Public Funds Sustain Essential Hospitals

Since Medicaid's enactment in 1965, states have had flexibility to generate their share of Medicaid expenditures through multiple sources, including intergovernmental transfers (IGTs). IGTs are funds that are transferred to the state Medicaid agency from other state or local public agencies, such as state university hospitals.

IGTs help maintain access to essential services. Essential hospitals serve a disproportionate share of Medicaid beneficiaries and often are the sole provider of critical services in their community, such as level I trauma centers, burn care, psychiatric beds, and neonatal intensive care units. IGTs help public and state hospitals provide these costly, intensive services to the entire community, enabling them to meet their missions by providing high-quality care for all.

Preserving existing IGT rules is important for helping states and hospitals manage changes to other Medicaid financing policies. Further restrictions on IGTs would likely force states to cut access to care or increase property or other local taxes to fill in the gap in Medicaid funding.

We urge policymakers to continue to reject MFAR-like proposals and preserve long-standing Medicaid funding for the safety net. Restrictions on IGTs would hamper states' ability to help fund their Medicaid programs and care for those in greatest need, including children, parents, pregnant patients, people with disabilities, and older adults.