RHODE ISLAND PROPOSES A GLOBAL CAP FOR ITS MEDICAID PROGRAM

Volume 29, Issue 517 June 9, 2008

Anna Spencer

Rhode Island may become the second state (after Vermont) to seek more flexibility in its Medicaid program in return for a cap on funding. In early 2008, Gov. Donald Carcieri announced plans to submit to the Centers for Medicare & Medicaid Services (CMS) a proposal for an 1115 demonstration waiver, which would, among other things, permit the state to overhaul its long-term care system and change eligibility for Medicaid.

The Global Consumer Choice Compact Waiver Proposal would make changes in eligibility for members of RIte Care, begin transitioning the disabled and elderly from nursing homes into community settings, and shift Medicaid fee-for-service beneficiaries into managed care. A formal waiver is expected to be delivered to CMS sometime this summer.

Although details haven't been developed, the proposal is garnering a firestorm of protest. Advocates for seniors and children say that capping spending will reduce access to services and create long waiting lists. The state could “lock into spending levels that are based on unrealistic assumptions and people may end up losing coverage,” said Marie Ganim, Senate policy analyst.

But supporters argue that without drastic reforms, people may lose coverage anyway. The state is facing a $450 billion budget deficit. “Just to balance the [FY10] budget, we may need to need to take 30,000 to 40,000 people off our current programs because we don't have any more money,” said Gary Alexander, director of the Department of Human Services (DHS). “I understand the community has concerns about the risk involved, but right now we are [moving ahead].”

Rhode Island’s Medicaid program serves about 185,000 people with a budget in state and federal funds of $1.7 billion (26 percent of the state’s total budget). According to the DHS, the program has grown 7 percent annually over the last six years, resulting in a funding gap of $135 million.

Already, the General Assembly has reduced eligibility for RIte Care. As of June 1, 2,800 children who have been legal permanent residents in the United States for fewer than five years or are unauthorized were dropped from the rolls. In addition, self-employed family child-care providers and their children (225 child-care workers and children), and adults who are part of the Starting Right Health Care Insurance Assistance Program for Child Care Providers (600 child-care workers) were disenrolled from RIte Care.

Rhode Island operates traditional Medicaid, along with 11 different waiver programs. “Rather than a piecemeal approach to reform—which we could do if we tinkered all our waivers and optional services and populations in our Medicaid program—the global waiver offers the best chance for innovation,” said Alexander. “The redesign will keep the current levels of service sustainable and possibly offer savings.”

The Devil is in the Fine Print

Currently, the DHS is negotiating with CMS over financing details such as the annual rate by which spending will inflate over the five years of the demonstration project. The federal lump sum will be based on historical spending and caseloads and will be trended forward on a “mutually agreed upon rate.”

The trend rate will cover both medical inflation and anticipated caseload growth, and the state will commit to a maintenance of effort to ensure that core (mandatory) populations and services are preserved. The two parties also are negotiating the extent to which the state can retain any unused federal funds, which would be reinvested to improve services or increase the number of eligible beneficiaries, Alexander said.

“There are still many, many questions to be answered,” said Ganim. For example, what will be the federal aggregate allotment, what are the contingencies and are there any escape clauses if costs or caseloads are miscalculated? “This is going to be a very difficult decision for the legislature and until the legislature has all the details, they aren’t going to sign off on anything,” Ganim said.

Transforming Long-Term Care

Rhode Island already has a home- and community-based waiver. At the heart of the reform proposal a rebalancing of the long-term system, which is heavily biased toward nursing homes, residential care, such as assisted living facilities, and high-end services. The goal of the Medicaid reform plan is to have a 50/50 split in the number of people being served in residential placements and the community by 2013. At present, that rate is approximately 90/10.

To achieve this goal, the reform plan proposes to replace the current single level of care definition with a three-tier level of care determination process (intense, mid- and low-levels of care). Financial requirements also will be modified to reduce the biases placed on institutional care. For example, an income disregard for living expenses will be allowed to enable individuals to retain more of their income. And lastly, additional provider and service choices will be offered to recipients of in-home care, such as medication management, developing shared living facilities, and expanding the use of vouchers and the Cash and Counseling program sponsored by the Robert Wood Johnson Foundation.

There is unanimous agreement that the move toward community-based care will save the state millions of dollars and is in the “best interest of seniors needing long-term care,” said Maureen Maigret, policy and legislative consultant with Senior Agenda Coalition. “The current long-term care system desperately needs reforming and we support the idea of giving people more choices.” But putting a cap on funding “potentially puts frail and elderly individuals at risk of losing coverage,” she said. Without the full financial details, "it’s impossible to know how everyone will be affected.”

The Trailblazer

Vermont is the only other state to have negotiated a similar arrangement with CMS. In 2005, Vermont secured two waivers from CMS to restructure its Medicaid program, becoming the first state in the nation to agree to cap its Medicaid spending. In exchange, the state received greater flexibility to use federal funds on non-Medicaid health programs and to reduce benefits, increase co-payments and cap enrollment in some programs.

So far, the arrangement has reportedly worked out well. According to a 2006 report issued by the Henry J. Kaiser Family Foundation, Vermont’s willingness to blaze a trail and accept a cap on funds secured the state a “relatively generous financing arrangement and significant fiscal relief,” the study says. It cautions, however, that states seeking similar waivers would likely receive more limited financing, making it more likely that they would fall short of needed federal funding and be forced to reduce coverage.