OPINION:
When American taxpayers fund the Medicaid safety net, they rightfully expect their hard-earned dollars to actually reach the vulnerable people it was designed to help. Instead, the state of California has hijacked federal Medicaid funds meant for emergency medical transportation, transforming them into a taxpayer-funded slush fund to paper over unrelated government spending.
This abusive fiscal gimmick does more than deprive patients of vital resources—it fundamentally violates the constitutional agreement between the state and the federal government.
The staggering scope of this grift was recently detailed by the Paragon Health Institute. Their analysis exposes how California abuses intergovernmental transfers (IGTs)—a bureaucratic shell game used to artificially inflate Medicaid spending and inappropriately shift massive costs onto federal taxpayers. Under this scheme, public providers shuffle funds to the state, which the state then uses to trigger massive federal matching dollars without making any actual state contribution.
The numbers are indefensible. According to Paragon’s research, this sleight-of-hand caused public provider payments for emergency transport to surge to $1,065 in 2023 and $1,168 in 2024. Meanwhile, private ambulance providers—who perform the exact same life-saving service—are stranded at a base rate of just $339. The state even has the audacity to slap a 10 percent “administrative charge” on the transferred amount, skimming money off the top for unrelated municipal purposes.
Now, California is asking the federal government to approve pushing public payments to an astonishing $1,597 per transport in 2025. That is nearly five times the rate paid to private providers for the exact same ambulance ride.
Beyond the sheer waste, these findings surface a glaring legal isnmsue. The U.S. Constitution’s Spending Clause grants Congress broad authority to distribute funds for the public good. But as the Supreme Court established in South Dakota v. Dole (1987), when Congress attaches conditions to federal funds, states must “exercise their choice knowingly, cognizant of the consequences of their participation.”
Federal law is completely unambiguous: Medicaid matching funds must only reimburse actual “medical assistance,” meaning direct patient care and services. By accepting these funds, California made a binding legal promise to Washington that the money would be used exclusively for healthcare.
Furthermore, in Sabri v. United States (2004), the Supreme Court affirmed that Congress has the power under the Necessary and Proper Clause to ensure taxpayer dollars are not diverted through graft or misuse.
Instead of honoring this legal agreement, California bureaucrats are laundering transit funds to bankroll capital purchases, infrastructure projects, and general municipal expenses. If a state uses healthcare funding to buy real estate or plug holes in a local budget via a 10 percent skim, it is not delivering medical care. Any argument from state officials that a new, unrelated infrastructure project “indirectly” helps patients is just a creative excuse to bypass federal appropriations laws and Supreme Court precedent.
Furthermore, this massive disparity actively threatens the financial viability of private ambulance services, which respond to a vast majority of 911 calls. Squeezing them out of the market will ultimately fracture the emergency response network and severely reduce patient access.
We do not need a decade of private litigation to fix this blatant misuse of taxpayer resources. As the Supreme Court clarified in Health and Hospital Corporation of Marion County v. Talevski (2023), the proper remedy for state noncompliance with federally imposed conditions is for the federal government to terminate those funds. Washington already possesses the clear legal authority to step in and withhold these matching payments until the state complies with the law.
Fortunately, the days of turning a blind eye to this exploitation are ending. The current administration has rightfully recognized the urgency of this crisis.
Under the leadership of Vice President JD Vance’s Fraud Task Force and the decisive actions of Centers for Medicare & Medicaid Services (CMS) Administrator Mehmet Oz, Washington is finally fighting back.
Mr. Oz’s newly proposed rule to aggressively cap unchecked state-directed payments targets these exact types of funding gimmicks that unfairly shift state costs onto federal taxpayers. Let there be no mistake: CMS possesses the full, unambiguous legal authority to finalize this rule and put an end to this grift.
It is a critical, long-overdue step to enforce the terms of our federal agreements, demand payment parity between public and private providers, and immediately cut off this unchecked diversion of medical funds.
We cannot allow states to use the Medicaid safety net as an ATM for local bureaucratic wish lists. The Constitution demands accountability. American taxpayers—and the vulnerable patients relying on these services—deserve nothing less.
• Mike Andrews is a Washington, D.C. based lawyer who previously served as a federal prosecutor for the U.S. Attorney’s Office.
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