Medicaid : states use illusory approaches to shift program costs to federal government: Report to the Chairman, Subcommittee on Oversight and ... Energy and Commerce, House of Representatives

Pursuant to a congressional request, GAO reviewed certain states' Medicaid program records, focusing on: (1) whether states are using financial arrangements that inflate the federal share of Medicaid program expenditures; (2) various techniques that states use to obtain federal funds for their basic Medicaid and disproportionate share hospital (DSH) programs; and (3) whether states are using their federal matching funds to provide medical services to Medicaid patients.

GAO found that: (1) states have used various financial arrangements to obtain federal Medicaid funds without committing their share of matching funds and to increase the federal share of Medicaid expenditures; (2) some states have used federal funds to finance their Medicaid programs, while other states have redirected their funds into their state treasuries; (3) although recently enacted legislation focuses on limiting states' improper use of federal Medicaid funds, Michigan has taken action to ensure its federal Medicaid funding level in 1995; and (4) the Medicaid program should prohibit states from using illusory financial arrangements so that federal funds can be diverted to those medical facilities providing care.