CMS Administrator Urges Action to End Medicaid Funding Abuse Through Intergovernmental Transfers

What's happening

Dr. Oz, the Administrator of the Centers for Medicare and Medicaid Services (CMS), has recently called for significant reforms to address what he describes as widespread abuse of Medicaid funding through intergovernmental transfers (IGTs). During visits to Minnesota and California, he highlighted concerns that these financial schemes prioritize government-operated providers, often at the expense of patients and taxpayers. His remarks come amid ongoing scrutiny of how states manage Medicaid payments and federal matching funds.

Medicaid is a joint federal and state program designed to provide health and long-term care services to vulnerable populations across the United States. The program’s financing structure involves shared costs between the federal government and states, with the federal government matching state expenditures. However, some states have exploited this open-ended matching system by using complex payment arrangements, such as IGTs, to maximize federal dollars without corresponding state financial commitments. This practice has raised questions about the integrity and efficiency of Medicaid funding.

Intergovernmental transfers were originally intended as a legitimate mechanism for states to share Medicaid costs between different government entities. Instead, many states have repurposed IGTs to create inflated Medicaid payments for government-run providers, such as county hospitals or nursing homes. These providers then transfer funds back to the state, which uses the transfers to claim higher federal matching payments. This circular flow of money has led to significant disparities in Medicaid payments for similar services, raising concerns about fairness and proper use of taxpayer funds.

For example, in California, public ambulance services reportedly receive Medicaid payments that are three times higher than those paid to private ambulance companies for the same transport services. Similarly, Indiana’s experience illustrates how IGT schemes can evolve over time. The state saw a dramatic increase in publicly-owned nursing homes after county hospitals acquired private facilities and converted them into public ones. This shift allowed Indiana to secure higher Medicaid payments through IGTs, but studies suggest it did not improve patient care. In fact, research linked these payment practices to worse health outcomes, including an estimated 50 additional resident deaths annually.

What's at stake

Critics argue that these funding schemes prioritize maximizing federal dollars and political interests over delivering quality care to Medicaid beneficiaries. They contend that the financial incentives created by IGTs encourage states to funnel money to politically favored providers rather than focusing on patient needs. Meanwhile, supporters of the current system warn that cracking down on IGTs could reduce access to care or financially harm providers who rely on these payments. This debate highlights the tension between financial oversight and maintaining service availability for vulnerable populations.

Dr. Oz emphasized that CMS already has the legal authority to intervene and halt IGT-funded schemes that do not meet federal requirements for efficiency, economy, and quality of care. He argued that Medicaid payment plans should not disproportionately reward government-operated providers for identical services, as this undermines the program’s goals. Oz called for CMS to enforce payment parity for identical services, which he believes would eliminate incentives for states to engage in these questionable financial practices and reduce waste and cronyism within Medicaid.

The stakes of this issue are significant. Medicaid serves millions of low-income individuals, including children, elderly adults, and people with disabilities. Misuse of funds through IGT schemes can divert resources away from direct patient care and undermine public trust in the program. Additionally, inflated payments strain federal budgets and can contribute to disparities in how Medicaid dollars are distributed across states and providers. Addressing these challenges is critical to ensuring Medicaid remains sustainable and focused on its mission.

Efforts to reform Medicaid financing and curb abuses like IGT schemes have been ongoing for years, with varying degrees of success. While Congress and CMS have implemented regulations aimed at limiting these practices, states often find ways to circumvent rules. Dr. Oz’s recent statements signal a renewed push from CMS leadership to more aggressively enforce existing laws and close loopholes. The agency’s next steps could include issuing new guidance, increasing audits, or pursuing regulatory changes to tighten oversight of Medicaid payments.

Looking ahead, the key developments to watch include how CMS plans to implement reforms and whether states will comply or resist changes to their Medicaid financing strategies. The agency’s actions in the coming months could set important precedents for federal-state relations in Medicaid administration. Stakeholders—including state governments, providers, and patient advocacy groups—will likely engage in debates over the balance between financial controls and access to care. Ultimately, the outcome will shape the future integrity and effectiveness of Medicaid funding.

Why it matters

Dr. Oz is pushing for reforms to stop what he calls widespread abuse of Medicaid funds via intergovernmental transfers. These schemes manipulate accounting to generate federal funds without real state financial contributions. The practices create stark disparities in Medicaid payments and may harm patient care quality.

Critics say such schemes prioritize political interests over vulnerable populations’ health needs. CMS has the authority to enforce payment rules ensuring efficiency, economy, and quality of care.

Key facts & context

Medicaid is jointly funded by federal and state governments to support vulnerable populations. Intergovernmental transfers (IGTs) were designed to share legitimate Medicaid costs among government entities. Some states use IGTs to inflate Medicaid payments to government-operated providers and claim higher federal matches.

California public ambulance services receive Medicaid payments three times higher than private counterparts for the same service. Indiana increased publicly-owned nursing homes from 5% to 95% between 2000 and 2017 through IGT-related acquisitions. Studies link inflated Medicaid payments in Indiana to worse nursing home quality and an estimated 50 additional resident deaths per year.

CMS Administrator Dr. Oz has stated that every president since George H.W. Bush has recognized the harms of Medicaid money laundering. CMS currently has the legal authority to stop IGT-funded schemes that do not comply with Medicaid payment standards. Efforts to reform IGT abuses have been ongoing but states often find ways to bypass regulations.

Dr. Oz advocates enforcing payment parity for identical services to eliminate incentives for IGT scams. The debate involves balancing financial oversight with maintaining access to care for Medicaid enrollees. CMS’s future actions could include new guidance, audits, or regulatory changes to strengthen Medicaid payment integrity.

Timeline & key developments

2026-02-17: CMS Administrator Calls for Action Against Medicaid Money Laundering Schemes. Additional reporting on this topic is available in our broader archive and will continue to shape this timeline as new developments emerge.

Primary sources

• cdc.gov document

Further reading & references

• (Additional background links will appear here as we cover this topic.)