The Iowa Medicaid Program receives approximately $66.1 million in federal revenue through a financing mechanism known as Intergovernmental Transfers (IGTs). Iowa, like more than half of the states, implemented IGTs many years ago and with approval by the federal Centers for Medicare and Medicaid Services (CMS), which oversees state Medicaid Programs.

Beginning in March 2004, CMS initiated actions to require states to voluntarily eliminate their IGTs as of July 1, 2005. In August 2004, the Department of Human Services developed a proposal that laid out a number of changes to the Medicaid Program requested by the State of Iowa in return for giving up its IGTs. The Department, Governor, legislators of both parties, and the Congressional delegation have been working with CMS to negotiate a resolution to the IGT issue. On March 22, 2005, Secretary of Health and Human Services Michael Leavitt sent a letter indicating support for the concepts in the proposal.