Barbara Torres, a mother of four, testifies at a House Finance Committee hearing against proposed cutbacks in RIte Care.

The Providence Journal / Mary Murphy

PROVIDENCE — For more than a decade, Rhode Island has been using its federal Medicaid dollars to provide free — and unrestricted use — bus passes to tens of thousands of people enrolled in the state-subsidized RIte Care health-insurance program for low- to moderate-income families with children.

This year alone, the state anticipated spending $14 million in Medicaid dollars to provide 27,000 bus passes, each worth $44 a month.

But during a State House hearing yesterday on Governor Carcieri’s midyear, welfare-cutting proposals, top officials at the state’s Department of Human Services put lawmakers on notice that a looming $151-million deficit is not the only financial problem they may need to face.

Rhode Island faces a potential $4.7-million penalty from one branch of the federal government for failing to meet minimum “work participation” requirements for its welfare population; and a possible noncompliance letter from the inspector general within the U.S. Department of Health and Human Services that could, at the very least, result in strict new restraints on who gets the free bus passes in the future and what they can be used for.

No one has yet asked the state to pay a fine or return the millions of Medicaid dollars spent over the years to reimburse the Rhode Island Public Transit Authority for the free bus passes.

After the hearing, however, the DHS Medicaid director, John Young, said Rhode Island was put on notice last month that the inspector general had issued a “draft finding” of noncompliance. In response, Young said, his department has devised a new financing package to make sure RIPTA does not come up short and those who really need the bus passes to get to-and-from doctor’s appointments have access to new, limited-use passes.

The plan hinges on a new $7-million state subsidy for RIPTA and the use of $5 million of the anticipated savings from dropping benefits to 3,400 children in 1,600 families that have been on the state’s welfare rolls for more than five years.

At this point, Young said, DHS is waiting to see what happens next, but if the federal government seeks repayment of the millions spent on the bus passes, Rhode Island will argue that a 1994 waiver allowed the state to use Medicaid for non-emergency medical care transportation, this is how it chose to do so, and the state was “never told to stop.”

The second threat stems from Rhode Island’s struggle to meet a federal work requirement for at least 50 percent of those on its assistance rolls.

Donalda Carlson, administrator of child and family support services at DHS, told the lawmakers that Rhode Island is “on the cusp of a penalty” with only 21 percent of its caseload meeting the recently tightened standard. While Rhode Island gets credit for reducing its caseload, she said the count is skewed because it includes thousands of children to whom the state has, until now, continued aid even though their parents hit the five-year benefit limit. With the children’s benefits gone, Rhode Island has a shot of making the target.

The agency’s warnings about the two potential federal actions spilled out during an hours-long hearing the House Finance Committee held yesterday on Republican Carcieri’s attempts to stave off massive deficits this year and next by lowering the income-eligibility limit for RIte Care, disqualifying non-citizen children from the program, terminating health-care subsidies to home-based childcare providers, imposing a new $45-a month co-share on many RIte Care recipients at the lower end of the income scale and eliminating traditional welfare payments for individuals on the rolls more than five years.

Yesterday, DHS administrators told the lawmakers their initial budget-saving predictions may have underestimated the number of people affected in some of these categories.

No actions were taken yesterday by the lawmakers who are waiting for Carcieri to deliver the rest of his budget package tomorrow. But one after another, the lobbyists, health-care chief executives and directors of the Rhode Island Medical Society, the Hospital Association of Rhode Island, the March of Dimes, the Providence Community Health Centers and Kids Count described for them the many potential downsides to dropping upwards of 7,000 people from state-subsidized health insurance.

Merrill Thomas, CEO of the Providence Community Health Centers, said 42 percent of his centers’ 35,000 patients in Providence are already uninsured; the centers are “already at capacity and struggling to survive” after laying off 40 staff, are in the process of shutting the door to new adult patients in internal medicine, and cannot take on a new influx of uninsured patients.

“Even though people will lose their Medicaid coverage, they will not disappear,” he warned the lawmakers. At the very least, they “will still need school immunizations.” But no room for them at the community health centers will mean “delayed care” which, in turn, “will mean sicker and costlier interventions and increased volume at emergency rooms.”

Kate Begin, executive director of a Pawtucket-based group called Prevent Child Abuse Rhode Island, spelled out what she described as another easily foreseeable scenario if traditionally low-wage childcare providers are forced to join the uninsured:

“A sick childcare provider who cannot afford to visit the doctor for diagnosis and treatment will risk everyone else’s health and well being….The common cold often times turns into strep throat, respiratory infections and even bacterial pneumonia…Children who become sick as a result of this exposure cause the parent [to] take time from work that they often can ill afford and in some cases, parents make survival decisions about leaving a sick child at home alone or in an unsafe placement for the day or days…[at risk] of being reported to DCYF for neglect and abuse. That begins a whole new cycle of state expenditures.”

Emma Villa told the lawmakers what would happen to her, as the operator of a small day-care business in her Laban Street, Providence, home, where she looks after two children in addition to her own.

With the help of a translator, the Spanish-speaking Villa, 40, said: “It is very important that we have health care,” she said, “because we are the ones that hold the entire welfare-to-work system up. If parents, children and those of us who care for them lose our health care, we could face the spread of disease without treatment — maybe even an epidemic…Is that what we really want?”

Without health insurance, Villa said she will have to look for another job and if she is unable to find one with health insurance, she will be forced to seek financial aid from the state for the first time in her 20 years in this country.

Providence Mayor David N. Cicilline added his voice to the debate via a letter to members of the House Finance Committee.

Directing his comments at the proposed cutbacks in the state welfare program known as the Family Independence Program, he wrote: “We simply cannot afford to increase the level of poverty among our city’s children or risk having more homeless families because they have lost their small FIP benefit. As you are aware, there is already an increase in homeless families in Providence as a result of the increased number of mortgage foreclosures….”

kgregg@projo.com