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Rhode Island No Model of How Medicaid Block Grant Would Affect States

Proponents of converting Medicaid to a block grant or per capita cap are again claiming (see here and here) that Rhode Island’s Medicaid waiver, adopted in 2009, shows that block grants can work well for states and even save them money. The reality, as we have written, is that Rhode Island’s “Global Medicaid Waiver” funneled more federal dollars to Rhode Island than it otherwise would have received under its existing Medicaid program. That’s the opposite of what would happen under recent House Republican proposals, such as the draft legislation House Republicans released last week, which would cut federal funding by large and growing amounts.

Rhode Island’s waiver was a “sweetheart deal” between the state’s Republican governor and the Bush Administration in which the state got more flexibility over Medicaid in exchange for a five-year, $12.1 billion cap on overall Medicaid spending. In theory, the state was on the hook for any costs that exceeded the cap. But the state was never in danger of breaching the cap because the Bush Administration set it $772 million above what the state would have likely spent without the waiver, according to the Government Accountability Office.

Thus, Rhode Island never had to make the tough decisions that states would have to make under the reduced federal funding of a block grant or a per capita cap, such as cutting people off of coverage or eliminating critical benefits. In fact, the Bush Administration allowed Rhode Island to collect tens of millions of extra federal dollars to cover services it had covered entirely at state expense.

An independent report found that Rhode Island saved money under the waiver, but largely by using flexibility available to all states, not because of the spending cap. The state noted that the cap had only a “minimal” impact on its Medicaid spending and dropped the cap when it extended the waiver through 2018.