Every state except Alaska (and Alaska recently awarded a contract to a firm “to study and develop” a tax proposal) uses Medicaid provider taxes. Since provider taxes are essentially a kick-back, the providers who benefit the most are generally those serving a larger number of Medicaid enrollees. They receive higher Medicaid payments than they would have received in the absence of the tax.
The kick-back often involves extra payments, dubbed supplemental payments, to providers. These extra payments raise serious questions of political influence and cronyism. For example, in 2014 GAO identified two New York City hospitals—Coler Memorial and Coler Goldwater— that received $416 million in extra Medicaid payments in 2011 in addition to $70 million in regular Medicaid payments. These Medicaid payments were nearly five times what Medicare would have paid these hospitals for these services, which is supposed to be the legal limit on what Medicaid can pay.