The Truth Behind Rhode Island’s Medicaid Waiver

Proponents of converting Medicaid to a block grant are at it again, claiming a Medicaid waiver in Rhode Island shows that states would benefit and beneficiaries would not be hurt by less federal funding under a block grant.  Last week, a Wall Street Journal editorial repeated exaggerated claims of state Medicaid savings by Rhode Island’s former Medicaid director that current state officials, our own analysis, and an independent report in the state have all refuted.

Rhode Island’s waiver was a sweetheart deal between the outgoing Bush Administration and Rhode Island’s Republican governor that directed extra federal Medicaid funds to the state in exchange for a cap on its Medicaid spending.  The cap was set at an inflated level that the state never expected to reach anyway.

Here are the facts:

• Rhode Island has received more federal funding under its waiver than it would have received without it — the exact opposite of what would happen under a block grant.  An independent report commissioned by Governor Lincoln Chafee found the state collected $42 million in federal matching funds over three years for health services that the state had previously financed entirely on its own.
• The waiver did not cut Rhode Island’s Medicaid costs by “nearly half,” as the Journal and the state’s former Medicaid director claim.  If that were the case, the waiver would have saved nearly $1 billion a year.  In reality, the independent report found policy changes that required a waiver saved the state a little more than $7 million a year.
• And while the Journal said block grants are needed so that states can innovate with their Medicaid programs, Rhode Island saved even more — $32 million over three years — by utilizing flexibilities that exist under current Medicaid rules.
• A block grant would have disastrous effects on seniors, children, persons with disabilities, and health care providers.  The block grant in the House-passed budget drafted by House Budget Committee Chairman Paul Ryan would slash federal Medicaid funding by 34 percent by 2022.  The Urban Institute projected that a similar block grant in last year’s House budget would have resulted in 14 to 27 million people losing health coverage by 2021.