the pandemic?
"Waste and fraud occur in other states, including some governed by Republicans. But most evidence indicates it’s more common in California, whose political leaders view more Medicaid spending as desirable for its own sake.
"Freezing Medicaid funds for profligate states is useful. But the grift will continue until Congress closes the open spending bar."
THE BOTTOM LINE
The Wall Street Journal Editorial Board highlights exactly why Republicans included the strongest anti-fraud reforms in history in the One Big Beautiful Bill and why the Trump Administration’s “War on Fraud” is so necessary.
The $1.3 billion frozen payment is a drop in the state’s Medicaid budget. According to officials, 90 percent of providers for which CMS has suspended payments have not even contacted CMS, as any legitimate business normally would. It is clear that there is much more work ahead to restore accountability and protect the integrity of these programs in their mission to serve the most vulnerable.
