Why Rhode Island’s Medicaid Waiver Does Not Prove That Block Grants Work

In 2009, Rhode Island accepted a block grant from the Bush administration that capped the amount of federal Medicaid funding it could receive for five years, in return for increased flexibility over the program. Now, as Republicans in Congress look to lower federal Medicaid expenditures, they’re pointing to the state as an example of what block grants can accomplish.

During a February 15th Senate Finance Committee hearing, Sen. Tom Coburn (R-OK) announced that the 2009 block grant has lowered health care spending and suggested that its success could be duplicated elsewhere. “Well, my question for you is if Rhode Island can save 15.8 percent, why don’t we just block grant every State and let them, and take the rules off and let them do these strategies that you’re outlining rather than spending money in Washington telling them what to do,” Coburn asked Secretary of Health and Human Services Kathleen Sebelius, who was testifying before the committee.

The answer to Coburn’s question is simple: if every state received a Rhode Island-type grant, Medicaid expenditures would increase dramatically. That’s because the Bush administration established a cap that was “above what the federal government otherwise was expected to spend” and gave Rhode Island additional federal Medicaid funding to help pay for services it had previously self-financed.

Most states won’t be so lucky. A recent block grant proposal introduced by Rep. Paul Ryan (R-WI) and Alice Rivlin would reduce federal Medicaid spending by $180 billion and establish caps below what the government would otherwise spend. States would receive an annual federal appropriation that would be less than current projected growth of the program and would be forced to, as the CBO put it in examining the Ryan/Rivlin Medicaid proposal, “provide less extensive coverage, or to pay a larger share of the program’s total costs, than would be the case under current law.” The proposal, in other words, shifts a greater burden of funding Medicaid to the states, which would either have to spend more on their Medicaid programs or cut services and eligibility.


Rhode Island’s alleged cost savings, meanwhile, are partly the the result of the Recovery Act and lower than expected enrollment, not block grant funding. From a recent Center on Policy and Budget Priorities (CBPP) report:

An analysis of how states would have fared under a previous GOP block grant proposal from 1995 concluded that the one-year reduction in federal funding under the block grant would have been so great, that it would have “exceeded federal Medicaid spending on prescription drugs or home and community-based services and would have equaled half of all Medicaid spending on nursing homes.” As a result, “more than 6 million people would have lost Medicaid coverage in 2002” if states did not make up the difference.