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<p>An Oregon state representative once called it a “dream tax.” States can use Medicaid to steal money from the federal treasury. It’s such a wonderful dream that Alaska is the only state in the nation that hasn’t leveraged it.</p>
<p>We’re not talking pennies here. The Congressional Budget Office figures that the 10-year cost of this tax scam is more than $600 billion, which is almost exactly what Republicans are eyeing in savings from Medicaid. Provider taxes are now the second largest source of funds for Medicaid.</p>
<p>Take California, which is the premier abuser of this scam. The state’s budget projects $119 billion in federal Medicaid funds – more than Florida’s entire budget – an increase of $11 billion from the prior year. American Commitment President Phil Kerpen notes that the increase alone is bigger than Nevada’s entire state budget.</p>
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This staggering number is hard to believe, but it’s right in Newsom’s budget.
The $118.8 billion Newsom is expecting in federal Medicaid funds next fiscal year represents a $22.4 billion increase (+23%) in just two years.
California expects more in federal Medicaid funding than… https://t.co/SDCOpZObIB pic.twitter.com/cAy4GYoSdc
— Phil Kerpen (@kerpen) February 27, 2025
And California makes clear who is picking up the tab, talking about a tax it imposes on state insurers: “While the tax is charged to health insurance plans, most of the burden of the cost of paying the tax falls on the federal government.”
This isn’t a new problem, either, and it’s one that both Democrats and Republicans have tried to fix for decades.
In the late 1980s and early 1990s, states using this gimmick pushed federal Medicaid spending up by 20% a year, resulting in a 1991 law aimed at curtailing the practice. But it didn’t work. From 2008 to 2015, for example, provider tax revenue doubled and the federal share of Medicaid spending climbed from 57% to 63%.
“Both George W. Bush and the Obama administrations recognized the problem of provider taxes and proposed limiting the amount that states could raise through them,” noted Brian Blase in a 2016 article published in Forbes.
Now, here’s the kicker.
In Bob Woodward’s 2011 book, “The Price of Politics,” he writes about budget negotiations during the Obama administration and notes that Republicans brought up the issue of Medicaid provider taxes with then-Vice President Joe Biden. Here’s how Woodward recounts the scene:
It’s a scam, Biden agreed. The states were gaming the system, taxing doctors and hospitals so they could get federal reimbursements and then returning the money to providers. Let’s call it like it is, and let’s just do this … It could save $40 billion. ‘If we can’t do this,’ the vice president said, ‘come on!’
Someone needs to ask Green – and by extension the rest of today’s corrupt Democratic party – why he’s willing to face congressional censure to defend a $600 billion tax scam that even Joe Biden has decried. Maybe follow Green around the Capitol, screaming the question while waving a cane in his face.
— Written by the I&I Editorial Board
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