Gov. Gavin Newsom loves to boast that California is a model for the nation.
But there’s one “innovation” you’ll never hear in his stump speech: a Medicaid racket that makes Minnesota’s much-publicized fraud scandals look almost quaint.
While prosecutors in the North Star State chase shady nonprofits, phony child-care operations, inflated food-aid claims, and padded Medicaid bills—schemes that may have looted up to $9 billion from taxpayers—California has perfected something more elegant and more dangerous: legal theft, engineered by the state government itself.
Minnesota’s crooks broke the rules. California’s political class rewrote them.
The instrument of choice is the intergovernmental transfer, or IGT. On paper, it sounds harmless: local governments and public providers help fund Medicaid.
In practice, it operates as a state-designed money carousel. Public providers send dollars to Sacramento, the state counts those transfers as its Medicaid “match,” Washington adds generous federal funds on top, and much of the combined pot spins back to the very entities that started the ride—only larger.
Strip away the jargon, and the scheme is simple: state and local providers enrich themselves by draining the federal treasury.
The ambulance sector is Exhibit A. Until recently, Medicaid paid about $339 per transport. Then state officials sought a hike to $1,168 per ride for public providers—over three times what private ambulances earn for the identical trip—while insisting the state’s general fund wouldn’t spend a dime more. The Biden administration signed off.
With a new state plan already in motion, the already eye-popping cost is set to surge to nearly $1,600 per transport—an increase so brazen it assumes no one is watching.
Where does all that extra money go? It isn’t lowering state taxes or improving state services.
It arguably benefits politically favored public unions, local machines, and Democratic client groups that dominate Sacramento’s priorities. When the same officials who bargain with public-sector unions also design reimbursement rules that shower those unions with federal dollars, taxpayers should assume the game is rigged.
Meanwhile, the costs are real. Private ambulance companies—who can’t play the IGT game—are locked into lower Medicaid rates and often squeezed to the brink, especially in rural and exurban areas.
When providers cut back or close, patients wait longer for help, and marginal emergencies turn into tragedies. Californians saw this in the 2025 Palisades fire, where failures in planning, coordination, and response turned a manageable disaster into a deadly one.
The same political culture that mismanages forests and power lines is quietly corrupting the safety net, with consequences that show up not in tidy spreadsheets but in response times and mortality statistics.
At a recent press conference, Vice President JD Vance and federal Centers for Medicare and Medicaid Services Administrator Mehmet Oz pledged to crack down on Medicaid fraud, waste, and abuse through the new CRUSH (Comprehensive Regulations to Uncover Suspicious Healthcare) initiative, which includes seeking public input and proposals aimed at strengthening oversight and preventing schemes that siphon taxpayer dollars from the vulnerable. If that commitment is serious, here is a prime candidate: the IGT shell game that pads government-provider reimbursements without delivering a single additional service.
This is not about cutting benefits. No services need be lost. Patients would still get the same ambulance ride, from the same crew to the same hospital. The only thing that would disappear is the arbitrage—federal dollars inflated through accounting maneuvers and routed back to favored public entities.
If federal officials truly want to “crush” abuse, the fix is straightforward. The Centers for Medicare & Medicaid Services can audit reimbursement practices, reject state plan amendments that rely on self-financing IGT arrangements, and standardize payments so public providers no longer receive triple what private ambulances earn for the same trip.
No new law is needed. No congressional deal required. Just a willingness to say that an ambulance ride is worth the same whether staffed by a public crew or a private one.
Minnesota’s crooks proved that outright theft can rouse public outrage. California’s leaders are betting that as long as the scam is legal and wrapped in bureaucratic language, no one will notice.
If CRUSH is more than a slogan, Washington should start here — shut down IGT abuse, protect patients, and save taxpayers billions without sacrificing a single service.
Time to call California’s bluff—and send the ambulance bill back to Sacramento.
James Carter is a Principal with Navigators Global. He previously served as Deputy Undersecretary for International Affairs at the U.S. Department of Labor (2006-07) and as the Director of the America First Policy Institute’s Center for American Prosperity (2021-23).
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
(Featured Image Media Credit: Screenshot/YouTube/California Governor Gavin Newsom)
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