Among the many conservative victories within the One Big Beautiful Bill Act is a long-overdue course correction for American healthcare policy.
By prioritizing reforms that require able-bodied, working-age adults without dependents to meet reasonable work or community engagement standards, Congress is reaffirming Medicaid’s original mission: to provide healthcare coverage to the truly vulnerable. It’s a commonsense step that restores accountability and dignity to the program, but there is still work to be done.
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House Speaker Mike Johnson (R-LA) and President Donald Trump have both thrown their support behind a second reconciliation bill. This follow-up to the OBBBA offers a real opportunity to further strengthen our safety net, making sure taxpayer dollars are protected, targeted, and truly benefit those who need it most. However, as we work to improve Medicaid, it’s important to address abuses.
Some states, especially California under Gov. Gavin Newsom (D-CA), have found ways to game the system, namely by exploiting “Intergovernmental Transfers,” which is how the federal government reimburses states for its portion of Medicaid coverage.
California has realized that by artificially inflating the cost of key services covered by Medicaid, the state can get a higher payout from the federal government. In one specific example, California has purposefully increased the cost of ambulance services, or ground emergency transportation services, from $339 per ride in 2022 to $1,168 per ride in 2024. Insanely, the state is asking for that number to be further increased to $1,597 this year. That’s because the more it claims to spend, the more money it gets from the federal government.
From there, shockingly, it gets worse. An important thing to understand is that before 2023, California fire departments relied heavily on private companies to provide GEMT services on contract. The same Medicaid reimbursement of $339 per trip was provided to private- and public-sector ambulances alike. After implementing a new program two years ago, government-run GEMT services were suddenly allowed to claim enhanced Medicaid reimbursements, while private GEMT companies were held steady at the $339 per trip rate.
We know private companies are generally more efficient and effective actors than the government — in this case, private ambulances drive better patient outcomes. So why would California choose to socialize EMT services and voluntarily raise its prices? Because it can get $1,168 per ambulance trip from Medicaid, subcontract the actual EMT work to the same private companies it just “fired,” and keep the difference for whatever Newsom and California Democrats wish to spend it on. And it’s not a secret. In 2023, San Diego officials laid out their plan to switch to the “public-private GEMT” model, projecting a $9.2 million surplus in 2024 to siphon back to their general fund. Imagine how much more of our tax dollars, whether you live in California or Maine, they’ll get their hands on if that reimbursement is bumped up to nearly $1,600 per ride.
This is Medicaid money laundering, pure and simple. And we need the next reconciliation bill to build upon the important reforms of the OBBBA by putting an end to this shell game that is happening in California and myriad other states.
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Congress needs to close the remaining loopholes that allow states to game the system through these complex financial arrangements. Only then can we ensure that Medicaid dollars are spent on real patient care — not on political patronage or bureaucratic maneuvering. And crucially, reforms must protect private EMT and healthcare providers who play by the rules and deliver real value, ensuring they are not inadvertently punished.
For too long, the Medicaid program has been a playground for state-level budget games. The OBBBA is a necessary intervention to restore fiscal sanity and end the era of Medicaid money laundering. Congress must finish the job in the next reconciliation bill: End the IGT abuse, and put patients and taxpayers first.
Ryan Ellis is the president of the Center for a Free Economy.