Why Rhode Island’s No Model for a Medicaid Block Grant

The budget that House Budget Committee Chairman Paul Ryan (R-WI) will unveil next week is expected to propose converting Medicaid into a block grant.  Some block-grant proponents cite Rhode Island’s Medicaid program, which operates under a federal waiver with capped federal funding, as evidence that all states would do well under a block grant, claiming the waiver has saved the state over $100 million.

But a recent independent report that Rhode Island Governor Lincoln Chafee commissioned shows that the state’s savings under the waiver were unrelated to the federal funding cap and mostly reflected a large influx of new federal dollars.  Our new paper highlights some of the report’s findings:

• The waiver did not save the state $100 million over 18 months, as block-grant proponents claim, but $23 million over three years.  These savings resulted from policy changes that required a waiver, but not one with a federal funding cap.
• A much larger chunk of the state’s savings under the waiver — $42 million — result from a waiver provision that allowed Rhode Island to claim federal matching funds for certain health services that the state had previously paid for.
• Since the waiver took effect, Rhode Island has also saved $32 million by making Medicaid changes that have nothing to do with the waiver; any state can make them under current federal rules.

As our 2011 report (which likewise argued that block-grant supporters were exaggerating the waiver’s savings) explained, the waiver was a “sweetheart deal” between the outgoing George W. Bush administration and Rhode Island’s Republican governor, allowing the state to get millions of additional federal dollars in return for accepting a cap on its Medicaid spending at an inflated level that it never expected to reach anyway.  The waiver is nothing like the block-grant proposals that Chairman Ryan and others have promoted, which are designed to produce federal savings by giving states substantially less money than they would otherwise receive.

By shifting financial risk and costs to states, a block grant would force them to dramatically reduce eligibility, benefits, and payments to providers, which could harm millions of seniors, people with disabilities, and children.