State cutbacks threaten federal funding

Benjamin Shors - Spokesman-Review Staff writer


Olympia, WA - A legislative cost-cutting effort could threaten billions of dollars in federal Medicaid money.

The Social Security Administration said the state violated federal regulations when it cut supplemental payments to 95,000 disabled and elderly residents.

This week, it again ordered the state to make $37.4 million in payments by the end of the year, or risk losing $2.4 billion in federal funding. That's about 40 percent of the Department of Social and Health Services' budget.

The SSA said the state's decision had a tremendous impact on Washington's elderly and disabled residents.

"It's money that the state was required to spend," said Dan Ferrell, regional spokesman for SSA in Seattle.

The problem arose in 2002, when the state Legislature cut payments to thousands of disabled and elderly residents. The state's share of the Supplemental Security Income, which covers people who are disabled, averaged about $25 per person each month.

By cutting most of the state payments, the state stood to save $24 million a year. It continued to make payments to about 7,000 residents to help with rent, therapy and other services.

Carl Rabun, regional Social Security administrator, said the state's plan was imprecise and confusing. He said it was unclear how the state decided who would continue to receive payments.

DSHS Secretary Dennis Braddock protested the decision in a letter this week.

Braddock said SSA officials supported the plan last fall but have since reversed their position. Under the previous arrangement, the state paid SSA to distribute the checks at an administrative cost of about $9 million a year.

SSA charged the state $8.50 a month per client to handle the aid. But some checks were as small as $4.

State officials maintain they had preliminary approval from federal officials. Rabun said he regretted that SSA had not objected to certain specifics of the plan.

"We've been working in good faith," said Roxie Schalliol, director of the state's Employment and Assistance programs. "We thought we were OK."

Now, seven months into the year, the state must spend millions to catch up.

Medicaid, the federal health care program for low-income people, requires states to spend a set amount of money on disabled residents to qualify for federal help. Washington is required to spend $28.9 million annually in supplemental payments.

The state made only about $20 million in payments last year, meaning it must spend an additional $8.5 million or lose federal funding.

Several state officials acknowledged it is unlikely the state will lose the $3 billion in funding. But it may have to spend millions more than originally planned.

State officials said they would make a congressional appeal for a waiver to the regulations. In the history of the Social Security Administration, Congress has waived requirements only twice.

Benjamin Shors can be reached at (509) 459-5484 or by e-mail at


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