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Providence Service Corporation Provides Update on Potential Medicaid
Date:1/15/2009

Stimulus Package and House Vote to Expand Child Health Insurance

TUCSON, Ariz., Jan. 15 /PRNewswire-FirstCall/ -- The Providence Service Corporation (Nasdaq: PRSC) today provided an update on recent discussions in Washington D.C. on an economic stimulus package being sought by President-elect Barack Obama as well as the recent House of Representatives vote to expand child health insurance.

The economic stimulus package under discussion includes aid to state and local governments as well as money to be set aside for Medicaid to help protect vital services like education and health care from damaging cuts. While formal discussion in the House and Senate would not begin until after Mr. Obama takes office on January 20, initial indications are that the total stimulus package could now approach $800 billion, with more than $160 billion in federal aid for state and local governments, of which $87 billion would be set aside for Medicaid.

"A Medicaid stimulus package could certainly provide our state government payers much needed fiscal help," said Fletcher McCusker, CEO. "This should translate to added funding for many of the services we provide, stemming some of the negative effects we have experienced over the last six months as a result of state government budgetary constraints. Given the continuing weak economic environment, the Medicaid population is expected to reach record levels making federal aid even more critical if states are expected to adequately service this population. While the federal government is expected to step in to help, as they did in 2003, timing and passage of this stimulus package still remain uncertain."

If additional Medicaid funding is approved, the funds are expected to be allocated based on states' Medicaid enrollment levels as stated by CMS. Assuming the $87 billion estimate is accurate, this would result in an allocation of approximately $14 billion to California, which has the largest Medicaid population, and from $2 to $3.5 billion for smaller states like Arizona, Pennsylvania and North Carolina, which are key states for the Company.

The House of Representatives also recently voted to expand a health-insurance program for children. The legislation would renew the State Children's Health Insurance Program (SCHIP), which was created in 1997 to provide health coverage for children in families that earn too much to qualify for Medicaid, but not enough to afford private insurance. The plan covers an estimated 6.7 million children and an estimated 4.1 million additional children are estimated to gain coverage under the House bill, including children of legal immigrants as well as pregnant immigrants. The estimated cost is $32.3 billion over the next 4 1/2 years. The Senate is expected to take up a similar bill next week. The passage of any legislation renewing SCHIP is not yet certain.

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.


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SOURCE Providence Service Corporation
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