NCPA - National Center for Policy Analysis

States and Schools Pay Consultants with Medicaid Money

April 5, 2000

The General Accounting Office charges that hundreds of millions of Medicaid dollars are being funneled improperly to consulting firms and states. The money was originally intended for disabled poor children.

  • A new GAO report accuses school districts of overstating their Medicaid costs in order to pay consulting firms to help them prepare and submit Medicaid claims -- a practice the GAO says is in violation of federal rules.
  • The consultants typically charge fees equal to 10 percent to 15 percent of any federal Medicaid money they get for schools -- but the contingency fees can run up to 25 percent.
  • The contingency fees tend to "encourage questionable claims," the report said -- with schools and consulting firms operating in "an environment of opportunism."
  • Medicaid provides health insurance coverage to 41 million people -- including 13 million school-age children.

State officials have increasingly used schools to deliver Medicaid benefits and many of them identify children eligible for Medicaid and help them enroll.

Schools in 47 states received $2.3 billion in Medicaid payments last year -- with the average claim for each child ranging from $818 in Maryland to less than $1 in Mississippi.

Source: Robert Pear, "Consultants and States Siphon Millions in Medicaid for Young, Inquiry Says," New York Times, April 5, 2000.


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