With Congress back in their districts for the August recess, GOP members will undoubtedly be bragging to their base about the Medicaid abuses they stopped by passing President Trump’s One Big Beautiful Bill. These reforms include enrollment reductions and new work requirements for enrollees.
However, many Members are hoping that no one calls them out for failing to address an intergovernmental transfer grift. This little-known accounting trick has turned this basic entitlement program into a bloated scam that enriches public agencies while squeezing out private providers.
In theory, many of the services Medicaid covers, such as emergency ambulance rides, officially known as Ground Emergency Medical Transport (GEMT), should be straightforward. Someone calls 911, an ambulance arrives and someone gets paid. It should be a clean transaction, one that reflects the actual cost of service. But that is not what happens.
The problem starts when public ambulance agencies file inflated cost reports to state Medicaid offices, claiming that a single ride costs as much as $1,600. In reality, private providers perform the same service for about $339. The state uses the inflated figure to extract extra federal funding, then hands the surplus to local governments. None of it improves care. It is a rigged operation that rewards false accounting, punishes honest providers and burns through taxpayer dollars.
Many of these public entities do not even operate ambulances. They subcontract the work to private companies, then skim the excess funding for unrelated local spending.
Private providers do not have access to this scheme. They bill Medicaid based on fixed rates and get paid for services rendered. They cannot inflate their books or use transfers to game reimbursements.
This is not an accident. It’s collusion. Public agencies have formed a closed loop with state Medicaid offices. They submit inflated costs, receive enhanced reimbursements and funnel the money wherever they choose.
Private ambulance companies, meanwhile, are left to survive in a distorted market. To stay afloat, they cut wages, reduce staff and extend equipment usage longer than necessary. Service quality drops. Morale declines. Lawsuits follow. Plaintiff attorneys pounce. Insurance costs surge. States respond with half-measures, such as tort reform, but nothing changes because the core distortion remains untouched.
That is what the One Big Beautiful Bill ignored. Worse, it may have expanded the imbalance, creating even more favorable reimbursement schemes for the government’s preferred players.
This is not market failure. It is a government-manufactured failure. The GEMT scheme is one example (likely out of tens of thousands) that shows how federal programs, once hijacked by local actors, produce outcomes that defy logic and destroy market discipline. It reveals how dysfunction is tolerated, even protected, in the name of political favoritism and cronyism. And it proves that despite all the media noise about oligarchy, it is bureaucracy that is bleeding the system dry.
The irony is that the media rarely touch it. Activists rail against corporate greed and so-called late-stage capitalism, yet here is a textbook case of bureaucratic capture. Public entities use private contractors, overcharge taxpayers and hide behind paperwork.
California is a prime example. The state aggressively uses the Intergovernmental Transfer (IGT) scheme to draw down massive reimbursements from Washington. While the Biden administration claimed to support tax relief for private providers, it gave California approval to collect more than ten times the IGT payments of any other state. In the private sector, a scheme like this would land you in prison.
There is a fix: reimbursement parity. If an ambulance ride costs $339, then every provider, public or private, should be paid $339. Or tie the rate to a regional wage index. But stop allowing inflated reports. Stop allowing backdoor subsidies. Require transparent cost reporting. State governments should not be allowed to overpay themselves so blatantly with federal funds or curry favor through these schemes while punishing the providers who actually deliver the care.
Medicaid is already the largest line item in many state budgets. Members should tout their success in the OBB, but they can’t pretend like the job is done.
The GEMT program is budget laundering masquerading as healthcare. It erodes trust, wastes resources, and drives out the most efficient players. Congress should make fixing it a priority when they return to DC.
