Medicaid Waiver Reform Saved Tens of Millions, Although ObamaCare/ARRA Curtailed Savings

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State pension reform has been the bright flashing light attracting national notice to Rhode Island, recently, but the Medicaid Global Waiver implemented in the waning days of the Bush presidency and Carcieri gubernancy (to coin a term) has also drawn some attention.  Basically, the terms of the agreement put a cap on the spending (and federal aid) that Rhode Island could put toward its local Medicaid system in exchange for additional liberty in designing its offerings.

In early April, the Wall Street Journal promoted the reform as follows:

How’s that working out? Well, a study released late last year by the Lewin Group, a consulting firm, found that the Ocean State’s reform with a federal waiver has been “highly effective in controlling Medicaid costs” and improving “access to more appropriate services.”…

The total savings from all of Rhode Island’s reforms were more than $55 million—a big deal in such a small state. According to an analysis by Gary Alexander, who ran the Medicaid program in Rhode Island when the federal waiver was granted and who now serves as the Secretary of Public Welfare in Pennsylvania, if these savings were extrapolated for all 50 states, they would exceed $200 billion in lower Medicaid costs over the next decade.

The editorialist offers a variety of other numbers that may be contestable based on different understandings of what ought to be included, but the $55 million number is very specific and comes directly from the Lewin Group report.

In the limited universe of local healthcare-concerned journalists, the WSJ’s facts were immediately called into question on Twitter (see here, here, and here), centering around a blog post by Megan Hall on the Web site of Rhode Island Public Radio (RIPR):

It turns out Rhode Island’s overhaul of its Medicaid program didn’t save the state $110 million dollars. It didn’t even save $50 million dollars. According to an independent report by The Lewin Group, the so called global Medicaid waiver saved a much smaller $22.9 million dollars over the course of three years.

Once again, the question comes down to decisions about what to include among the savings.  Lewin Group designated reforms in three categories:

  1. Those that the state was self-empowered to realize through legislative and policy action, responsible for $22.9 million in savings
  2. Those requiring additional approval from the federal Centers for Medicare and Medicaid Services (CMS), responsible for $9.4 million
  3. Those authorized in January 2009, responsible for $22.9 million

Hall only counts category 3.  By contrast, Lewin credits Rhode Island’s “cost containment initiatives” for all $55.2 million.  Although acknowledging that the savings “were not solely driven by the Global Waiver,” the report treats the reform as a whole package, stating (for instance) that “Global Waiver strategies clearly helped the state to re-balance the delivery of [long-term care] services, resulting in savings of $35.7 million during the three year study period.”

Describing the savings as realized “over the course of three years” is also misleading.  Lewin’s study covers fiscal years 2008 through 2010, but none of the independent steps of the reform were implemented until FY09.  Many were not fully implemented until well into the last year of the study period, and some had yet to begin even as the report was being completed.

Other factors affecting savings amounts were the protracted economy and — very interestingly — federal legislation.  On the latter count, the Lewin Group writes (emphasis added):

To further complicate the question of savings attributable to the Global Waiver, the passage of the Affordable Care Act (ACA) as well as maintenance of effort requirements within the [American Recovery and Reinvestment Act (ARRA)], had a profound impact on the flexibility Rhode Island anticipated through implementation of Global Waiver activities. Rhode Island negotiated expedited and streamlined change processes in exchange for operation under the aggregate cap; however the flexibility sought did not always materialize. For example, the Special Terms and Conditions for the Global Waiver authorized Rhode Island to charge premiums of up to 5 percent for certain RIte Care families; however CMS prohibited Rhode Island from using this authority citing the ARRA and ACA maintenance of effort requirements. The authorization to charge premiums is considered a category II change and should not require any renegotiation under category III, yet Rhode Island was still prohibited from exercising its authority. In fact, Rhode Island sought the Global Waiver in part to streamline processes, reduce state administrative burden and create efficiencies yet the amount of administrative time and effort to pursue category II is lengthier than initially envisioned.

According to Executive Office of Health and Human Services Medicaid Director Elena Nicolella, increasing RIte Care premiums as initially intended would, by itself, have saved another $1.5 million.  She did not elaborate on additional savings that the ACA and ARRA prevented.

Regarding the initiatives that ought to be treated as parts of the reform, Nicolella tells the Current that Lewin’s report was designed to help answer the question, “What actions could have been taken without the Global Waiver?”  Some of the actions in the first category of savings “are certainly within the spirit” of the waiver itself, she says.  In the second category, some changes are directly related to it.  And all are part of the larger reform plan to streamline Medicaid in Rhode Island.



  • GabMitch

    Facts are facts. The Waiver saved RI millions of dollars plus according to the Projo on May 10, 2012
    PROVIDENCE, R.I. — State budget analysts said Thursday that they expect revenues for the fiscal year that ends June 30 to be $62 million greater than predicted……They also said revenues for the coming year are now expected to be $17.8 million greater than projected, based on trends that suggest…………Medicaid and cash assistance programs will be $27.8 million lower than projected this year and $31.6 million lower next year.
    It is clear that the reforms set in motion by Alexander saved the state.

  • GabMitch

    Just read this again and it's obvious that Mr. Katz understands the reform and Ms. Hall doesn't. Or, maybe Ms. Hall is ideologically opposed to any reform.

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