Showdown Looms Over Changes to Kentucky Medicaid

Kentucky Governor Matt Bevin, a Republican elected last fall with a vow to end Medicaid expansion, will soon give CMS a touch choice: approve his Medicaid overhaul, or he’ll cancel expansion.

In doing so, Bevin seeks to become the first governor to build work requirements into Medicaid, something that eluded his neighbor, Indiana Governor Mike Pence, when that state received its waiver in 2015. Pence is now the Republican nominee for vice president.

The coming showdown has riled health advocates in Kentucky, which gained national attention for bringing coverage to 450,000 people and dropping one of the nation’s highest uninsured rates from above 20% to 7.5%. Kentucky did so by setting up a well-regarded health exchange, called kynect, which Bevin wants to dismantle.

HHS Secretary Sylvia Mathews Burwell has questioned ending kynect as well as the Medicaid overhaul in a letter to Bevin. The real drama will start within the week, when Bevin’s administration files its final waiver proposal, which is due August 1, 2016. The original plan drew fire from health advocates and a lukewarm endorsement from hospitals, which reportedly fear the threat of ending expansion completely.

Under the Affordable Care Act (ACA), states can extend Medicaid to those earning up to 138% of the federal poverty line (FPL), which has covered millions of working poor who had no access to healthcare through their jobs. Kentucky had been among the states that previously only granted Medicaid to extremely poor women and children, the disabled, and frail elderly.

Bevin has said that Kentucky cannot afford the cost-sharing that will kick in next year for the Medicaid expansion population, which will rise to 10% in 2020. An overview of the plan states that these cost will be $1.2 billion for 2017 to 2021. “These high costs are unsustainable and create funding issues that put other state programs like education and pensions at risk, as well the traditional Medicaid program,” the plan states.

The proposal, Kentucky HEALTH (Helping to Engage and Achieve Long-term Health), calls for the following:

· Asking those between 100% and 138% of FPL to enroll in employer-based insurance if available, with premium assistance from Medicaid. Recipients would be required to use an employer’s coverage after a year on the job.

· Most of the Medicaid population would be placed in a high-deductible plan, similar to what Indiana has done. Bevin said he was determined for recipients to have “skin in the game.” Everyone would pay premiums of up to $15 a month, except pregnant women and children. Even the medically frail would face financial penalties for failing to pay premiums. Preventative services remain free.

· While Kentucky would fund the deductible, Medicaid expansion enrollees could lose access for not paying monthly premiums of up to $15.

· A credit system would offer a mix of carrots and sticks to keep certain benefits and discourage costly behavior. Enrollees would have to earn credits to keep vision and dental care. They would lose credits for things like using the emergency department for primary care.

· Credits would be earned through volunteer work, job training, or attending disease management classes. Requirements for “community engagement” or work would rise to 20 hours a week.

· Enrollees could spend credits for things like over-the-counter medications or to help pay for a gym membership.

· Substance abuse treatment would remain, and the waiver seeks to allow treatment centers to expand the number of available beds.

· The plan pushes Medicaid’s managed care contractors toward value-based models and make other reforms to control spending, reduce administrative time, and limit profits.

The changes represent not just an overhaul, but a view that Medicaid should only be transitional step toward employer-based coverage. In fact, Bevin’s administration does not characterize Medicaid expansion as coverage at all. “Medicaid is not health insurance,” Jean West of the Cabinet for Health Services to the Courier-Journal. “It is a benefit program,” on par with food stamps and welfare.

Kentucky Voices for Health, an advocacy coalition, on Tuesday released its comments to the plan on behalf of 18 groups that included the Catholic Conference, the American Lung Association and the Kentucky Equal Justice Center. In a statement, the group said Bevin’s plan “will mean less coverage and more barriers for the most vulnerable Kentuckians, including veterans, people with disabilities, formally resettled refugees fleeing prosecution, low-income workers and families.

Susan Zepeda, president and CEO of the Foundation for a Healthy Kentucky, said in a commentary that while the plan contains some positive elements—including expanding treatment for substance abuse and cracking down on managed care contracts—the overall focus on more costs and hurdles for the poor would likely increase health disparities, not reduce them.

Zepeda is among the observers who note that Medicaid waivers are typically designed to expand access to healthcare, not reduce it. CMS has long resisted requests to tie healthcare coverage with work, although in a meeting with governors last year, Burwell said CMS was not opposed to promoting work. Healthcare, she said during the meeting, “is not a conditional thing.”

The question is how far federal officials are willing to go in granting a waiver, or whether they think Bevin will blink at the prospect of cancelling coverage to 450,000 people.

“This plan threatens to undermine health and economic gains we have made in the past 2 years as a result of Medicaid expansion,” the Voices for Health statement read. “It would be a giant step backward for Kentucky.”