Unpacking the Details on Medicaid Expansion

When the Kansas legislature suspended their session on March 19th, the status of Medicaid Expansion was left in limbo.

Senate Bill SB 252 would establish the Kansas Innovative Solution for Affordable Healthcare Act and expand eligibility of Medicaid in Kansas in accordance with the federal Affordable Care Act (ACA) requirements, with insurance coverage going into effect January 1, 2022.

SB252 was introduced on January 13th, the opening day of the legislature, by Senator Jim Denning (R-Overland Park), chair of Health Subcommittee of Ways and Means, along with 21 bi-partisan co-sponsors.

Medicaid expansion has been a top priority of the Kansas Silver Haired Legislators, the Kansas Hospital Association, Alliance for a Healthy Kansas and scores of other groups since expanding Medicaid became an option for states with the passage of the Affordable Care Act in 2010.

The bill soon ran into trouble, as Medicaid Expansion got swept into partisan wrangling over a constitutional amendment on abortion. Kansans will have to wait until the legislature reconvenes on April 27 to see what happens next.

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While much has been written on the politics of the bill, the actual contents of SB 252 have not received the same attention. With this article, Keynotes attempts to unpack the details.

Currently, most able-bodied Kansans, except pregnant women or caretakers of children under 19, are ineligible for Medicaid regardless of income. The act would allow those adults currently excluded to sign-up for Medicaid as long as their income does not exceed 138 percent of the federal poverty level. For a family of 3, the federal poverty level is an income of $21,720, and 138 percent of the poverty level for the same family is an income of $29,973.

Those newly eligible for Medicaid would enroll in KanCare, the state’s privatized Medicaid program. They would select a health plan from one of the state’s three Managed Care Organizations (MCOs) and be eligible for treatment based on state rules and the MCOs’ plan requirements.

Other requirements in SB 252 include:

Monthly Fees: Each person enrolled would pay a $25 monthly fee, up to $100 per month per family. There may be some hardship exemptions.

Work Referrals: All non-disabled adults receiving benefits who are unemployed or working less than 20 hours a week would be referred the state’s job program, KansasWorks, and employment outcomes would be tracked. There is an exemption for students enrolled full time in a college, university or technical school. The Act does not eliminate coverage for participants based on their work status.

Health Insurance Support for Workers: The state would establish a health insurance coverage premium assistance program to help some covered individuals afford employer health insurance coverage instead of going onto KanCare. This would apply to those eligible for employer health insurance whose incomes are between 100 and 138 percent of the federal poverty level.

Health Insurance Plan Reinsurance: The Act requires the state to submit a plan to the federal government to request permission (a waiver) for Kansas to create a Health Insurance Plan Reinsurance program. If approved, the program would transition Kansans earning between 100% and 138% of the federal poverty level from Medicaid to private insurance plans by January 1, 2022.

Kansas Prisoners Healthcare: Under current law, inmates in state prisons are covered by Medicaid for certain services. With Medicaid expansion, the Department of Corrections estimates savings on prisoners’ healthcare costs due to eligibility and pricing factors. SB 252 also requires that the state coordinate with county sheriffs requesting assistance in facilitating Medicaid coverage for any state or county inmate incarcerated in a Kansas prison or jail.

Rural Hospital Transformation Program: SB 252 creates the Rural Hospital Advisory Committee to manage a new Rural Hospital Transformation Program and authorizes a pilot project to work with targeted hospitals.

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Funding for expansion would come largely from the federal government under the terms and programs laid out in the Affordable Care Act (ACA.)

Under the ACA, the federal government covers 90 percent of the state’s extra costs associated with expanding Medicaid. This figure is referred to as the Federal Medical Assistance Percentage (FMAP).

(photo by jc gellidon on unsplash)

If at any point the FMAP becomes lower than 90 percent, SB 252 requires the Kansas Department of Health and Environment (KDHE) to terminate coverage for participants in the expanded program within 12 months.

To cover the state’s share of expansion, the Act authorizes a variety of new funds and fund transfers:

Medicaid Expansion Privilege Fee Fund. The state will continue to collect the current 5.77% privilege fee levied on the Managed Care Organizations (MCOs) who contract for Medicaid and apply it to Medicaid Expansion. This fee is based on MCO’s overall total revenues and expenditures.

Hospital Medicaid Expansion Support Surcharge. This surcharge would be based on the number of Medicaid expansion enrollees and allocated among Kansas hospitals as determined by the Healthcare Access Improvement Panel.

Drug Rebates. All revenues from drug rebates associated with current and expanded medical assistance members would be captured.

Federal Medical Assistance Percentage Stabilization Fund. This entity would capture funds recovered, if any, by the Office of the Attorney General on behalf of Kansas in the civil action Texas v. United States – the lawsuit filed by 20 states in an attempt to overturn the Affordable Care Act.

Populations Movement Savings. KDHE officials believe that the bill would create health care cost savings for certain populations, such as members of the MediKan Program or those participating in the Medical Needy Spend-Down Program. These programs serve part of the current covered Medicaid population who would be eligible for the enhanced FMAP rate.

Participant Fees: Funds from the required $25 monthly fee would be deposited into the State General Fund. Due to the cost of administering the program and the requirement to refund 90% to the federal government, Kansas would actually spend more than it keeps on this program.

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KDHE projects that 154,000 Kansas would be added to the Medicaid rolls by FY2022 if expansion is adopted. The Kansas Legislative Research Department has estimated that the cost of KanCare services for these newly covered Kansans would be $1.14 Billion in FY 2022. Of that, the federal government would cover $1.03 Billion, leaving the state to finance $114 million in KanCare service costs.

Most of the non-federal share would be financed through a combination of the Privilege Fee ($66 million) and the Medicaid Surcharge offset ($35 million), with another $21.5 million coming from the Population Movement savings. A smaller amount of revenue comes from enhanced drug rebates and the inmate care provisions.

These dedicated funding sources would cover nearly all the costs needed for expansion, with only $2 million being needed from the State General Fund in FY2022.

The share of costs to the state general fund in the first 6 months of implementation, prior to the start of FY2022, would be higher as the Medicaid Surcharge offset program would not yet be in effect.

Ironically, if the proposal to move some members of expansion-eligible population onto private insurance is put into effect, the impact on the state general fund increases to $40.3 million in FY 2022. This is because of lost federal revenue for those people who were on Medicaid and the costs the state will bear for the subsidized Reinsurance program.

This article was adapted from a longer feature that appeared in the 1st quarter 2020 edition of Keynotes. Please contact us to receive your own copy of Keynotes. Sources for this article included the Kansas Legislative website at www.kslegislature.org, including the bill tracker and fiscal notes prepared by the Kansas Legislative Research Department, and news from the Kansas News Service at www.ksnewsservice.org.