In addition, if a State requires county or municipal facilities to refund its own Medicaid contribution, the practice also effectively undermines the requirement that a State share in the funding for its Medicaid program. Moreover, this practice appears to be creating rapid increases in Federal Medicaid spending, with no commensurate increase in Medicaid coverage, quality, or amount of services provided. There is preliminary evidence that this current practice has contributed to a spike in Federal Medicaid spending. Assuming additional States come forward with State plan amendments, the five-year cost of this growing State practice can bein the tens of billions of dollars. It appears some States allow public hospitals to keep a portion of these funds to help pay for uncompensated care.
Several States appear to have used it to fill budget gaps.
Another State's local newspaper reported that Federal Medicaid funds would be used for State tax cuts or for reducing State debt. One State announced that it intended to use funds generated through the UPL system to pay for education programs. These practices, which are effectively general revenue sharing, are inconsistent with the Medicaid statute, Congressional intent, and Administration policy. However, we lack authority under existing regulations to deny State proposals to engage in these arrangements. Furthermore, significant public policy should be made through an open public process.