By skyforbes 
California has long been known for its high taxes, lofty promises, and frequent budget shortfalls. These issues, traditionally handled by the state’s taxpayers, now seem to be creeping into the pockets of the entire nation. Through a controversial approach to federal funding, California is raising questions about how Medicaid reimbursements are being used, not just for healthcare but to plug gaps in the state’s pension system.
The state’s Department of Health Care Services (DHCS) put forth State Plan Amendment 22-0015 in 2022, which significantly increased the federal reimbursement for Ground Emergency Medical Transport (GEMT) covered by Medi-Cal. This more than tripled the Medicaid reimbursement for public ambulance services, creating a financial boon for the state’s fire departments and other public entities. As a result, private ambulance providers are being edged out, not because they are less effective, but because they can’t match the lucrative reimbursement rates that public providers now enjoy.
The strategy is that by inflating the cost of emergency services and securing higher federal payouts, California is backfilling its underfunded public pensions. Essentially, the same private ambulance services that used to operate independently at lower rates are now being subcontracted by local governments. However, this time, they are doing the same work for three times the price. The discrepancy in spending isn’t improving public health outcomes but simply lining the pockets of local governments, who are using the difference to shore up pension liabilities. This arrangement is inefficient, costly, and largely unchecked.
Medicaid: A System Under Strain
Medicaid is one of the largest federal and state programs in the U.S., designed to provide healthcare for low-income individuals. According to the Kaiser Family Foundation (KFF), Medicaid accounts for one-sixth of all healthcare spending in the U.S., and the federal government shoulders a significant portion of that burden. The system becomes strained when states like California push for higher reimbursements without corresponding improvements in public health outcomes.
From 2021 to 2023, California’s federal Medicaid reimbursement increased from $75 billion to over $91 billion. This growth coincides suspiciously with the implementation of SPA 22-0015. The Centers for Medicare & Medicaid Services (CMS), tasked with overseeing these federal reimbursements, is facing a critical question: should these reimbursements be used to plug state pension holes, or should they strictly be tied to healthcare improvements?
Public Pensions: California’s Long-Standing Struggle
California’s pension system has long been underfunded, with liabilities piling up as state and local governments over promised benefits to retirees. Rather than addressing the structural issues, the state has found creative ways to leverage federal programs, like Medicaid, to fill the gaps. By gaming the federal reimbursement system, California is using taxpayer dollars from across the nation to pay for its pension promises.
The strategy here is to inflate the cost of Medi-Cal ambulance services, rake in federal money, and funnel the extra cash into pension funds. However, this “solution” is unsustainable and, as critics point out, both unethical and illegal. Upper Payment Limits (UPLs) set by the federal government are meant to ensure that Medicaid payments don’t exceed the cost of comparable services in other federal programs, like Medicare. Yet, California seems to be skirting these limits to gain an unfair advantage for public providers, to the detriment of the private sector.
Time for Reform
The consequences of this manipulation are real. Private ambulance companies, often more efficient and cost-effective, are being squeezed out, while public providers benefit from inflated reimbursements that do nothing to improve public health. Response times increase, costs skyrocket, and taxpayers, both in California and across the nation—foot the bill.
California’s prioritization of pension funds over healthcare needs is an alarming trend that CMS must address. The federal government must ensure that Medicaid reimbursements are aligned with health outcomes and not used as a backdoor for states to prop up their fiscal mismanagement. Reform is needed to protect both American taxpayers and the integrity of federal healthcare programs.