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Governor seeks waiver to cap Medicaid at $12.4 bilion

10:20 AM EDT on Wednesday, July 30, 2008

By Steve Peoples
Journal State House Bureau

PROVIDENCE –– The Carcieri administration will ask the federal government to cap spending on Rhode Island’s health-care programs for the low-income, elderly and disabled at $12.4 billion over the next five years, according to a “global Medicaid waiver” proposal released for the first time yesterday.

The waiver is among the more contentious moves Governor Carcieri is pushing to help control state spending as Rhode Island trudges through its worst fiscal woes in nearly two decades. The General Assembly authorized the plan — and a projected $67 million in savings this year alone –– in the state budget adopted last month.

The administration released the 91-page waiver to the General Assembly yesterday, as required by state law, 10 days before the first-of-its-kind application may be submitted to federal regulators.

Rhode Island is trying to do what no state has done before.

In adopting a global waiver, the governor would agree to limit Medicaid spending — which constitutes one quarter of the state budget — through 2013 in exchange for broad authority to change services such as nursing-home care, subsidized transportation for the disabled and elderly, health insurance for low-income children and their parents, and prescription drug coverage for seniors.

While the application released yesterday was lengthy, it contained few specific details on how people would be affected. That was intentional, according to Adelita Orefice, the deputy secretary of health and human services.

“You’re going to see some of the larger concepts in here about the direction and the values and that sort of thing, but not a whole lot of detail about programs specifically, in part because we want to be able to preserve that flexibility,” she said in a briefing with top administration officials yesterday. “If we propose right now the details … then we’re going to be wedded to that. And if in a year that doesn’t work, and that kind of program makes no sense, we’re stuck.”

The leaders of the House and Senate Finance committee received copies of the waiver yesterday, but had yet to be briefed.

Senate Finance Committee chairman Stephen D. Alves reserved substantive comment for after a Thursday briefing, but said he was concerned with how Medicaid recipients would be affected. He noticed few details after scanning the application.

“That’s part of the problem with the global waiver. They’re always short on details,” he said.

House Finance Committee chairman Steven M. Costantino through a spokesman declined comment.

The House and Senate will likely have a joint hearing on the waiver in the near future to study the proposal, according to Alves, who would not be more specific.

Medicaid programs have major implications on the state budget and Rhode Island’s health-care system.

Rhode Island spent roughly $1.8 billion — one quarter of all state and federal spending — on Medicaid programs last year. The federal government contributed roughly 52 percent of the funding.

The programs touched 180,000 Rhode Islanders, or 17 percent of the state’s population. Local school districts, too, depend heavily on Medicaid dollars. They received more than $24 million in 2006.

Major steps remain before the global waiver takes effect.

The proposal must survive vetting by a host of federal agencies, including the federal Office of Management and Budget and the Centers for Medicare & Medicaid Services. As part of that process, the Carcieri administration will negotiate key points with federal regulators.

For example, Rhode Island would like to secure a spending cap of $12.4 billion for the next five years, but that’s simply the starting point in negotiations.

Orefice declined to say how low the administration would be willing to go. The negotiations will determine the state’s portion of the final cap versus the federal government’s.

Historical data suggest that $12.4 billion is more than the state needs for the next five years, according to state Department of Human Services Associate Director Murray Blitzer. But the figure takes into account the increased cost of an aging population and a weak economy, in which more residents may qualify for Medicaid programs because of unemployment or lower salaries.

The high figure also takes into account the risk the state will assume in the deal, Blitzer said.

If the state should run out of its Medicaid allotment sooner than five years, it would lose access to matching federal dollars. The state would be forced to slash Medicaid programs or to bear the full costs on its own.

Further, the state will try to negotiate “escape clauses” that allow leaders to wiggle out of the spending cap should unexpected circumstances arise. Orefice yesterday declined to say what those escape clauses might be for, other than something catastrophic.

Asked yesterday whether the governor — whose final term ends in two years — was brokering a deal that would handcuff the next governor, Orefice cited the unsustainable growth of Medicaid programs and health-care costs in general.

“This is not just about getting the governor through. If it were just about getting the governor out, it would be much easier to just ride it out and cut programs the next couple of years,” she said. “This is about legacy. This isn’t about closing a budget gap.”

Orefice acknowledged that the governor likely would miss the Oct. 1 deadline to have the waiver and the corresponding program changes in place. Despite the delays, she said the administration would meet its budget targets.

“We’re on the hook for $67 million. We will achieve $67 million,” she said, noting that she had assembled “Team 67,” a group of officials who meet biweekly to monitor budget savings. “It may not be exactly the way we thought it was going to be on Feb. 1…but we know we have to get $67 million.”

speoples@projo.com

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