D.C. created its billion-dollar deficit
July 3, 2009
Chief Financial Officer Natwar Gandhi delivered more bad news about D.C. finances last week. In his latest revenue projections, the chief bean counter told Mayor Adrian Fenty and the city council that the government faces more red ink, much more, as in $340 million over the next two years.
Add that to the $800 million shortfall city leaders have already had to cut from the budget, and you arrive at a deficit of more than $1 billion.
What if I told you the $1 billion deficit could have been avoided? I don’t mean the city could have spent less over the years, or the city could have raised taxes more, or the federal government should have paid D.C. more for the trouble of hosting and servicing the federal work force.
No. What I know to be true is that the District of Columbia government over the past two decades has failed to collect about $1 billion in funds it was rightfully due. Just by filing proper documents, the city could have erased its deficit.
It’s Medicaid, stupid.
For the past 20 years or more, the District has been in charge of managing the federal Medicaid program, which provides medical care for the needy. Being an urban center with an entrenched poor population, D.C. pays out millions every year in health care. Being a federal district as opposed to a city, D.C. has to administer the system as it if were a state. That means it has to apply to the feds to reimburse its share of the costs.
Therein lies the problem: The District has been inept in applying for the federal funds.
Permit me to explain. Let’s say a person on Medicaid requires heart surgery. The procedure and the hospital stay and the tests cost $10,000. The city pays. Under Medicaid rules, the federal government is responsible for a portion of the costs; in this case, let’s say 75 percent. If the city keeps track of the costs and submits the proper paperwork to the federal government, it would get $7,500 back.
Unfortunately, the city has been flubbing this basic task. From the costs of treating hangnails to mental health, from birthing babies to caring for seniors, the city has not been able to complete the simple task of collecting receipts, confirming treatment and sending the paperwork.
The most recent example came when my colleague Mike Neibauer reported that the District botched the process of applying for child welfare reimbursements that would have netted $176 million. Gary Burtless, an economist at the Brookings Institution, said the city should have “top-notch” people assigned to harvesting the cash and asked Neibauer: “How much does it cost to send an itemized receipt to the federal government?”
Apparently, too much.
Multiply the $176 million squandered by the child welfare agency by at least 10 and you will get an idea of how much money has gone down the drain because city leaders can’t figure out how to collect money due from the feds.
D.C. doesn’t have a money deficit; it has an accounting deficit.
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