Rhode Island is proving that it’s possible to save money on health costs without harming the impoverished people who rely on the social safety net. On Friday, state officials announced they have saved millions of dollars by reducing Medicaid spending growth — all without cutting health care benefits or eligibility for the state’s low-income population.
When Gov. Gina Raimondo (D) took office after the 2014 elections, the state faced a $190 million deficit. Since Medicaid spending represented about 30 percent of all state spending, finding savings in the program jumped to the top of the state’s priority list. But with Rhode Island’s new reforms, Medicaid spending is now projected to not just slow its growth, but actually decline between now and 2017 — even while enrollment is projected to increase.
As a result, Rhode Island is saving $75 million in state spending on Medicaid this year, along with a projected $120 million next year. Since Medicaid is jointly financed by federal and state governments, the federal government will save money from Rhode Island’s reforms as well.
Many of Rhode Island’s initial savings come from reduced payments to or higher fees on hospitals, nursing homes, and insurance companies, tied to incentive programs to improve the quality of care or reduce administrative costs.
Rhode Island has also laid the groundwork for long-term reforms that will save money and improve the quality of care for Medicaid beneficiaries in the coming years. These initiatives include programs to improve coordination of care for children with special health care needs, expand seniors’ access to community- and home-based long-term care services rather than nursing homes, and move toward bundled payments for maternity and childbirth services, among others.
Most importantly, none of these savings come from cutting Medicaid eligibility or reducing benefits. This is a sharp contrast from the plans offered by Congressional Republicans, which generally center around proposals that would reduce enrollment and shift costs to beneficiaries. For example, the Ryan budget would finance Medicaid through block grants. While sold as a way to increase state flexibility, in reality block grants would dramatically slash Medicaid spending over time. Independent estimates have shown that the Ryan budget would result in 14 to 20 million low-income people losing their Medicaid coverage.
Similarly, some conservative lawmakers have promoted “per-capita caps” for Medicaid as a way to package cuts under the guise of reforms. And on the state level, some states expanding Medicaid under the Affordable Care Act have sought waivers from the federal government to require higher cost-sharing and other restrictive measures for beneficiaries.
Yet Rhode Island’s savings show that block grants and other reforms like them aren’t necessary. States already have a great deal of flexibility to pursue innovative reforms that actually reduce spending, rather than just shift costs to beneficiaries. Meanwhile, although national spending on Medicaid ticked up in 2014 due to the one-time impact of Medicaid expansion, Medicaid spending growth is projected to return to a more normal, sustainable level this year.
Across the country, from Maryland’s hospital payment reforms to Massachusetts’ cost growth target, innovative states are showing us that we don’t have to choose between being progressive and controlling health care spending. Medicaid is a vital program for millions of low-income people, and like Rhode Island, states can ensure its sustainability without shifting costs to beneficiaries or forcing them off their coverage. That’s a lesson Washington would do well to listen to.