PROVIDENCE –– Governor Carcieri unveiled dramatic plans in January to transform the state’s Medicaid system, a proposal that would affect tens of thousands of elderly, disabled and poor Rhode Islanders who live in nursing homes, group homes and receive health insurance on the state’s dime.

The plan was a win-win for government and the people being served, the governor said at the time. Taxpayers would save an estimated $67 million, while the patients and group home residents would have greater freedom to get the care they wanted.

But Carcieri didn’t mention the risks.

And now, as state officials are negotiating an unprecedented agreement with the federal government to cap all Medicaid spending over the next five years, interest groups and key lawmakers fear the administration may create a “catastrophe” for 186,000 Rhode Islanders –– nearly 18 percent of the state’s population –– who depend on Medicaid funding for medical treatment.

“We know that it’s risky. One of the things we’re trying to do is find a way to minimize the risk,” said Adelita Orefice, the deputy secretary of health and human services.

Senior advocates warn of waiting lists for the elderly, reduced access to in-home care, and cuts to transportation programs for medical appointments. Parents of disabled children made emotional pleas this week to lawmakers to block the cap, fearing they’d lose funding for part-time in-home aides. And others fear the move will force lawmakers to cut thousands more off the state’s health-care program for the poor, RIte Care.

“It alarms us to think of frail 80- and 90-year-olds in need of assistance with activities of daily living on waiting lists for care,” said Maureen Maigret, former Department of Elderly Affairs director, and current policy director for the Senior Agenda Coalition.

Administration officials, meanwhile, argue the current system is already facing substantial risk as costs continue to climb and the state’s financial health worsens.

“I understand the risk involved and I understand the concerns of the community, but right now we are past the risk point,” said Gary Alexander, director of the state Department of Human Services. “We may be at a point where, just to balance the budget, we’ll be taking 30,000 to 40,000 people off our current programs for [fiscal year] 2010 because we don’t have any more money.”

There are still many questions as to how the Carcieri administration would execute the cost-saving plan. Details are being ironed out behind closed doors between the state Department of Human Services and the federal Centers for Medicare & Medicaid Services.

But what is clear is that Rhode Island is negotiating something that has never been done in the United States.

The plan calls for Rhode Island to agree to limit spending on all its Medicaid programs –– at a rate yet to be determined for the next five years. In exchange, the Carcieri administration would have greater flexibility to change the programs –– in ways that have yet to be determined in many cases.

The stakes are high, not only in terms of the people affected, but in the potential impact on the state’s financial health. Rhode Island’s Medicaid spending totaled more than $1.8 billion, one quarter of the total state budget, in fiscal 2006, the most recent annual data available. (The federal government currently pays 52 cents out of every dollar spent on Rhode Island’s Medicaid program.)

There is concern that the agreement being negotiated, known as a “global waiver,” would lock Rhode Island into spending levels that are based on unrealistic assumptions. If actual costs exceeded the negotiated cap, the state would have no option but to cut people off services or pay for the additional programs on its own without a federal match.

Among the likely changes, the state would set strict new criteria for elderly residents wishing to enter nursing homes (the department has yet to finalize the specific criteria). But, “a second new group of persons with lower care needs, who under today’s standards would be eligible for nursing home care, would now be limited to home and community care services, but they would only get services if funding is available,” Maigret said.

The General Assembly, which largely controls the state budget, has the power to block the plan.

House Finance Committee chairman Steven M. Costantino this week expressed serious concern over the global waiver: “There’s a lot of uncertainty about this. Maybe we need a year. Maybe we need a year to do this global waiver and start working on it where it’s fully flushed out,” he said. “I don’t want to put the state at so much risk that in the third year, we’ve got a major catastrophe for the state of Rhode Island.”

Vermont is the only state to have arranged something close to what the Carcieri administration is seeking.

In 2005, Vermont secured two broad federal Medicaid waivers to restructure its Medicaid program, becoming the first state in the nation to agree to cap its Medicaid spending. In exchange, the state received greater flexibility to use the federal dollars on non-Medicaid health programs and to reduce benefits, increase co-pays and cap enrollment for some programs.

The agreement has worked out well for Vermont so far. But a report issued by the Kaiser Family Foundation in 2006 warns other states of potential risks.

“As a small state that was willing to set the precedent of accepting an aggregate cap on federal Medicaid funds, Vermont secured a relatively generous financing arrangement and significant fiscal relief,” reads the report. “If other states were to seek similar waivers, they would likely receive more limited financing, making it more likely that they would fall short of federal funding and face pressure to reduce coverage.”

Senior advocates such as Maigret generally support the administration’s plans to reduce the dependence of nursing homes in Rhode Island. The global waiver simply isn’t the best way to get there, she said.

“There’s enough uncertainty on this proposal that we can’t tell seniors that they will have access to services they currently have access to,” Maigret said. “A global cap presents risks to the state. It also puts elders at risk for service denials. This is a risk we do not support.” MEDICAID IN R.I.

More than 186,000 Rhode Islanders received Medicaid funding for medical services in 2006, the most recent annual data available. Costs include state and federal spending.

Adults with disabilities:

27,334 people served

$638.7 million

(38.4 percent of spending)

Elderly: 18,166 people served

$457 million

(27.5 percent of spending)

Medical coverage for low-income (RIte Care): 129,111 people served

$342.7 million

(20.6 percent of spending)

Children with special needs:

12,353 people served

$225 million

(13.5 percent of spending)

Source: Rhode Island annual Medicaid Expenditure Report, April 2007

speoples@projo.com