GAO: State funding for Medicaid shifts back to providers

More states turn to non-traditional methods to fund the portion of their Medicaid obligation that is not covered by the federal government, according to a new report by the Government Accountability Office (GAO).

The states financed 26 percent of their Medicaid obligations, or $46 billion, from healthcare providers and local governments in fiscal year 2012, according to the report. The GAO obtained the data by querying individual state Medicaid agencies. The agency said it performed the survey to gauge whether the new forms of financing shifted some of the burden of Medicaid program spending back to the federal government.

Hospital bed taxes have become more popular in recent years for states to help fund their portion of the Medicaid program, with the states using the fees to then leverage matching Medicaid funds. One such tax in California was recently extended and will likely raise more than $10 billion over the next couple of years.

Such funding from providers has increased from about $10 billion in 2008 to just under $19 billion in 2012, an increase of nearly 90 percent, according to the GAO.

"States have increasingly turned to sources of funds other than state general funds to finance the non-federal share of their Medicaid programs," the report said. "These sources include levying taxes on healthcare providers and receiving funding transfers from local governments and local government providers to help finance the non-federal share of Medicaid. These financing arrangements can have the effect of shifting costs of Medicaid from states to the federal government, while benefits to providers, which may be financing a large share of any new payments, and the beneficiaries whom they may serve are less apparent."

The GAO recommended that the Centers for Medicare & Medicaid Services "develop a data collection strategy that ensures that states report accurate and complete data on all sources of funds used to finance the nonfederal share of Medicaid payments," but that it take no other actions regarding the new forms of financing.

To learn more:
- check out the GAO report