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Why Rhode Island’s No Model for Medicaid

A recent Wall Street Journal editorial touting Rhode Island’s Medicaid program as a model for other states misrepresents Rhode Island’s experience under its federal Medicaid waiver.

The waiver represented a “sweetheart deal” between the state’s Republican governor and the outgoing George W. Bush Administration, which agreed to the waiver in its final week in office, as independent analyses and state documents have shown.  Rhode Island received added flexibility over its program as well as extra federal funds, in exchange for accepting a cap on overall Medicaid spending set at an inflated level that the state never expected to reach anyway.

As a result, Rhode Island hasn’t faced the kinds of difficult choices that states would have to make under a cap that cuts federal payments — which would almost certainly happen if policymakers converted Medicaid to a block grant, as the Journal favors.

The waiver capped combined federal and state Medicaid spending for Rhode Island at roughly $12 billion over the 2009-2013 period.  The Bush Administration incorrectly applied the formula used to calculate the cap, thus setting the cap $772 million too high, as a recent report from the Government Accountability Office found.  The waiver has also allowed Rhode Island to collect tens of millions of dollars in federal funds each year to cover services that it previously covered entirely at state expense.

The state itself notes that the cap’s impact on Medicaid spending has been “minimal” and that the waiver’s real impact has been to allow the state to secure extra federal Medicaid funds.

So what has been the impact on the state’s finances and Medicaid beneficiaries?  The waiver did not save the state $2.3 billion over four years, as the Journal claims.  In fact, the 2011 Lewin Group report mentioned by the Journal found that the state saved only a little more than $7 million a year through policy changes that required a waiver.  It saved much more by making policy changes available to all states under existing Medicaid rules, as we’ve explained.

As for the impact on beneficiaries, the Journal criticizes CBPP for concerns we voiced in 2008 in response to the waiver as it was originally proposed.  Those concerns — that accepting a cap on federal Medicaid spending during an economic downturn could harm beneficiaries if costs grew unexpectedly quickly — were well founded, though fortunately they haven’t materialized.

The Journal correctly notes that Rhode Island’s waiver expires at the end of this year but wrongly suggests that state and federal officials will try to kill it.  The state has already applied for a five-year extension.  The application does not include a cap on Medicaid spending because the state has done just fine holding down costs without it.