Wednesday, May 28, 2008

Cooked books

The Wisconsin Club for Growth latest newsletter has this goodie:

The Great Intergovernmental Heist

In recent years, when Wisconsin's Medicaid program started hemorrhaging cash, Governor Jim Doyle didn't look for ways to make the program more efficient. Nor did he cut costs by eliminating fraud and abuse in the system. Instead, Doyle leaned heavily on a convoluted scheme known as the "Intergovernmental Transfer Program," (IGT) which allows the state go after hundreds of millions of dollars in federal money by over-reporting their health care costs.

The program, which began under the Thompson administration, works like this: a Wisconsin county over-reports their health care expenditures and is reimbursed by the state for those costs. Since the federal government provides a match to the state for health care costs, the feds then reimburse the state for this phony, higher rate of spending.

This caused a significant problem in 2003, when Governor Doyle budgeted $367.5 million in IGT federal funds. Unfortunately, $213 million of that budgeted federal cash never showed up. Basically, Doyle had written an imaginary number into the budget, hoping the money would materialize. When it didn't, Doyle proposed restructuring some state bonding to make up for the shortfall - contributing to the budget deficit the state continues to face.

This week, the Wall Street Journal pointed out something everyone within government already knows - if a private company attempted to pull off a similar scheme, their entire board of directors would end up in jail. In their editorial titled "Medicaid Money Laundering," the WSJ said:

The right word for this is fraud. A corporation caught in this kind of self-dealing - faking payments to extract billions, then laundering the money - would be indicted. In fact, a new industry of contingency-fee consultants has sprung up to help states find and exploit the "ambiguities" in Medicaid's regulatory wasteland. All the feds can do is notice loopholes when they get too expensive and close them, whereupon the cycle starts over.

Now Congress wants to extend it until President Bush leaves office. The House passed a bill - 349-62 - but Harry Reid was unable to whisk it through the Senate unnoticed. Wavering GOP Senators are trying to strike a deal with the Bush Administration, which is threatening a veto, mostly with offers to beef up the $25 million allocated to "combat" Medicaid fraud and abuse. Of course, these antifraud troops only fight after state schemes have been paid out. And should the moratorium stick around, states will merely revert to their con artistry, knowing they are no longer being watched.