Governor Don Carcieri

As states slash Medicaid spending from their budgets and await an imminent federal bail out, Rhode Island’s governor has come under heavy criticism for seeking to overhaul the state’s Medicaid system through a spending cap.

Last summer, Gov. Don Carcieri applied for federal permission from the Centers for Medicare and Medicaid Services to change the state’s program and set a limit on spending. The waiver was approved earlier this month. According to the Boston Globe (“Congressional Democrats fault RI Medicaid plan“), Carcieri reached a deal during the final days of the Bush administration that would set a $12 billion cap on Medicaid spending over five years. Rhode Island is the only state to have taken this action.

The arrangement is intended to benefit both Rhode Island and the federal government; in return for the spending cap, which will save the U.S. government money, Rhode Island will be allowed to use Medicaid funding in new ways that the federal government otherwise prohibits.

The Georgetown University health policy institute and the Washington-based Center on Budget and Policy Priorities recently co-published a report highly critical of the governor’s plan (Rhode Island’s Medicaid Waiver: A Bad Deal for the State). They argue that the plan is “especially unwise” during a recession, that Rhode Island will need to devote far more than $12 billion to its Medicaid program over the next five years, and that the plan is unnecessary anyway because the state can expect to receive enough money from the forthcoming federal stimulus package to buy it some time to formulate a safer solution.

Critics say Rhode Island could undermine the state and federal match for Medicaid and set a precedent for all of the other states that are frantically looking for ways to deal with budget shortfalls.

The Rhode Island experiment merits close observation. Whether or not the governor can follow through on promises to expand home care services within the spending cap, as he claims, remains to be seen.