Some of the biggest ideas for improving Medicaid may be coming from the smallest state. Rhode Island has had a proposal sitting before the federal Department of Health and Human Services for a while now, and word is that an agreement may be coming soon .

Gov. Don Carcieri wants the state to have free reign over Medicaid, but since it is partly funded by money from HHS, he needs a federal blessing. His idea is to experiment with ways to improve care and get the budget under control. In exchange, the state would agree to freeze its take from the federal treasury for several years.

It sounds like a fair trade, though it could make more sense if instead of a freeze, the feds simply agree to give the state increases based on some formula such as the average per-person amount for states with a similar demographic profile.

While the governor’s willingness to freeze the federal match makes the idea more attractive to the feds, it scares a lot of people in the Ocean State. Oh, and did I mention that the governor is a Republican who faces an overwhelmingly Democratic legislature? It’s quite easy to see how this idea, which could do a lot of good for the state (if it works out) and the nation (as a laboratory) could get scuttled before it even gets started.