When Government Launders Money

Today's Wall Street Journal features an editorial on "Medicaid Money Laundering." Did you know your government was using Medicaid to launder money?

The swindle works like this: A state overpays state-run health-care providers, such as county hospitals or nursing homes, for Medicaid benefits far in excess of its typical rates. Then the federal government reimburses the state for "half" of the inflated bills. Once the state bags the extra matching funds, the hospital is required to rebate the extra money it received at the scam's outset. Cash thus makes a round trip from states to providers and back to the states – all to dupe Washington.

Is this something legitimate that government (at any level) should be doing? If one of those evil corporations were doing this, what would we call it?

The right word for this is fraud. A corporation caught in this kind of self-dealing – faking payments to extract billions, then laundering the money – would be indicted. In fact, a new industry of contingency-fee consultants has sprung up to help states find and exploit the "ambiguities" in Medicaid's regulatory wasteland. All the feds can do is notice loopholes when they get too expensive and close them, whereupon the cycle starts over.

But shouldn't someone be doing something to stop this fraud (i.e. theft) being perpetrated on the American taxpayer? Our elected representatives, whose job it is to protect our interest in Washington, perhaps? Don't count on it.

The state governors squealed, and congress forbade prosecution for this crime. The article says the moratorium on prosecution runs out this month, but congress looks set to continue the fraud at least until Bush leaves office.

Plutocracy? Evil corporations? Look no further than your own government. When private companies do evil and break the law, it's wrong. But when our government, the agency empowered to enforce what's right, perpetrates fraud, then what?

Who will guard the guardians? The people of the United States are supposed to do that, but they're too busy going to ballgames, fiddling with their MP3 players, watching Survivor: Third Moon of Jupiter or American Idol, and talking on the cell phone to guard our nation's virtue...or their own wealth.

The loss of morality in a society doesn't just result in things like killing unborn children and normalization of sexual perversion. It also includes things like fraud, waste, abuse, misappropriation, nest-feathering, bribery and so on...from our government. Our government is made up of people, after all, with the same moral weaknesses as any of us.

Want more responsible corporations? Want responsible, accountable government? Start demanding a higher (objective) moral standard from each of us going all the way up, starting with the guy in the mirror.