Cutting Medicaid the R.I. way

THE REPUBLICAN budget-cutters in Washington are looking for ways to impose austerity--and they're looking to Rhode Island's "global waiver" as a model. But there are several reasons why the Rhode Island experiment just doesn't add up.

Sen. Tom Coburn (R-Okla.) pointed to Rhode Island's supposed success story. "Why don't we just block-grant every state, take the rules off and let them do these strategies," he said during a Senate Finance Committee hearing in February. "Rhode Island's obviously already figured it out."

Medicaid is high on the Republicans' hit list. By 2014, Medicaid will expand to include all of the people who live under 133 percent of the federal poverty level. This expansion, a result of the Obama administration's health care legislation, has met resistance from some state politicians, who are targeting major entitlement programs as their solution to the economic crisis.

The targets include Medicare, Medicaid and Social Security. In some states, legislators are trying to make Medicaid patients pay for services that once were free. Florida, for example, has a proposal to charge Medicaid clients $100 for emergency room visits.

The dismantling of these programs began with the privatization of Medicare under the Part D prescription drug program in 2006 and continues today with a recently proposed voucher system for Medicare. At the same time, politicians are using scare tactics about the "crisis in Social Security" in an effort to privatize Social Security, after years of raiding the trust fund that keeps it solvent.

Luckily, some of the worst aspects of Wisconsin Rep. Paul Ryan's budget plan, such as the Medicare voucher system, aren't going to be implemented. But Ryan is also calling for a repeal of the Medicaid expansion.

Arguably, the best part of the limited health care legislation put forward by the Obama administration was the expansion of Medicaid--this has the potential of greatly reducing the number of people who are currently uninsured. But state governments resistant to adopting health care reform, or simply looking to cut costs, can look to "global waivers."

According to Rhode Island's global waiver in 2009, the state government agreed to a cap on federal Medicaid funding in exchange for increased flexibility over things like how it contracts Medicaid services.

By choosing a global waiver, individual state governments can reduce costs by setting a ceiling on spending or by having the flexibility to determine what benefits are offered and what people are deemed beneficiaries.

THE BACKDROP to the right's fascination with global waivers is the fight for the enrollment of 16 million new Medicaid beneficiaries who are projected to join Medicaid under the Obama health care law. This is a business opportunity for insurance companies to profit off the poor. As Kaiser Family News reported, "With billions of dollars at stake, insurance companies, hospitals and doctors are fighting over money and control."

Hospitals want to create their own managed care networks with more favorable reimbursement from the state. Any decrease in the number of people covered by Medicaid would lead to increased uncompensated care for the hospitals to provide health care for these individuals.

The danger with the Medicaid framework is that if payment and reimbursement rates continue to be cut from Medicaid, providers may drop out of the network, and clients will have an even more limited network. Due to low reimbursement rates, the Medicaid population is insured, yet there are barriers to accessing care, especially specialists.

According to the 2009 Global Consumer Choice Compact Waiver agreement, or global waiver, Rhode Island agreed to a cap on the amount of federal Medicaid funding it would receive over the next five years. Federal funding wouldn't be tied to the amount a state spends on Medicaid but to a specific dollar amount. This is a reversal of how states receive matching funds--in the past, a state would receive monies for every dollar spent on Medicaid.

Rhode Island agreed to cap its spending at $12.4 billion over five years--but its anticipated spending was only $10.7 billion. Now the outgoing administration stated in a report that Rhode Island spent $1.75 billion during 2009, well below the first-year spending level of $2.6 billion offered through the waiver.

Many are trying to claim that there has been a savings of $850 million due to the waiver. But this claim isn't based in reality.

There were no real savings for the state. The state simply spent within the given range it was going to anyway for Medicaid assistance. Any real savings could more accurately be attributed to the Recovery Act funding that went to Rhode Island. (A limited amount of savings also can be attributed to the millions of dollars in federal matching funds for health care services that previously had been provided entirely at state expense to certain groups.)

Other state governments will likely point to this sweetheart deal as an excuse to utilize another waiver. And states that are granted a waiver in the future could reasonably expect to "do more with less," receiving a much less generous allotment to fund possibly more Medicaid beneficiaries than before.

THE LATEST Republican proposal trims $771 billion over the next 10 years from Medicaid. Ryan's budget plan to convert Medicaid into a block grant and repeal the new health care law would leave at least 30 million more Americans without coverage, according to a new report by the Kaiser Family Foundation.

New states that don't receive a sweetheart deal could be forced to reduce their Medicaid rolls and/or benefits as they reach their ceiling for Medicaid spending. This is a danger of the Rhode Island model. And with the flexibility that the Rhode Island deal offers, states will be able to reduce the benefits they offer, increase cost-sharing, and keep certain groups of people on waiting lists for services.

Under this waiver, the burden is shifted from the federal government to the state. Under a block grant, the federal government would provide each state with a fixed dollar amount, usually based on a state's current expenditure level, and states would have to pay 100 percent of any costs that exceed these amounts.

States would also have to pay for any expenses beyond the block grant, and, if they opted out of the global waiver, they would need to pay back the federal government.

People are missing the fact that overall federal costs for Medicaid increased in Rhode Island, because under the sweetheart deal, the federal government covered services it didn't cover in the past.

According to the Center on Budget and Policy Priorities, there are several areas in which Rhode Island may have achieved some savings under its global waiver--rebalancing long-term care, placing greater emphasis on selective, competitive contracting, and improving care coordination. But all this could have been done without the waiver.

The danger with any global waiver is that once the spending limit is reached, there is a risk that the state may change benefits or remove people from the program.

The full implications of the global waiver have yet to be seen in Rhode Island. Just this week, a private, nonprofit health care service provider sued the state because Rhode Island is seeking to reduce Medicaid cuts that could jeopardize the employment of 20 staff and in services to 95 individuals with developmental disabilities and mental health problems. Over $1 million was cut from the company's allocation under the global waiver.

Gov. Lincoln Chafee has also proposed a cut of $12.8 million in Medicaid spending for this year. The savings will be realized through adopting a "price-based" reimbursement system. This will greatly affect nursing homes in Rhode Island. As a nursing home lobbyist said in the Providence Journal, "Nursing homes must make up for Medicaid shortfalls with Medicare revenues, but with Medicaid funding getting cut every year, this gets extremely difficult."

The Rhode Island experience is another example of how millions of Americans continue to feel the effects of the Obama administration's failure to pursue the kind of health care reform that would really affect the crisis--a single-payer system.