By Hannah Davis
FAIR
A new audit conducted by the Department of Health and Human Services Office of the Inspector General (OIG), found that California improperly claimed billions of dollars in federal reimbursements to pay for the health care of illegal aliens enrolled in the state’s Medicaid program. Whether intentional or accidental, the state must repay the federal government a whopping $52.7 million. It may also be required to pay back money the federal government has given California in previous years.
Medicaid, which pays the health care costs of individuals below a certain income level, is jointly run by the federal government and the states. States submit a Quarterly Medicaid Statement of Expenditures to claim Federal reimbursement for each quarter. The federal government reimburses states a certain percentage of the total expenditures, which is calculated on multiple criteria designed to determine the share fairly attributable to the state versus the federal government. However, under the laws governing Medicaid, the federal government will only reimburse states for the emergency treatment of illegal aliens; in general, it will not reimburse for non-emergency care of illegal aliens. California must use state dollars to pay for non-emergency Medicaid services provided to illegal aliens.
In 2020, the State of California notified the federal government that it had become aware that it had incorrectly claimed reimbursement for Medicaid spending on illegal aliens. Not long thereafter the Department of Health and Human Services requested that the OIG conduct an audit.
In its audit, the OIG found California was improperly claiming federal reimbursements for services provided to illegal aliens. The improper reimbursement claims, according to the OIG, were due to California using an incorrect and outdated formula to calculate its Medicaid reimbursement claims. California claimed 39.87 percent of its total cost was attributable to non-emergency services. However, OIG determined the correct percentage attributable to non-emergency services was 48.36.
In terms of dollars, this means that in just nine months of FY 2019 (the audit period), California received $52.7 million of federal taxpayer dollars to which it was not entitled. The audit reads, “California improperly claimed $52.7 million in Federal Medicaid reimbursement because it continued to use the proxy percentage that was developed in the early 2000s without assessing whether the percentage correctly accounted for the costs of providing non-emergency services to noncitizens with [unsatisfactory immigration status] under managed care. In addition, California did not have any policies and procedures for assessing and periodically reassessing the proxy percentage.”
As of now, California has not disputed the audit’s findings and is working on methods to return the funds seamlessly. What remains to be seen is whether these improper reimbursement claims extend to prior years, which could require California to return billions more to the federal government.
California’s costly mistake may appear to be a simple calculation error, but it runs much deeper. The initial misstep was the passage of Senate Bill 4 in 2016, signed by former Governor Jerry Brown, which expanded the state’s Medi-Cal program to cover illegal alien minors up to 18 years old. This was followed by the Young Adult Expansion of 2019, which extended health coverage to illegal aliens between the ages of 19 and 25.
California’s second mistake was the passage of Assembly Bill 133 in 2022 by Governor Gavin Newsom. This legislation expanded the Medi-Cal program to provide health coverage to all low-income individuals over 50 years of age, regardless of citizenship status.
California made another mistake by further expanding Medi-Cal last year. Governor Newsom approved the state’s $310.8 billion 2023–2024 budget, which includes provisions to provide medical coverage to all low-income illegal aliens between the ages of 26 and 49. As a result, over 700,000 more illegal aliens are now eligible for Medi-Cal.
California is the only state in the nation that provides free healthcare to all residents, regardless of citizenship status. Even before the Medi-Cal fraud was discovered, the state owed the federal government $21 billion. As California grapples with its $73 billion budget deficit, many, including Jon Coupal, president of the Howard Jarvis Taxpayers Association, believe that Medi-Cal expansion acts as “a magnet for those who are not legally authorized to enter the country.” As of now, California’s Medi-Cal program is the second-largest expense in the state’s budget, costing $37 billion annually.
Furthermore, a cost study by FAIR on the impact of illegal immigration on taxpayers asserts that the increase in Medicaid fraud results in an overall annual loss of approximately $8 billion. Clearly, Governor Newsom has aligned with the Biden administration’s policies and will continue to extend a myriad of benefits to illegal aliens. Considering that the HHS-OIG audit only covered the first three quarters of FY 2019, one can anticipate that future audits may be warranted.
Just recently, in May, President Biden expanded health coverage to Deferred Action for Childhood Arrivals (DACA) recipients. While Governor Newsom may follow the President’s agenda, others are likely to take different approaches. Put succinctly by Senator Roger Niello (R-CA), vice-chair of the Senate Budget and Fiscal Review Committee, “Regardless of what your position is on this, it doesn’t make sense for us to be adding to our deficit.”
