Study: Medicaid changes could cost RI $514M

Tying new federal 'block grants' to states' income would shift funding, experts find

PROVIDENCE, R.I. (WPRI) – Rhode Island could lose half a billion dollars in Medicaid funding under one version of the Republican vision for restructuring the state-federal health program for low-income Americans, according to an expert analysis.

GOP officials have long supported converting Medicaid from a program that shares the cost of however much states decide to spend on it into one that provides a “block grant” of lump-sum payments based on uniform criteria. Democrats who oppose such a move have argued it wouldn’t provide adequate funding.

There are various ways to decide how much each state would receive in Medicaid funding through block grants. Two experts – Jeffrey Clemens of the University of California at San Diego and Benedic Ippolito of the American Enterprise Institute – ran the numbers based on tying the block grants to the difference between each state’s per-capita income and the national average.

Using 2015 data, their projections showed Rhode Island would lose $514 million in annual federal Medicaid funding under such a formula – a huge amount of money, equal to 22% of the state’s $2.3 billion in total Medicaid spending during the 2014-15 budget year. Massachusetts would lose $3.4 billion under the scenario.

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Clemens and Ippolito acknowledged the large size of the potential funding cuts, saying the income-based block grants they tested “would result in a seismic redistribution of federal spending,” with “major winners and losers.”

As an example, they pointed to the estimated $15.9 billion loss of federal Medicaid funding New York would face. “[R]ecouping a $15 billion shortfall would require increasing all tax rates, fees, and charges by 16%,” they wrote. “The loss falls just short of the state’s combined spending on education and transportation infrastructure.”

Medicaid covered approximately 317,000 Rhode Islanders over the course of the 2014-15 budget year, nearly one in three residents of the state. Progressive Democrats in the General Assembly have already urged state leaders to use state dollars to replace federal funding cut by the new Republican leadership in Washington; the state is currently facing a $112 million deficit in 2017-18.

Another approach floated by Clemens and Ippolito – tying the block grants to current Medicaid spending – would be far less jarring for Rhode Island’s budget. But it could also draw criticism, they said.

It “would lock in large and arguably unfair variation in funding across states,” they wrote. “Current federal spending per low-income resident varies by a factor of 11 to 1 across the country. Permanently entrenching this variation would justifiably draw the ire of states locked permanently into low federal contributions.”

“Beyond the sheer volume of dollars at stake, seemingly technical details can have significant long-term consequences,” they added. “According to what formula, for example, would the federal contribution grow over time? Will the federal contribution expand during recessions or will states be left more exposed to economic downturns than under the current system? While these and other design elements must be addressed, proposals are often sparse on such detail.”

It’s unclear how Republicans will proceed on Medicaid as they wrestle with promises to repeal and replace President Obama’s Affordable Care Act, which expanded Medicaid. President-elect Donald Trump pledged “no cuts” to Medicaid in a 2015 tweet, but he’s also signaled support for block grants.

Ted Nesi (tnesi@wpri.com) covers politics and the economy for WPRI.com. He writes Nesi’s Notes on Saturdays and hosts Executive Suite. Follow him on Twitter, Facebook and Instagram