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State Shortfall Met With Medicaid Cuts

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A Rhode Island proposal to tackle state budget shortfalls by limiting Medicaid funding threatens to leave the state’s most vulnerable populations without access to health services, according to some Democrats and low-income health-care advocates.

The plan, submitted last month by GOP Gov. Donald Carcieri, would cap federal Medicaid funds to Rhode Island, while lending the state new powers to limit eligibility and the scope of services available to certain patients. Supporters maintain that the changes would personalize care and rein in soaring state health-care spending. Critics say the strategy eliminates the safety net for low-income patients, thereby undermining the very purpose of the program.


Illustration by: Matt Mahurin

While the cap allows for both annual enrollment increases and medical inflation, it excludes additional federal assistance if funding is required beyond estimations. Faced with a deteriorating economy that could throw many new Americans onto Medicaid rolls, health-care advocates say the Rhode Island proposal is a recipe for disaster.

“This is a complete transformation of how Medicaid is supposed to operate,” said Rachel Klein, deputy director of health policy at Families USA, a health-care advocacy group. “Ultimately, the entire plan is designed to limit health care.”

“It’s a fundamental change in the structuring of the program that calls into question whether Medicaid would remain an entitlement,” said Judith Solomon, a senior fellow at the Center on Budget and Policy Priorities, a liberal policy watchdog group. “What Rhode Island is seeking is radical.”

The debate highlights the difficulty facing states as they try to address severe budget shortages exacerbated by an ailing national economy. Unlike the federal government, states (generally) must balance their annual budgets, forcing many to make difficult choices about which programs and services to cut. In a report issued this week, CBPP found that 13 states face budget shortfalls totaling $4.4 billion by the middle of next year.

The trend worries consumer advocates, who say that cutting programs like Medicaid will only create more problems for low-income folks already suffering disproportionately from the country’s economic woes. In the case of Rhode Island, they say, the proposed changes could be particularly damaging because it allows for no additional federal funds if health costs or enrollment jumps unexpectedly in the future.

“If the need for services increases beyond the cap, there’s basically nothing the state could do beyond going it alone,” said Elizabeth Burke Bryant, executive director of Rhode Island Kids Count, a children’s advocacy group. “Not knowing what needs might arrive in years to come makes this plan very risky.”

“That’s the problem,” said Bruce Lesley, president of First Focus, a child welfare group. “It really allows the feds to just walk away.”

In a state like Rhode Island, the effects could be significant. In 2005, the last year for which data is publicized, Medicaid spent roughly $1.8 billion in state and federal funds to treat an average of 186,000 people each month — nearly 20 percent of the state’s population.

The proposal has stirred a good deal of criticism on Capitol Hill. In an Aug. 21 letter to Health and Human Services Sec. Michael Leavitt, Rhode Island Democratic Reps. Patrick Kennedy and James Langevin urged the agency to reject the proposal.

“Medicaid was designed to ensure that all those who met the program’s requirements could access coverage and care,” the lawmakers wrote. “By capping funding, there is no guarantee that all beneficiaries who are eligible will be able to access needed care.”

Adding weight to the message, Reps. John Dingell (D-Mich.), who chairs the Energy and Commerce Committee, and Frank Pallone (D-N.J.), who chairs the E&C health subcommittee, also signed the letter.

Lawmakers and advocates have also criticized the process, charging that state officials left little opportunity for outside scrutiny of the plan. “It wasn’t until very close to the submission that the details became clear,” said Bryant.

That message wasn’t lost in the Senate, where Sens. Max Baucus (D-Mont.), chairman of the Finance Committee, and Jay Rockefeller (D-W.V.), who heads the Finance health subcommittee, have requested a staff-level meeting with the Centers for Medicare & Medicaid Services to discuss what they consider a “lack of transparency and opportunity for public input” surrounding the waiver proposal.

Erin Shields, a Baucus aide, said that meeting is scheduled for Sept. 17.

CMS spokeswoman Mary Kahn provided little comment on the proposal’s status. “It’s still under review,” she said.

Rhode Island’s proposal would scrap Medicaid’s current payment structure, in which the federal government reimburses the state 52.5 cents for every dollar it spends on Medicaid patients. Instead, the state would receive a predetermined annual sum based on its Medicaid spending last year.

The governor’s Website says the plan would lend the state “greater flexibility while assuring federal funding certainty.”

But advocates are quick to point out that the current model — in which federal dollars arrive as a function of actual services delivered — provides even greater assurance that funds would be available when needed. The plan would also limit state Medicaid spending to 23 percent of Rhode Island’s annual budget. No other state has an across-the-board cap on its Medicaid spending.

Calls to Rhode Island’s Dept. of Health Services were deflected to the governor’s office. Calls to the governor’s office were not returned.

The proposed changes are consistent with long-held Bush administration wishes to grant states more flexibility in managing Medicaid eligibility and services, with several states already moving in that direction. A two-year-old program in Florida, for example, allows the state to cap Medicaid coverage for some patients based on their health status.

Advocates argue that states can control Medicaid costs without scaling back services. As an example, some suggest moving the program to a managed-care model emphasizing preventive care. As another option, Klein, of Families USA, said the federal government could temporarily increase Washington’s matching rate until the economy rebounds and state revenues increase.

The latter idea already has at least one powerful ear in Washington. On Tuesday, House Majority Leader Steny Hoyer (D-Md.) indicated that such an increase to the matching rate might arrive this month as part of a second economic stimulus package.

“Federal Medicaid assistance to the states,” Hoyer told reporters, “[is] very much under consideration because the states are so stretched, as the federal government is, by the slowdown in this economy.”

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