[Comment: I had composed this in reply to a comment left by an advocate on a previous blog entry ].
The problem is that revenue maximization schemes divert federal dollars from the intended beneficiaries. See generally my recent posting Child Support, Foster Care, and the Poverty Profiteers (citing the National Center on Poverty Law: “The current child support system was not developed from a desire to help children. The federal government and the states created it to reduce the number of children needing public assistance and to recoup partially the costs of providing benefits to those who nonetheless needed benefits”); and Daniel L. Hatcher, Collateral Children: Consequence and Illegality at the Intersection of Foster Care and Child Support (addressing “the conflict between state revenue maximization strategies and the missions of state agencies serving low-income children”).
See also the HHS OIG audit Review of Emergency Assistance Payments Claimed by the Maryland Department of Human Resources Under Title IV of the Social Security Act (noting that: “As a result of lengthening EA eligibility periods, defining emergencies broadly, and setting high income limits for determining eligibility, States amended their respective EA Programs to shift State funded long-term services to the EA Program, thereby maximizing Federal revenue”).
See also the GAO reports: Intergovernmental Transfers Have Facilitated State Financing Schemes (noting that Intergovernmental Transfers, in use for over a decade, result in “the diversion of federal funds intended to pay for covered services for Medicaid-eligible individuals to whatever purpose a state chooses”); States’ Efforts to Maximize Federal Reimbursements Highlight Need for Improved Federal Oversight (explaining that “round-trip payment arrangements can be accomplished via electronic wire transfer in less than an hour”); State Financing Schemes Again Drive Up Federal Payments (noting that: “On the same day that the county facilities received the money, they wired $271 million of the payment back to the state. None of these funds were returned to the federal government but instead were intended to reduce the state’s share of Medicaid payments”); Improved Federal Oversight of State Financing Schemes Is Needed (noting that in Wisconsin “three counties wired a total of $637 million to the state, and the state then wired most of the money back to the counties, creating an illusion of a Medicaid payment”); Federal Oversight Initiative Is Consistent with Medicaid Payment Principles but Needs Greater Transparency (noting a 2005 9th Circuit ruling against a state plan “that was estimated to increase federal reimbursements by $50 million a year even though providers would retain only $5 million of the payments that had been made to them”); Improprieties by Contractors Compromised Medicare Program Integrity (noting that “criminal and other improper activities were uncovered only after whistleblowers, or relators, filed qui tam complaints under the False Claims Act.”); and, to be sure, States Use Illusory Approaches to Shift Program Costs to Federal Government.
See also John M. Hagedorn, Forsaking Our Children: Bureaucracy and Reform in the Child Welfare System (noting that “the chief beneficiaries of increased social service spending have been urban social service bureaucracies, who have used the funds to adapt to a punative climate, expanding their capacity to investigate poor families and remove children from their homes”).