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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Review of Illinois' Use of Intergovernmental Transfers to Finance Enhanced Medicaid Payments to Cook County for Hospital Services," (A-05-00-00056)

March 26, 2001

Complete Text of Report is available in PDF format (905 kb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


This final report points out a method used by Illinois to obtain additional Federal Medicaid funds by circumventing the Medicaid requirement that expenditures be a shared Federal/State responsibility. During the period July 1, 1991 through June 30, 2000, Illinois made about $5.9 billion of enhanced payments to Cook County operated hospitals for inpatient, outpatient, and clinic services under the Medicaid program. About $3.0 billion of the $5.9 billion represented a payback of funds that were initially made as intergovernmental transfers from Cook County to the State. The remaining $2.9 billion represented the Federal share of the payments. About $866.6 million of the $2.9 billion was returned by Cook County to the State as windfall revenue and deposited to the State's General Revenue Fund. Cook County used the enhanced payments to cover costs that would not otherwise qualify for Medicaid funding. Cook County also has used the enhanced funding to supplant the level of State and local tax supported revenue for these operations. Further, although the State contended that it used the funds returned by the County for health-related services, we could not confirm this contention. Among other things, we recommended that the Health Care Financing Administration (HCFA) take action to place a control on the overall financing mechanisms being used by the State to circumvent the Medicaid program requirement that expenditures be a shared Federal/State responsibility. The HCFA concurred and to address the problem has issued revised regulations to be implemented over a transition period to become fully effective on October 1, 2008. During this transition period we estimate the Federal Government will save $1.2 billion in Illinois alone.