Kentucky and feds near possible collision on altering Medicaid expansion

Kentucky Governor Matt Bevin. Photo by Wikipedia

Anxiety and suspense are building in Kentucky as a potential clash over the state's high-achieving Medicaid expansion nears next month between Gov. Matt Bevin and the Obama administration.

At issue is whether to make the poor pay and work to obtain health insurance under the federal-state program.

Kentucky has brought more than 450,000 people into its Medicaid program and cut an uninsured rate that topped 20 percent in 2013 to 7.5 percent last year. Under the Affordable Care Act, the federal government pays the full cost of the expansion now, but in 2017 the state will begin absorbing some expenses and its share will rise to 10 percent in 2020. Bevin's position is Kentucky can't afford it.

A Republican who advocated ending the expansion before his election last year, Bevin now wants to overhaul it instead. His proposals would require low-income, non-disabled Kentuckians to take jobs in order to qualify for Medicaid coverage and lock out for up to six months those who don't pay new Medicaid premiums of $1 to $15 a month.

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Bevin's alternative hinges on approval from the Centers for Medicare & Medicaid Services. By Aug. 1, the governor is expected to apply to CMS for a waiver from Medicaid's rules -- challenging the administration's policy against linking Medicaid coverage to a work requirement.

Stakes are high.

Bevin has threatened to undo Kentucky's Medicaid expansion altogether if CMS rejects his plan.  "The commonwealth's expansion of Medicaid will now lie in the hands of CMS," Bevin said at a press conference in June.

Precedent could give the administration some cover to just say no. CMS typically only approves waivers that expand coverage or make it easier for people to get coverage. The review process generally takes several months, meaning the issue could be decided in the next president's administration.

"We are hopeful that Kentucky will ultimately choose to build on its historic improvements in health coverage and health care, rather than go backwards," said Ben Wakana, a spokesman for the Department of Health and Human Services, which oversees CMS.

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In the meantime, advocates for the poor worry many people will lose coverage if Bevin gets his way and worse outcomes await if he doesn't.

If the state completely ends its Medicaid expansion, "we are very concerned about the potential to lose coverage for almost half a million Kentuckians," said Emily Beauregard, executive director for advocacy group Kentucky Voices for Health.  "The proposed waiver undermines the successful expansion we have had and puts at risk the gains we have made."

Kentucky's proposal won't be the only challenge testing CMS this summer. Legislatures in Arizona and Ohio, which expanded Medicaid in 2014 under Republican governors, have also submitted proposals to the federal government that call for enrollees to pay monthly premiums, said Judith Solomon, vice president for health policy at the Center on Budget and Policy Priorities, a left-leaning think tank. But neither of those requests will carry an ultimatum like Kentucky's, she said.

Bevin's proposals go beyond any Medicaid waivers granted by the Obama administration, said Adam Searing, senior research fellow at Georgetown University's Center for Children and Families.

Vision and dental coverage also would be dropped as a standard benefit, he said. Instead, enrollees would earn them through activities that encourage healthier lifestyles or community participation -- for instance, taking a disease management course or doing volunteer work. Those efforts would accumulate points in a rewards account redeemable for vision and dental care.

"Kentucky's request to make changes to its Medicaid expansion program is all the more puzzling because it is so successful as is," Searing said.

Searing said Bevin's threat to end the expansion must be taken seriously, but in practice it would be difficult to carry out because hundreds of thousands of people would lose coverage and health providers would suffer financial hardship.

[Also: Matt Bevin elected governor of Kentucky, leaves future of state's Medicaid expansion in jeopardy]

Studies indicate Kentucky's expansion has created thousands of jobs and other economic gains for the state, the Kaiser Family Foundation reported recently. Kentucky hospitals' costs for uncompensated care fell by $1.2 billion in the months of Jan.-Sept. 2014 compared with the same period in 2013, Deloitte Development said last year.

Kentucky's hospitals have offered muted support for the proposal which they hope will ensure the Medicaid expansion will continue.

Bevin has said his plan will ensure the Medicaid program, which today covers 1.3 million Kentuckians, will stay financially sustainable.

The proposal is modeled partly on an expansion strategy begun in 2015 in Indiana, which has made some recipients pay premiums and requires most to use special savings accounts to buy care.

Proponents such as Indiana Gov. Mike Pence, the Republican nominee for vice president, say the accounts give Medicaid recipients "skin in the game," encouraging them to take responsibility for their health care by shopping and using their coverage wisely.

Indiana won federal approval for its plan only after it gave up on requiring Medicaid recipients to hold jobs.

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Bill Wagner, executive director of Family Health Centers, a large community health center based in Louisville, said Bevin's plan would be disastrous.

"Medicaid is complicated enough already, and the plan that they are proposing creates incomprehensible complexity for our patients," he said. "Many of our patients are low literacy, homeless, immigrants and refugees who have difficulty navigating complex systems and complying with regulations consistently over time."

On the other side of the controversy is Kentucky State Sen. Ralph Alvarado, a family doctor in Winchester, Ky., who treats many Medicaid patients.

"At the end of the day we can't afford the current expansion as we don't have the money," he said. "We are in a pinch and to keep the expansion we have to find another way. Giving the working poor incentives to seek care in the most appropriate and affordable area is the way to go."

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

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