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Providence Service Corporation Comments on $87 Billion Medicaid Assistance for States in the American Recovery and Reinvestment Act Signed into Law Yesterday

Posted on: Wednesday, 18 February 2009, 07:00 CST

TUCSON, Ariz., Feb. 18 /PRNewswire-FirstCall/ -- The Providence Service Corporation (Nasdaq: PRSC) today commented on the Medicaid assistance for states in the American Recovery and Reinvestment Act, which was signed by President Obama yesterday. The American Recovery and Reinvestment Act includes an $87 billion temporary increase in the share of Medicaid that the federal government would pay over nine calendar quarters (October 1, 2008, through December 31, 2010).

"The Medicaid stimulus package is a significant piece of legislation, providing unprecedented levels of fiscal support for our state government payers to serve today's growing Medicaid population," said Fletcher McCusker, CEO. "While we expect this to translate to added funding for many of the services we provide, the retroactive date is not expected to impact our 2008 results, and the overall timing and implementation of the program still remains somewhat uncertain."

The Economic Recovery legislation contains three provisions relating to increased Medicaid funding for states. First, it would suspend through fiscal year 2011 the reductions that some states would otherwise experience in the percentage of their Medicaid costs paid by the federal government, known as the state's FMAP. This would prevent states from losing federal funding simply because economic conditions in the states were much stronger several years ago. Secondly, all states would receive a "base" 6.2 percentage point increase in their FMAP rate. Finally, states experiencing poor economic conditions as indicated by a significant rise in unemployment would receive additional assistance. Depending on the extent of the state's rise in unemployment, a state could receive a 5.5 percent, 8.5 percent, or 11.5 percent reduction in the share of Medicaid costs the state pays. To receive any increased FMAP, however, a state's Medicaid eligibility levels must not be more restrictive than they were on July 1, 2008. States that have restricted eligibility would be allowed to reverse their actions and qualify for an increased FMAP in the first calendar quarter in which they have restored their Medicaid eligibility.

An analysis of the American Recovery and Reinvestment Act was issued by The Center on Budget and Policy Priorities on February 13, 2009, and can be found on their website at http://www.cbpp.org/2-13-09sfp.htm. The Center on Budget and Policy Priorities is one of the nation's premier policy organizations working at the federal and state levels on fiscal policy and public programs that affect low- and moderate-income families and individuals.

Based on estimates and projections of future economic conditions by the Government Accountability Office (GAO), the amount of assistance each state would potentially receive under the new legislation ranges from $11.2 billion for California, to approximately $2.0 to $4.0 billion for smaller states like Arizona, Pennsylvania and North Carolina, which are key states for the Company. The GAO notes that their projections are admittedly highly uncertain. These figures are also referenced in the Center on Budget and Policy Priorities' report.

About Providence

Providence Service Corporation, through its owned and managed entities, provides home and community based social services and non-emergency transportation services management to government sponsored clients under programs such as welfare, juvenile justice, Medicaid and corrections. Providence does not own or operate beds, treatment facilities, hospitals or group homes, preferring to provide services in the client's own home or other community setting. The Company provides a range of services through its direct and managed entities to over 74,000 clients through 870 contracts at September 30, 2008, with an estimated six million individuals eligible to receive the Company's non-emergency transportation services related to its LogistiCare operations. Combined, the Company has a nearly $1 billion book of business including managed entities.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "demonstrate," "expect," "estimate," "anticipate," "should" and "likely" and similar expressions identify forward-looking statements. In addition, statements that are not historical should also be considered forward-looking statements. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of the date the statement was made. Forward-looking statements contained in this release may relate to, but are not limited to, statements regarding Providence's review of potential strategic options, the timing of such review, and the outcome of such review. Such forward-looking statements are based on current expectations that involve a number of known and unknown risks, uncertainties and other factors which may cause actual events to be materially different from those expressed or implied by such forward-looking statements. These factors include, but are not limited to the global credit crisis, uncertainties as to the timing and amount of any stimulus package capital market conditions, and other risks detailed in Providence's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2007. Providence is under no obligation to (and expressly disclaims any such obligation to) update any of the information in this press release if any forward-looking statement later turns out to be inaccurate whether as a result of new information, future events or otherwise.

5524 E. Fourth Street Tucson, Arizona 85711 Tel 520/747-6600 Fax 520/747-6605 www.provcorp.com

SOURCE Providence Service Corporation

Source: PR Newswire

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