Summary: Under various financing schemes, the states, have inappropriately increased federal Medicaid payments by paying some providers more than they would normally receive and having them return the bulk of the extra money to the state. Making excess payments generates additional federal matching funds, which can be used to pay its share of future Medicaid payments--thus generating even more matching funds--or spent however the state determines. By getting some of the money back from the provider and keeping the federal share associated with it, the state is able to lower its own Medicaid contribution substantially below the share specified in federal law. According to the Health Care Financing. Administration (HCFA), 17 states have plans that could allow this. Eleven states are drafting plans for doing so. Billions of dollars are generated through this practice. When related schemes came to light in the past, steps were taken to curtail them and restore the federal/state partnership as intended. HCFA has drafted a regulation that would curtail this scheme, but the draft has not moved far in the rulemaking process.
