California's ambulance payments surge using a federal Medicaid loophole

California has leveraged an intergovernmental transfer mechanism to inflate Medicaid reimbursements for public ambulance services, raising the per-transport rate from $339 in 2022 to $1,168 in 2024 and targeting more than $1,600 for 2025. The IGT allows the state to use federal Medicaid funds while contributing a reduced share of its own budget, a practice previously flagged in the 1980s and 1990s for other states. Private ambulance operators remain paid at the original $339 level, prompting accusations of collusion that give public providers an unfair edge.

Analysts from Paragon Health Institute and the Cato Institute liken the arrangement to money laundering, noting that it shifts costs from states to the federal government. Historical GAO reports documented similar schemes in Michigan, Tennessee, Texas, and elsewhere, leading to past proposals to cap reimbursements that never passed. The Trump administration and CMS have recently withheld $1.3 billion in California Medicaid payments while evaluating the IGT's legality, and reform advocates are urging broader changes to prevent such exploitation.