PROVIDENCE – Federal law provides the Secretary of Health and Human Services broad authority to OK state projects that “test policy innovations likely to further the objectives of the Medicaid program” – a waiver that would change the way the federal government funds Medicaid.

The Carcieri administration is banking on a swift and sweeping blessing from the federal Centers for Medicare and Medicaid Services and the White House Office of Management and Budget for its requested so-called “global Medicaid waiver.”

Unveiled in late July, the waiver got its first public outing at a General Assembly Joint Finance Committee hearing this week.

Rep. Peter Lewiss, D-Westerly chaired a portion of the near-five hour hearing where a presentation of the Carcieri-created Executive Office of Health and Human Services made its case for the waiver.

“We should have talked more globally about reform. We are now,” said EOHHS deputy director Adelita Orafice. “We want more flexibility in the process. [For example], expand care beyond regular populations, like home-based care.”

But not so fast: ‘what’s the ultimate cost?’ critics of the proposed waiver are asking.

Lt. Gov. Elizabeth Roberts testified that while she agrees in principal that Medicaid reform is critically needed, the waiver is the wrong way to go.

“(It’s) not necessary to achieve reforms. We have the ability to make changes without capping (federal funding). (The waiver) would have a significant impact on the public,” she told Committee members. And removing some populations from the ranks of the Medicaid-insured - which the waiver would allow the state to do - “(shifts) that burden to already stressed hospitals,” read the uninsured would end up in the emergency rooms across the state.

But Orefice said that since the waiver would provide the flexibility to tweak federal Medicaid rules, the state could rebalance the long-term care system, manage care for all Medicaid “populations” and ensure that the “transition from payor to purchaser” is completed; “tie reimbursement to performance and quality, purchase selected heath care “interdepartmentally” and “enhance competition.”

The Carcieri waiver proposal, which the administration hopes would be approved by October, would be a five-year pilot program that gives the state autonomy to run its Medicaid program the way it wants in exchange for a fixed $12.4 billion ‘block grant’ Medicaid payment.

Currently, the feds pay more than half on every dollar spent by states for Medicaid. If the waiver is approved, Rhode Island would have carte blanche to reform its program the way it sees fit. And based on the EOHHS report presented to the Joint Committee, that means adding, but also, eliminating “optional” populations - those that the law does not mandate coverage.

But detractors say the waiver, if OK’d by the federal government, would hurt those who need Medicaid the most and reform, in any event, could be accomplished without the waiver. According to the presentation delivered by the EOHHS, mandated populations will keep medical coverage, but it concedes that “optional” populations may lose coverage or end up on waiting lists. The “optional” populations include children. According to Elizabeth Burke Bryant of RI Kids Count, one-third of the children currently on RIte Care are considered “optional.”

“They will be at risk and could lose access to health care,” she said.

And, worst case, critics said, if the state ends up spending the entire $12.4 billion allotment before the end of the pilot period, it would still be out the federal matching and be struck footing the entire bill in any event.

House Committee on Finance chair Rep. Steven Costantino said that “either way” the state can’t cover its end now: The current state match of the projected near-$2 billion in Medicaid costs.

Rhode Island is the only state in the nation looking for this waiver, one described by Georgetown Health Policy Institute professor Joan Alker as a “radical and risky departure from the way Medicaid currently operates.”

And one, she said, similar in scope to a failed Bush Administration’s Medicaid waiver initiative proposed in his 2004 budget. Congress rejected his plan.

Locally, agencies and health care centers including day services for adults with disabilities and community health centers like Wood River Health Services could feel the negative effect of a Medicaid waiver, critics charge.

“RIte Care is a public health policy success. It’s the most efficient, high performing program. (A waiver) would mean a commitment to only covering mandated populations. One third in RIte Care are eligible (to be cut),” she said.

As explained by Alker, optional populations in RI include children ages 6 and up from the poverty level to 250 percent of poverty, parents from 40 percent of the poverty line, some pregnant women, ‘Katie Beckett’ kids (see info box), low income seniors and people with disabilities over 74 percent of the federal poverty level, women eligible for breast and cervical cancer programs, and seniors and others with disabilities that are otherwise eligible for home and community-based waiver programs.

Pitting population against population for coverage given the state would have discretion in which population gets coverage and which does not, Ackler said.

But Orefice said that the state has little choice and needs to move forward with “serious” reform and the waiver is the best way to realize that goal.

“In Rhode Island one quarter of the budget goes to Medicaid. If we keep doing what we’re doing, like in every state, Medicaid is taking up a greater and greater portion of the budget. This is a pilot. Other states are waiting to see how we do.”

R.I. Medicaid facts

· Wood River Health Services is one of the state’s 11 community health centers. With more than 12,000 RI’ers receiving care at the centers annually, they also serve the largest percentage of Medicaid-supported RIte Care-enrolled children and families. Some optional population children may be removed from care.

· "Katie Beckett" is a special eligibility process  that allows certain children with long-term disabilities or complex medical needs to obtain coverage and under this provision, children who meet the disability and level of care criteria for at home and/or in an institutional setting. This population could be at risk of losing coverage.

· The 2006 National Commission on Quality Assurance and the US News and World Report ranked 71 Medicaid care organizations nationally and Rhode Island’s RIte Care Neighborhood Health Plan ranked first in the U.S.

Sources: RI Kids Count, RI HHS, federal CM, RICHA