It was recently reported that the Centralia School District submitted false financial claims to the Medicaid program at least 200 times.[1] What does a school district have to do with Medicaid, a health insurance entitlement for children of poor families?

Medicaid began in 1965 as a safety-net insurance plan, with combined financing from federal and state taxpayers. Washington state’s contribution has historically been 43 to 50 percent of the overall cost. The federal government has paid the balance.[2]

When Medicaid began, Congress assumed the program would remain limited because state legislatures would not want to increase the tax burden on their citizens. The exact opposite has happened. State lawmakers have doubled-down on Medicaid simply because of the extra federal money.  If a state spends a dollar on education, it gets a dollar’s worth of education. If a state spends a dollar on Medicaid, it actually gets two dollars to spend because of the federal match. Consequently, Medicaid has exploded and is now one of the top three budget items for every state.

Through the years, states have used a number of questionable, but legal, methods of gaming the system to obtain more federal dollars.[3] Part of Medicaid is the Medicaid Administrative Claiming (MAC) which encourages teachers to inform their students and families about the insurance plan. Teachers can record the time they spend discussing Medicaid and then submit their time-cards to the state. The state pays the teachers for the time, adds the teacher expense to its overall Medicaid spending and receives matching funds from the federal government.[4]

In other words, teachers are padding their salaries and the state gets more money thanks to federal taxpayer dollars via the Medicaid program. To date, 23 states have participated in the MAC. Washington state received $17 million extra federal dollars through the program in 2011-2012 and had 97 school districts participate. (email from Alan Himsl, Supervisor, WA State Medicaid Outreach Unit, HCA; available on request)

The Centralia School District got greedy and falsified time-sheets to reflect an unrealistic number of hours. The state Attorney General threatened to sue and won a resolution of $372,000. (email correspondence from Alison Dempsey-Hall, Director of Communication, WA State AG; available on request)

The critical issue is that state taxpayers are also federal taxpayers. So although state legislators treat Medicaid matching dollars from Washington, D.C,, as free money, in point of fact, state officials are placing a greater tax burden on their own citizens. Or, they are forcing the federal government to borrow more money against future generations. Either way, state citizens are ultimately responsible for the overall cost of Medicaid.