Medicaid

Medicaid, which provides health insurance for qualified low-income persons, is jointly funded by the federal government and the states. Because of soaring health care costs during the past decade, states have been searching for new ways to help finance the $125 billion Medicaid program. Some states are now using dubious financial arrangements to collect federal funds without committing their own matching amounts, thus increasing the share of Medicaid costs borne by the federal government. This report (1) examines the financial arrangements used by states to inflate the federal share of Medicaid program expenditures, (2) describes the various techniques that states use to obtain federal funds for their basic Medicaid and disproportionate share hospital programs, and (3) looks into whether states are using their federal matching funds to provide medical services to Medicaid patients.

GAO found that: (1) states have used various financial arrangements to obtain federal Medicaid funds without committing their share of matching funds and to increase the federal share of Medicaid expenditures; (2) some states have used federal funds to finance their Medicaid programs, while other states have redirected their funds into their state treasuries; (3) although recently enacted legislation focuses on limiting states' improper use of federal Medicaid funds, Michigan has taken action to ensure its federal Medicaid funding level in 1995; and (4) the Medicaid program should prohibit states from using illusory financial arrangements so that federal funds can be diverted to those medical facilities providing care.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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