Will Kentucky expand Medicaid, and if so, how?

By Molly Burchett
Kentucky Health News

Kentucky is one of the last states to decide whether to expand Medicaid under federal health reform, and now that the General Assembly has gone home, Democratic Gov. Steve Beshear can turn his attention to the many questions that linger. Some Republican legislators think he will expand the program, but they worry about the cost when the state would have to start helping cover the new expenses, beginning in 2017.

Republican Gov. Bill Haslam of Tennessee decided Wednesday that he will not pursue Medicaid expansion, saying that it could put hospitals in financial jeopardy by giving them more patients on which they lose money, reports Michelle Kaske of Bloomberg. If he is right and the same logic applies to Kentucky, Medicaid expansion in the state could harm the rural hospitals and providers — some of whom are already squeezed by the issues with the new managed-care system.

Along with Kentucky, 10 other states are undecided about Medicaid expansion: Alaska, Indiana, Kansas, Nebraska, New York, Oregon, Utah, Virginia, West Virginia and Wyoming. The map by The Advisory Board Company shows the lay of the land; for an interactive picture that outlines the research behind the map, click here.

Red=Not participating; Pink=Leaning toward not participating;
Gray=Undecided; Blue=Participating; Light Blue=Leaning toward participating

Only three states with Democratic governors are undecided; 18 Republican governors have rejected expansion. Kentucky is shown as leaning for it because Beshear has repeatedly said that he will expand Medicaid if the state can afford it. He has also mentioned that the state can reserve the right to pull out of the deal in 2017,
when it must paying 3 percent of the cost of covering the newly insured, reaching 10
percent in 2020. Still, the questions about cost and affordability remain, and Beshear could be considering another option.

Tennessee has joined

Ohio and Arkansas in negotiating with the Obama administration over plans to use federal Medicaid money to purchase private insurance for those who can’t afford it but don’t qualify for Medicaid now. However, Haslam’s plan has been held up because the administration placed too many conditions on the money, writes Kaske. Republicans in other states, including Florida, Louisiana, Pennsylvania and Texas, have expressed interest in this option since Gov. Mike Beebe of Arkansas, a Democrat, ignited the wildfire of creating a hybrid of the two alternatives, reports Robert Pear of The New York Times.

The idea of privatizing Medicaid expansion appeals to many doctors and hospitals because they typically receive higher payments from commercial insurance than from Medicaid. However, many Kentucky hospitals and providers are concerned about the managed-care program that is run by three private organizations, and are calling for immediate action. Beshear has not said whether he will sign or veto a bill that would subject the managed-care firms to the prompt-payments and dispute-resolution rules of the state Department of Insurance.

“Action is needed to address the problems that patients and hospitals are experiencing with Medicaid managed care and to make the system work properly,” wrote Harold “Bud” Warman, chair of the Kentucky Hospital Association, and Charles Lovell, chair-elect of the association, in a recent Herald-Leader article that laid out the various problems with the system. “And with the possibility that Medicaid will be expanded in Kentucky to include an additional 350,000 people, it is critical that these issues be addressed right away to avoid even greater problems in the future.”

Either using federal dollars to buy private insurance in order to cover newly qualified individuals (the hybrid plan) under the health law’s expansion  or expanding in the “traditional” way will not change the current managed care structure of Medicaid in Kentucky. Yet, it would mean that 350,000 more Kentuckians would be covered under managed care; Medicaid would cover those earning up to 138 percent of the federal poverty level, currently up to $15,856 a year for an individual.

The money that the federal government offers for expansion is very tempting. The question then may be, how will it be used?

Kentucky Health News is an independent news service of the Institute for Rural Journalism and Community Issues at the University of Kentucky, with support from the Foundation for a Healthy Kentucky.

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