Will Kentucky Roll Back Its Medicaid Expansion?

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    New limits for Kentucky's proposed Medicaid demonstration are expected to significantly reduce enrollment
    After a successful Medicaid expansion, will Kentucky roll back its progress?

Among states that have implemented the Affordable Care Act’s Medicaid expansion, Kentucky has been singular in its success. Through the combination of expanded eligibility and a streamlined enrollment process using its Kynect health insurance marketplace, Kentucky has enrolled over 428,000 newly eligible adults in Medicaid—a reflection, in part, of its status as one of the nation’s poorest states. The results have been dramatic: the uninsured rate among working-age adults with incomes under 138 percent of poverty dropped from 40.2 percent in 2013 to 23.6 percent in 2014;1 improved access to necessary health care;2  reduced inability to pay for care; a major decline in the percentage of poor with no usual source of care;3  and the largest reduction in uninsured hospital stays among expansion states.4  Today 1.35 million residents—more than one-third of Kentucky’s population—receives Medicaid, with the newly eligible making up nearly one-third of all beneficiaries.5

Now Governor Matt Bevin, who ran on an Affordable Care Act repeal platform, has released a draft proposal to obtain federal permission under section 1115 of the Social Security Act to dramatically alter Kentucky’s Medicaid program as a condition of preserving the expansion beyond 2016. His draft proposal, Kentucky HEALTH (Helping to Engage and Achieve Long Term Health),6  now undergoes public comment. It follows a separate proposal to replace Kynect with the federal marketplace. His marketplace plan, still pending at the U.S. Department of Health and Human Services (HHS), also can be expected to significantly reduce Medicaid enrollment.

Despite a robust and growing body of evidence chronicling the health, health care, and financial success of Kentucky’s Medicaid expansion, Kentucky HEALTH rests on two basic premises: First, the expansion has failed to provide health care access. Second, continuing the program is financially unsustainable. The state’s first premise appears to conflict with considerable peer-reviewed research. The second appears inconsistent with the enhanced federal funding available to the state, as well as evidence of the expansion’s positive economic impact on the state, particularly with respect to reducing uncompensated care.

Borrowing from the 1115 demonstrations already in operation but also adding new limits and requirements, Governor Bevin’s plan would:

  • Move Medicaid from rolling enrollment onto a system of “fixed” or enrollment periods at specific times of the year for all poor adults other than pregnant women. Fixed enrollment time periods (an annual “open enrollment” time frame coupled with limited special enrollment rules) are a principle of the commercial insurance market but fundamentally at odds with Medicaid’s role as a health care safety-net program that is available whenever it is needed.
  • After the first year of the demonstration, require “able-bodied” adults to work least 20 hours per week, with exceptions for children, pregnant women, caregivers of dependent children, and the medically frail.
  • Condition enrollment on payment of premiums equal to 2 percent of income, while eliminating retroactive eligibility for people who are uninsured at the time care is sought.7  Failure to pay premiums would result in a coverage lock-out similar to that used in Indiana. Beneficiaries with below-poverty incomes could elect to pay cost-sharing, such as copayments, instead of premiums.
  • Introduce a $1,000 deductible for “nonpreventive” services, coupled with a health savings account sufficient to cover the deductible but not other cost-sharing and uncovered services.
  • Raise cost-sharing for a range of services above normally permissible Medicaid levels while limiting adult vision and dental coverage to what beneficiaries can pay for out of their health savings accounts.
  • Apply benefit limits to adults that parallel state employee benefits, with more exclusions and limits in connection with chronic disability and illness.

The proposal estimates that these and other changes will meet 1115’s per-capita budget neutrality requirements and also reduce adult eligibility by a slightly more than 2 percent decline in member months, which reflects the total number of months that a target population can be expected to be enrolled in Medicaid over the course of a year. But the combination of eliminating the Kynect enrollment system, limiting Medicaid to “open enrollment” time periods, tying eligibility to premium payments, and employing lock-outs, suggests that enrollment will likely decline by much more than 2 percent. The state’s proposed evaluation plan does not include studying the cumulative effects of its proposals.

Following public comment, the proposal will receive formal HHS review. The comment record will be crucial here given the implications of this draft proposal. Some of its elements, such as premiums, already are being tested in other states; why would the HHS Secretary permit further testing before the earlier results are in? Furthermore, the proposal to convert Medicaid from a safety-net insurer to one governed by commercial risk principles would so materially alter Medicaid’s core purpose that to allow the change arguably would exceed the Secretary’s 1115 authority, which is limited to demonstrations consistent with program objectives. Indeed, such a dramatic departure from Medicaid norms exposes eligible populations to true health risks, by completely barring them from assistance when medical care is needed.

 


 

Notes

1 B. D. Sommers, R. J. Blendon, and E. J. Orav, “Both the ‘Private Option’ and Traditional Medicaid Expansions Improved Access to Care for Low-Income Adults,” Health Affairs, Jan. 2016 35(1):96–105.

2 Ibid.

3 J. A. Benitez, L. Creel, and J. Jennings, “Kentucky’s Medicaid Expansion Showing Early Promise on Coverage and Access to Care,” Health Affairs, March 2016 35(3):528–34.

4 S. Nikpay, T. Buchmueller, and H. G. Levy, “Affordable Care Act Medicaid Expansion Reduced Uninsured Hospital Stays in 2014,” Health Affairs, Jan. 2016 35(1):106–10.

5 Kentucky HEALTH, available at http://chfs.ky.gov/NR/rdonlyres/A7F17FE3-7E2D-40EF-B404-5D8D12DB9EAB/0/62216KentuckyHEALTHWaiverProposal.pdf.

6 Ibid.

7 Retroactive enrollment allows eligibility to begin up to three months prior to the date of application so that bills incurred prior to application can be covered.

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Publication Details

Publication Date: July 8, 2016
Authors: Sara Rosenbaum, Sara Schmucker, Sara Rothenberg
Contact: Sara Rosenbaum, Harold and Jane Hirsh Professor of Health Law and Policy, Milken Institute School of Public Health at the George Washington University
E-mail: sarar@gwu.edu
Citation:
S. Rosenbaum, S. Schmucker, and S. Rothenberg, "Will Kentucky Roll Back Its Medicaid Expansion?," To the Point, The Commonwealth Fund, July 8, 2016.

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