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G.O.P. Targets a Medicaid Loophole Used by 49 States to Grab Federal Money
States have long used taxes on hospitals and nursing homes to increase federal matching funds. If Republicans end the tactic, red states could feel the most pain.
“It’s a way that the state is basically just creating federal money out of thin air,” said Brian Blase, the president of the Paragon Institute and the author of a recent paper that analyzes some of the most elaborate ways states exploit the loophole. In Arizona, legislators established a hospital tax in 2020 that allowed it to increase hospital payments by more than $1 billion, without spending any additional state funds. Mr. Blase is encouraging lawmakers to reform the system as part of their budget bill.
In its simplest form, the tax maneuver works like this: When a Medicaid patient goes to the hospital, the federal government and state usually share the costs. The ratio varies from one state to another, depending on how poor the state is, but the federal government often pays around 60 percent of the bill."