According to a new study, California is using billions of dollars from federal taxpayers to pay for illegal immigrants’ medical care.
“They are exploiting an existing loophole within the law,” Paul Winfree, president and CEO of the Economic Policy Innovation Center (EPIC), told Fox News Digital.
“States can levy provider taxes to return funds to the state, which they then use to fund the enrollment of illegal immigrants on Medicaid. That’s exactly what’s happening.
EPIC and the Paragon Health Institute released a paper that draws a line between California’s Medicaid provider taxes and what appears to be nearly $4 billion in state funding for illegal immigrants’ healthcare and other initiatives.
However, EPIC reports that the federal government is providing the funding through reimbursements to California.
Winfree suggested it could be a target for federal dollars as House Republicans seek to save between $1.5 trillion and $2 trillion to offset the cost of President Donald Trump’s budget priorities.
Under current law, states must pay Medicaid providers the same amount they collect in taxes.
The federal government then matches those payments by 60% in an effort to assist states in recouping Medicaid costs.
“Medicaid expenditures are supposed to be shared by the federal government and states. However, states are increasingly designing Medicaid money laundering schemes, resulting in massive federal expenditures with no state financial obligation, according to the paper.
“The state of California, colluding with insurance companies who cover Medicaid beneficiaries, has created one of the most outrageous ones yet, a money laundering scheme that results in California obtaining more than $19 billion in federal money without any state contribution over the period from April 2023 through December 2026.”
The paper went on to say that these funds were “used to implement major expansions in the Medicaid program to fund illegal immigrants and long-term care (LTC) for the wealthy.”
“This scheme enriches insurers, attracts illegal immigrants to the United States, and adds mountains to the federal debt, all at the expense of working Americans,” according to the statement.
Winfree said closing a loophole that allows states like California to significantly raise the provider tax could save up to $630 billion, and that Republicans are looking into it as they seek up to $2 trillion in savings or more during the budget reconciliation process.
House and Senate Republicans intend to use their majorities to pass a massive bill addressing Trump’s border security, defense, energy, and tax policies.
They can do so because reconciliation allows the Senate to lower its passage threshold from 60 to 51 votes, as long as the legislation contains measures related to budgetary and fiscal policy.
As part of the framework resolution passed by House Republicans last month, instructions were sent to the relevant committees on how much to cut or, in some cases, spend extra money.
The Energy and Commerce Committee, which oversees Medicaid and Medicare, is tasked with identifying $880 billion in spending cuts.
Republicans have insisted that they are only looking to eliminate waste, fraud, and abuse, but Democratic opponents of Trump’s budget proposal accuse the GOP of attempting to significantly reduce federal medical benefits for millions of Americans.
“Congress is currently considering limiting the Medicaid provider tax loophole. It’s one of the most significant offsets in the Medicaid portfolio that the Senate’s Energy and Commerce and Finance Committees can consider as they work on their reconciliation bill,” Winfree explained.
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He cited a projection that eliminating the loophole could save up to $630 billion, but cautioned that this was an unlikely outcome.
“They are more likely to reduce what is known as the safe harbor. So, in other words, they will simply reduce the amount of gaming that occurs, including this type of gaming.
And if that happens, it is more likely to affect some of the big blue states than the red states, simply because the blue states have really tested the upper limits of this type of gimmick,” Winfree said.
Even if the tax is not completely eliminated, reforming it has the potential to save the federal government billions of dollars.
Fox News Digital reached out to the California Department of Public Health for comment but did not receive a response.
