PROVIDENCE, Rhode Island — After six months in hospitals and nursing homes rehabbing from a stroke, Elvira Tesarek of Warren, R.I., had a decision to make: Either Medicaid would move her to a long-term nursing facility, or she could simply go home.
For Tesarek, the choice was obvious. Instead of costly institutional care, Medicaid pays for a nurse's aide to visit Tesarek at home five days a week to help with meals and household chores. A registered nurse comes three times a week to prepare her medications. A physical therapist visits twice weekly, and a speech therapist makes occasional home visits as well.
Nearly 1,300 elderly and disabled adults, such as Tesarek, have been able to leave Rhode Island nursing facilities or avoid them altogether under a pilot program designed to cut spending on Medicaid, the federal-state health plan for the poor.
Many states steer certain Medicaid patients into assisted-living and home-care settings, where they have greater independence. Rhode Island's effort, however, has garnered national attention in conservative circles not because of what it does but because of how it's funded.
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Rhode Island is the first and only state with a block grant-like spending cap for its entire Medicaid program. Conservative activists are urging states that want to cut Medicaid spending to seek similar funding agreements from the Obama administration.
They say that the spending cap, along with the program changes it brought about, has helped Rhode Island cut Medicaid spending by more than $100 million.
Advocates for the poor and elderly applaud the state's push for at-home care. But they say that the savings from the effort have been wildly exaggerated. In their eyes, Rhode Island's Medicaid funding arrangement was, essentially, a sweetheart deal that other states are unlikely to duplicate.
They say that capping Medicaid spending as a cost-cutting measure imperils society's most vulnerable citizens, who could lose access to care if funding is depleted.
As lawmakers struggle to loosen Medicaid's growing stranglehold on state budgets, Sarah Somers, a senior attorney at the National Health Law Program in North Carolina, warns that "what's good for Rhode Island may not be good for the rest of the nation."
Rather than continue paying a fixed share of total Medicaid spending, the Republicans who control the U.S. House of Representatives want to give states capped amounts of federal money, or block grants, to operate and restructure their Medicaid programs with little federal oversight.
Because the grants are unlikely to keep pace with rising health care costs and Medicaid enrollment increases, states would end up with less federal funding over time. House Budget Committee Chairman Paul Ryan's block grant proposal would cut federal Medicaid spending by $207 billion over five years, forcing states either to pay a larger share of the costs or cut services.
Back in 2008, President George W. Bush couldn't sell congressional Democrats on block-grant funding, so Rhode Island's Republican governor, Donald Carcieri, got a consolation prize from the Bush administration: special permission, or a "waiver," to operate his state's entire Medicaid program with a block grant-like funding cap of $12 billion over five years.
Unlike a true block grant, the waiver continues Medicaid's cost-sharing formula, which provides Rhode Island with federal money for about 53 percent of the program's costs.
But in exchange for capping those federal and state expenditures through 2013, the waiver allowed Rhode Island to make certain changes to its Medicaid program, without federal approval in some cases, and through a streamlined federal process in others.
In January, Gary Alexander, Rhode Island's former secretary of health and human services, said the waiver had saved about $100 million.
A February report by the American Action Forum, a conservative policy group, says Rhode Island expects the waiver to save $146 million by June by cutting waste, fraud and abuse.
Rhode Island's new HHS secretary, Steven Costantino, said his agency couldn't confirm those claims.
"The numbers that have been reported, to be honest with you, I can't substantiate any of those numbers," Costantino said. He's considering hiring an independent consultant to "really figure out what the savings have been."
But that hasn't stopped the praise from conservative quarters.
"Rhode Island's experience is quietly being noticed as the mother of innovation and a model for the nation," Alexander wrote in a January article for a conservative health care website.
A Wall Street Journal editorial in March said, "If Congress and the White House are serious about reducing the cost of entitlements, they'll grant a Rhode Island-style waiver to any state that requests one."
Republican New Jersey Gov. Chris Christie apparently got the message. His administration plans to ask the Centers for Medicare and Medicaid Services for a similar waiver, which it says will save the state $300 million.
Minnesota Republican state Rep. Jim Abeler, the chairman of his legislature's Health and Human Services Finance Committee, said his state also would save $300 million under his waiver proposal.
Mississippi Republican Gov. Haley Barbour, one of the biggest block-grant boosters, also likes the Rhode Island model.
"Governor Barbour supports the concept of block grants similar to the approach in Rhode Island," said his spokeswoman, Laura Hipp, "but he believes states should have complete flexibility to manage Medicaid programs."
Conservative infatuation with Rhode Island's waiver is more ideological than substantive, said Linda Katz, the policy director at The Poverty Institute, which studies policies that affect Rhode Island's poor.
Katz said the waiver's $12 billion funding cap was more than Rhode Island expected to spend on Medicaid over the five-year funding period.
Costantino, a former Democratic state lawmaker, agreed. "We're not even close to reaching the cap," he said.
Additionally, the waiver helped secure $21 million each year in federal matching funds for services that the state previously had paid for entirely. So Rhode Island's federal Medicaid funding increased under the waiver, just the opposite of what's envisioned under a block-grant proposal.
In that sense, Rhode Island's waiver was a "sweetheart deal" that states shouldn't expect from the Obama administration, particularly in this economic climate, said Judith Solomon, the vice president for health policy at the Center on Budget and Policy Priorities, a liberal research center in Washington.
Still, John R. Graham, the director of health care studies at the conservative Pacific Research Institute, maintained in an editorial last month that "Rhode Island's reform benefits not only the state but federal taxpayers nationwide."
Many feared that Rhode Island would use its waiver to impose waiting lists for services, limit benefit packages and tighten eligibility for services. But that hasn't happened, Costantino said.
Instead, the state used the added flexibility from the waiver to beef up home-care services, overhaul hospital payments, tailor benefit packages to specific populations and inject competition into contracts for program goods and services. It also required most Medicaid enrollees to join managed-care networks.
Critics say Rhode Island could have done most of these things without its unique waiver. It's a fair criticism, Costantino said.
"I think many of the things we could've done without the waiver," he said. "The more important question is, would we have done it?"
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