California’s $119 Billion in Fed. Medicaid Spending – More than Florida’s Entire State Budget

“California Is Getting Rich Off of Medicaid”, reports Paul Winfree, Former Director of Budget Policy at the White House. “California openly brags about using a provider tax scam to avoid paying what is supposed to be the state share.”  

Winfree, Founder, President & CEO of EPIC, quotes a Wall Street article: “California is expecting to take in almost $120 billion in federal Medicaid funds in the coming fiscal year – a gift from Uncle Sam. That’s up 23% over two years.”

“This is how the California government describes the laundering via provider taxes”:

“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 is because the tax is designed to draw down more federal Medicaid funds, enabling the state to generate a large fiscal benefit while using the Medi-Cal program to cover most of the cost of the tax to health insurance plans.”

Crazy, right?

“This staggering number is hard to believe, but it’s right in Newsom’s budget” courtesy of the Legislative Analyst’s Office:

California will receive more in federal Medicaid funding next year than Florida’s entire state budget – and just the increase they want is more than Nevada’s entire state budget, Unleash Prosperity says.

California’s Medi-Cal is California’s implementation of the federal Medicaid program, which offers free or low-cost health coverage to people who qualify.

Curiously, CalMatters is more concerned about what the Trump administration may cut because “it’s for the children”:

“California has a lot to lose if Trump slashes Medicaid. Seniors, kids and more could face coverage cuts.”

Hmmm. Maybe if Governor Gavin Newsom wasn’t paying for millions of illegal aliens in Medi-Cal benefits, Seniors, kids, widows, orphans and poor people would actually have the Medi-Cal benefits they need.

As the WSJ notes, “States have turned the program for the poor into an entitlement for able-bodied men.”

“Keep in mind that Medicaid was established to help the needy—poor children, pregnant women, the elderly and disabled. Democrats have since expanded it by degrees into a far broader entitlement for able-bodied, working-age adults with lower incomes.”

The California Legislative Analyst’s Office further explains the scam:

Generally, the state in past years used the MCO tax solely to offset General Fund spending on Medi-Cal’s existing budget. The new version of the MCO tax, by contrast, includes an expenditure plan for the funds with mixed uses. Specifically, a portion of the net fiscal benefit will offset General Fund spending in Medi-Cal, and the remaining portion of funds will support certain health-related augmentations. To accomplish this dual purpose, the trailer bill legislation establishes two new special funds. All proceeds first will be deposited into the Managed Care Enrollment Fund. Funds specifically for augmentations then will be transferred to a new reserve account called the Medi-Cal Provider Payment Reserve Fund. Health-related trailer bill legislation (Chapter 42 of 2023 [AB 118, Committee on Budget]) further elaborates on the specific augmentations (described below).

(MCO tax: managed care organization tax)

And here is where Newsom’s scam is further explained with “undocumented residents” more commonly and legally known as illegal aliens:

Assumes Increased Costs for Medi-Cal Expansions to Undocumented Residents. Over the last several years, and in a number of steps, the Legislature has expanded comprehensive Medi-Cal coverage to all income-eligible undocumented residents, with the most recent expansion for undocumented residents aged 26 through 49 scheduled to go into effect in January 2024. As only limited Medi-Cal services provided to undocumented residents are eligible for federal funding, the 2023-24 budget reflects significant General Fund increases related to the provision of comprehensive services to this population. Specifically, the 2023-24 budget includes (1) $4.3 billion General Fund for federal repayments and deferrals to address claims for federal funding that potentially were made in error, (2) $2.3 billion General Fund for technical adjustments intended to ensure federal funds are not used to provide services for undocumented residents inappropriately by replacing federal funds budgeted in the fee-for-service and managed care base with General Fund where appropriate, and (3) $1.2 billion General Fund for the scheduled expansion of eligibility for comprehensive Medi-Cal services to undocumented residents between the ages of 26 and 49. These amounts are considerably higher than estimated in past budgets. The increased costs are largely due to a federal corrective action plan, under which the state has developed a revised methodology to determine per-enrollee costs for this population and the appropriate amount of federal funding to claim.

As CalMatters reports, “no state has more to lose than California in the federal budget proposal House Republicans passed this week.” Cue the tears.

“Under the Affordable Care Act, California opened up its Medi-Cal roll to low-income adults who had previously not been covered. The federal government pays California 90% of the cost for this expansion group — that’s up from the state’s 50% regular match rate. Republicans may also choose to eliminate the increased match rate for adults covered under this expansion,” CalMatters said.

A few more details from CalMatters about California’s Medi-Cal:

2.2 million seniors and people with disabilities are enrolled in Medi-Cal.

More than 5 million kids in California are insured through Medi-Cal.

“Medi-Cal is also a big player in services provided at schools. It helps fund services and equipment for students with disabilities, such as hearing aids and specialty transportation. It reimburses school districts for certain providers, including psychologists and social workers, for example. Across the state, some districts also provide physical and mental health care to children and their family through school-based health centers that also draw down on Medi-Cal funding.”

Notably, CalMatters’ health writer is “Supported by the California Health Care Foundation,” which says it is “an independent, nonprofit philanthropy that works to improve the health care system so that all Californians have the care they need. We focus especially on making sure the system works for Californians with low incomes and for communities who have traditionally faced the greatest barriers to care.”

Asking for a friend… why does the State of California need a well-funded health care foundation to “improve the health care system” and “make sure the system works for Californians with low incomes?” Isn’t that what state workers are for?

The California Health Foundation’s most recent IRS Form 990 shows net assets of $826,454,616, investment totaling $765,062,076, investments outside of the United Sates in Central America, the Caribbean, Iceland and Greenland totaling $150,411,654. They paid out $41,648,168 in smaller grants to various health organizations and smaller non-profits, and lots of “health equity” and DEI projects.

The CEO of California Health Foundation, Sandra R. Hernández, MD, is paid a $700,000 salary plus $105,000 in benefits for a grand total of $807, 220 annually, and the foundation pays total salaries of $16 million annually. The salaries below tell a loud story:

Who is Sandra R. Hernández, MD? Her bio tells a story of government rent-seeking:

Sandra R. Hernández, MD is president and CEO of the California Health Care Foundation. Prior to joining CHCF, Sandra was CEO of The San Francisco Foundation. She previously served as director of public health for the City and County of San Francisco.

In February 2023, Sandra was appointed by Governor Gavin Newsom to serve on the state’s Health Care Affordability Board. From 2018 to 2023, she served on the Covered California board of directors, after having been appointed by Governor Jerry Brown. In 2019, she was also appointed by Governor Newsom to the Healthy California for All Commission.

This is what taxpayers are up against and why California needs DOGE – the California Health Care Foundation non-profit is very profitable, yet is legally allowed to hide the sources of their income:

And, notably, this is the non-profit funding CalMatters’ health reporting and why they obfuscate Medi-Cal details.

The Wall Street Journal says, “The press claims Republicans want to gut Medicaid. That’s false. They’re not even proposing a cut.”

But they should. They need to cut the waste and fraud from the Medicaid budget.

“The Biden Administration also gave states waivers to spend federal Medicaid dollars on non-medical purposes, including food, homeless housing, and personal transportation,” the WSJ reports. “Nearly half of the states have received federal permission to spend Medicaid dollars on housing, and a dozen have for food. What are federal low-income housing vouchers and food stamps for again?”

Republicans and Trump’s DOGE need to cut Medicaid, and thus cut California’s Medicaid scam. DOGE needs to take on behemoth and profitable non-profits.

Did we already say that California is scamming Medicaid?