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Kentucky Governor Talks Up His Medicaid Plan

June 14, 2006 -- Kentucky Gov. Ernie Fletcher said a Medicaid overhaul plan his state plans to implement later this year will save $1 billion over seven years by dividing beneficiaries into four groups and creating different standards, benefits, and restrictions for each group. Opponents of the measure, however, say it could make some Medicaid services too expensive for beneficiaries.

The changes were made possible because of a provision in the budget bill (PL 109-171) passed earlier this year that gives states more flexibility in designing Medicaid programs and allows increased cost-savings for some services and populations.

The new rules allow states to charge premiums, create or raise copayments, and create penalties or incentives to encourage cost-saving behavior such as taking preferred drugs or avoiding emergency departments for non-emergency care.

Fletcher, a Republican, discussed Kentucky's new Medicaid plan at a briefing for reporters and health policy analysts that was sponsored by the Galen Institute, a Alexandria, Va., research group that promotes free-market health care ideas.

At the beginning of May, Kentucky was the first state approved to implement a comprehensive Medicaid overhaul plan, according to a letter from Department of Health and Human Services Secretary Michael O. Leavitt. The program, which goes into effect in late summer/early fall, divides the state's Medicaid population into four groups and treats each differently based on their needs.

The first group covers 235,000 people, including most adults on Medicaid as well as foster and medically fragile children. The second will cover 263,000 and is made up of most children in the state including State Children's Health Insurance Program beneficiaries. Kentucky officials mentioned that this group also could eventually be covered in the private insurance market with their premiums sponsored by the state.

The third group will cover 3,500 people with mental and developmental disabilities who require long-term care. In the fourth group are 27,900 people who need long-term care, including elderly individuals who require care from a nursing facility and those with brain injuries.

The program also creates certain disease management groups designed around the symptoms and treatments of conditions such as diabetes. Patients are encouraged to participate in these groups, which are more common in the private insurance market.

Finally, adults who use generic rather than brand name drugs and see a primary physician rather than going to an emergency department for primary care can qualify for coverage not available to the rest of the Medicaid population—for things such as smoking cessation, dental care, or glasses.

The consumers group Families USA predicts that the Kentucky plan will end up pricing Medicaid beneficiaries out of certain services. "The current Medicaid program only provides coverage for medically necessary care," said Ron Pollack, the group's executive director. "The cost savings are achieved at the cost of people not getting essential care."

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