RI waiver meant more federal funds for state

Some states are contemplating asking the federal government for a "waiver" of the standard Medicaid requirements modeled after Rhode Island's, which was implemented in 2009, says Jesse Cross-Call, a policy associate on the Health Policy team at the Center on Budget and Policy Priorities in Washington, DC.

However, according to a March 2011 report from the Center on Budget and Policy Priorities (CBPP), Rhode Island's Global Waiver Not a Model For How States Would Fare Under a Medicaid Block Grant, proponents of converting Medicaid into a block grant have exaggerated the savings.

Rhode Island's global waiver, called the Global Consumer Choice Compact, merged new waiver initiatives with a number of waivers the state already had received from the federal government, says the report, including waivers for helping Medicaid-eligible people enroll in employer-based coverage and expanding the use of home- and community-based services for people needing long-term care.

A key component of the Rhode Island waiver, though, was that it allowed the state to receive federal Medicaid funds for services the state previously paid for entirely on its own — meaning the state got more federal money, not less, says Mr. Cross-Call, one of the report's authors. "New Jersey and Texas are two states that have made it explicit that they too hope to use a waiver to increase the federal contribution to their Medicaid programs," he says.

Some states are also using waivers as a means to prepare their Medicaid programs and their larger health care markets for the expansion of coverage that will occur in 2014 when health reform is fully implemented, says Mr. Cross-Call, noting that California's Bridge to Reform waiver was approved by the Centers for Medicare & Medicaid Services (CMS) in November 2010.

Under this waiver, he explains, California will receive a federal match to extend Medicaid coverage to some individuals earning less than 133% of poverty, provide new revenue to public hospitals to upgrade their infrastructure and delivery systems in anticipation of the greater demand for care in 2014, and move Medicaid-eligible seniors and persons with disabilities into managed care.

Lower federal contributions

Texas submitted a waiver proposal to CMS that incorporates some of the features of California's waiver, says Mr. Cross-Call, and seeks to expand Medicaid managed care in the state and use the anticipated savings to help cover hospitals' uncompensated care costs and expand their capacity in advance of 2014. "Importantly, the Texas proposal does not seek a cap on Medicaid spending, and would not cut beneficiaries from the program," he adds.

Mr. Cross-Call notes that although Medicaid was a focus as many states confronted large budget gaps during the most recent legislative sessions, no state has submitted a proposal that would change the structure of their Medicaid program to a block grant.

"This is not surprising, because a block grant would decrease the federal contribution to state Medicaid programs over time, as a way to bring down federal spending," says Mr. Cross-Call. Under a block grant, he explains, states would receive significantly less federal funding than they would under the current Medicaid system, shifting significant costs to the states.

This cost shift would force states to cut eligibility for seniors, children, pregnant women, and persons with disabilities, reduce payments to health providers in their states, contribute more state funds to their Medicaid programs, or some combination of these options, says Mr. Cross-Call.

The House-passed budget crafted by Budget Committee Chairman Paul Ryan contains a concrete example of a block grant, says Mr. Cross-Call, and would reduce federal funding for state Medicaid programs by 35% in 2022 and cut it nearly in half in 2030. As a result, between 14 million and 27 million people would lose coverage and hospitals would have to deal with a 31% decline in revenue from Medicaid, according to a May 2011 analysis.1

"In addition to millions losing insurance coverage, many health providers would find it difficult to stay in business," says Mr. Cross-Call.

Contact Mr. Cross-Call at (202) 408-1080 or cross-call@cbpp.org.

Reference

1. Holahan J. Buettgens M, Chen V, et al. House Republican budget plan: State-by-state impact of changes in Medicaid financing. May 2011. Kaiser Commission on Medicaid and the Uninsured, Washington, DC.