PROVIDENCE — A federal clampdown on the state’s Medicaid program will cost as many as 18,000 needy Rhode Islanders their free bus passes and will force the state to make up for millions of dollars in lost transit money to avert wreaking havoc on the state’s bus system, state officials say.

The state is also expecting an attempt by the federal government to demand repayment of millions of dollars in past Medicaid money that was spent on transit. Those payments, reaching back to 1995, total more than $60 million, according to figures from the Rhode Island Public Transit Authority, although state officials say they expect the amount sought by the federal government in “recoupment” to be much smaller, between $4 million and $5 million.

The development means that the state, which paid an increasing amount of the cost of running the state bus system with Medicaid money, will now have to pick up that expense or face a major disruption, probably including bus service cuts and perhaps layoffs, at RIPTA.

Effective July 1, the change will end the state Department of Human Services’ years-long practice of paying for monthly RIPTA passes for RIte Care members, giving enrolled children and heads of households unlimited use of the bus system.

As a result, “a lot of people are going to lose a big transportation benefit,” said state Deputy Budget Officer George Welly.

DHS Director Gary Alexander said the change will affect about 18,000 of the 27,000 RIte Care members who now get bus passes, worth $45 a month. He said the other 9,000 will continue to get passes through the Family Independence Program, formerly the welfare program.

The reason for the change is that Medicaid doesn’t pay for general transportation, only for transportation related to medical treatment, according to the Centers for Medicare & Medicaid Services, which runs the Medicare, Medicaid and related programs.

“Non-emergency transportation is designed to assist beneficiaries in getting to medical appointments only, not to non-health-care related destinations,” said agency spokeswoman Mary M. Kahn. She declined to answer further questions without authorization, which was not immediately forthcoming.

Alexander said his agency will probably propose an arrangement in which DHS would buy its RIte Care clients a limited number of individual RIPTA bus tickets, perhaps 12 per month, intended solely for medical trips, to replace the passes good for unlimited use.

It isn’t clear how the improper use of millions of dollars in federal funds could have gone unnoticed for more than a dozen years. State officials have this explanation: when Rite Care was established in 1994, a waiver of Medicaid rules regarding transportation was granted to the program.

Federal officials, Welly said, approved the arrangement. However, he said, “We’re lucky to get it for as long as we did.… Now, it’s over.”

“They’ve asked us to stop doing it,” Alexander said, “and we’re going to stop.”

RIPTA has become increasingly dependent on the Medicaid money since 1995, when the RIte Care transportation program began. RIPTA’s revenue grew from $648,000 that year to $2 million in 1998 and $4 million in 2003.

For next fiscal year, RIPTA budgeted $14.1 million in revenue, from DHS for bus passes for RIte Care members, $7 million of it from Medicaid. Seven million dollars is more than 7 percent of the agency’s budget.

Alexander said he expects DHS will continue to get $1.4 million in Medicaid money to pay for the tickets, which it would pass on to RIPTA. Without state intervention, that would leave a continuing $5.6-million hole in RIPTA’s budget.

The situation has caused consternation at RIPTA, where officials say they have been trying to pry information out of DHS with little success and as recently as Monday said they didn’t know how much money, if any, they would get under the RIte Care program for the next fiscal year, which starts July 1. Alexander, by contrast, said Wednesday, “We’ve been working closely with RIPTA.”

However, Alexander said that Governor Carcieri’s proposed budget, to be presented today, “will make RIPTA whole” for the fiscal year beginning July 1.

RIte Care, with about 110,000 members, provides health coverage to families on the Family Independence Program, to eligible uninsured pregnant women, parents, and children up to age 19. Families get most of their health care through Neighborhood Health Plan of Rhode Island, UnitedHealthcare of New England and Blue Cross & Blue Shield of Rhode Island.

blandis@projo.com