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Kansas Hospitals Crafting Medicaid Expansion Proposal

Kansas Hospital Association

It’s make-or-break time for advocates of Medicaid expansion in Kansas.

Fearing that political events may be conspiring to foreclose the opportunity to use mostly federal dollars to extend coverage to thousands of uninsured poor adults, the Kansas Hospital Association is preparing to shift its lobbying campaign into high gear.

The first step, says Tom Bell, the association’s chief executive, will be to craft an expansion proposal for lawmakers to consider in the 2015 session.

“We plan to have something very specific for the Legislature to consider next year,” Bell says.

The organization spent the last two legislative sessions trying to stimulate a conversation about expansion. It bankrolled a study that projected the economic benefits of expansion and commissioned a poll that showed a majority of Kansans favored expansion. The results generated headlines but little serious discussion at the Statehouse. Republican legislative leaders refused to even schedule a hearing on a bill to authorize expansion.

“The influence of Obamacare, from a political standpoint, has made this a very difficult issue,” says Jerry Slaughter, executive director of the Kansas Medical Society.

With the Affordable Care Act still unpopular with Kansas voters — Republicans in particular —Brownback and legislative leaders opposed to the law did not want to discuss Medicaid expansion, fearing it would send the wrong signal to core supporters heading into the November election. So, when asked about the issue, they stuck to talking points about the ACA’s messy rollout and concerns about the federal government’s ability to shoulder the lion’s share of expansion costs into the future.

Bell acknowledges that it has been virtually impossible to engage Gov. Sam Brownback and GOP leaders on the expansion issue. But he says he believes that could change after the election.

“We’ve had a number of people tell us that maybe after the election this is something that will be a little easier to talk about,” he says.

A 'unique' Kansas proposal

The legislation being drafted by the hospital association will be tailored specifically to Kansas, though it will borrow elements from so-called private sector expansion proposals in other states. Pioneered in Arkansas by a Democratic governor attempting to overcome opposition from a Republican-led legislature, the private-sector approach has been adopted by an increasing number of Republican governors seeking an alternative to expanding public coverage.

Generally, the alternative plans, which require federal approval, expand Medicaid coverage to adults earning up to 100 percent of the federal poverty level — $11,670 of annual incomes for an individual. But the plans use mostly federal Medicaid dollars to help people earning between 100 percent of the federal level and 138 percent of the federal level — $16,104 annually for an individual — purchase private coverage. Some of the plans also require beneficiaries to work and contribute to the cost of their coverage and care.

“Our feeling is that the (Obama) administration wants to approve state plans,” Bell says. “And we ought to get something in front of them before it’s too late.”

Brownback said recently that he is watching what is being done in other states and is open to discussing options.

“We’re watching all of it,” Brownback said. “I’m more confident today than I’ve ever been there will be other options out there.”

Anthony Hensley, the Democratic leader in the Kansas Senate, calls the hospital association’s decision to come forward with an expansion plan “a very positive move.”

“I’m open to looking at their proposal,” he says.

Kansas is one of 20 states to so far reject expansion. Of the 30 remaining states, 26 have implemented some version of expansion. The issue is still being debated in the other four.

Crafting a private-sector approach in Kansas makes sense, Bell saiys, given that three for-profit managed care companies have essentially run the Medicaid program since it was privatized in January 2012 and renamed KanCare.

Costs becoming bigger issue

KanCare costs about $3.2 billion a year. The state is responsible for about 40 percent of that cost, about $1.3 billion.

As an inducement to states, the ACA obligates the federal government to cover 100 percent of the costs of expansion through 2015 and not less than 90 percent after that. But even at that rate, states that expand Medicaid will see their costs go up.

Brownback administration officials have estimated that expansion would cost the state an additional $1.1 billion over 10 years. About $513 million of that would go to cover new beneficiaries who were previously eligible for Medicaid but not enrolled. Approximately $600 million would be needed to cover up to 150,000 low-income adults who would be made eligible by expansion.

Any increase in cost is likely to be a barrier to expansion given the state’s emerging budget problems.

Revenue shortfalls of more than $300 million in recent months have heightened concerns about the potential for spending reductions in the coming fiscal year to maintain a balanced budget.

Anticipating the cost concerns, the hospital association is considering a number of funding options for expansion, including the possibility of raising the state assessment on hospitals.

The state uses money generated by the assessment to bolster the rates it pays to hospitals to care for Medicaid beneficiaries. That, in turn, triggers an increase in federal matching funds to the state.

The arrangement currently generates about $50 million, according the nonpartisan Kansas Legislative Research Department. Expanding Medicaid eligibility would increase the amount generated by the assessment because of the higher match rate.

Cindy Samuelson, a spokesperson for the hospital association, says dedicating the increase in assessment revenue to help offset the costs of expansion is one of the funding options being considered. Raising the assessment also is a possibility, she says. Currently, hospitals pay assessments equal to 1.83 percent of their revenue. Federal law allows for an assessment of up to 6 percent.

“There are a lot of options to consider,” Samuelson says. “Everything is on the table.”

Some conservative Republican governors are attempting to use their state provider assessments to fund expansion, including Mike Pence of Indiana and Jan Brewer of Arizona.

Brewer succeeded in getting her proposal through the Arizona Legislature, but the conservative Goldwater Institute, acting on behalf of a group of legislators and private citizens, filed a lawsuit to block its implementation.

Urgent issue for hospitals

Medicaid expansion is a critical bottom-line issue for many Kansas hospitals. Their national association supported reductions in Medicare reimbursements and other government payments, believing they would be offset by ACA-driven increases in the number of patients with private coverage and Medicaid.

“Whatever your politics, the reality on the ground in hospitals is that Medicaid expansion is critically important for us,” says Jodi Schmidt, chief executive of Labette Health, a 99-bed regional hospital in the southeast Kansas community of Parsons.

Reductions in Medicare reimbursements are expected to cost Kansas hospitals $1.3 billion over 10 years. Hospitals also are facing reductions in federal payments intended to offset their cost of providing care to uninsured patients who can’t pay their bills.

A ticker on the KHA website that keeps track of how much federal money the state has foregone by not expanding Medicaid reached $155 million on Monday.

Jim McLean is executive editor of KHI News Service, an editorially independent reporting program of the Kansas Health Institute. 

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