Medicaid Waivers & the Looming Fiscal Crisis

In the waning days of 2008, the state of Rhode Island secured a global waiver for its Medicaid program. The waiver exempted the state from many federal rules and mandates in exchange for a five year spending cap of $12.1 billion. The architect of the waiver was then-Rhode Island Secretary of Health and Human Services Gary Alexander. He’s now heading Pennsylvania’s Department of Public Welfare.

A December 2011 study by the Lewin Group found Rhode Island’s experiment is lowering spending and improving care. Patients are finding better access to doctors, reducing the need for expensive emergency room use. The savings total more than $55 million—not bad for a small state.

In the Wall Street Journal last week Sec. Alexander said taxpayers across the country could save $200 billion if every state followed Rhode Island’s lead.

But unfortunately, the federal government won’t allow other states to follow Rhode Island’s lead. A cornerstone of President Obama’s health care plan is to enroll even more Americans in Medicaid. Medicaid currently costs taxpayers more than $400 billion annually in federal and state spending. The surge in enrollment will force states to spend an estimated $118 billion more over the next decade—creating fiscal crises across the country. State governors recognize the desperate situation and have been asking for a Rhode Island-type alternative for nearly two years.

Congressman Todd Rokita from Indiana has introduced a block grant bill that would mimic Rhode Island’s waiver and cap states’ Medicaid and SCHIP funding at 2012 levels in exchange for regulatory flexibility. States should rally behind this legislation and continue to press upon the Obama Administration the necessity of state flexibility—it is essential if states want to continue to serve the neediest citizens without raising taxes.