Gov. Steve Beshear's proposal to balance the budgets for Medicaid and higher education won approval from the House budget committee Tuesday.
The panel also approved two other high-profile bills: a proposal that would allow state universities to use their own money to finance building projects and a gradual increase in the state's dropout age from 16 to 18.
To fix the state's Medicaid shortfall, House Bill 305 would move $166.6 million from next year's Medicaid budget to this year's budget. The budget hole was caused in part because the legislature built the two-year budget on the assumption that they would receive a higher federal match for Medicaid.
But Congress only provided part of the assumed funding, State Budget Director Mary Lassiter told the House Appropriations and Revenue Committee.
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If the legislature fails to move the money, the state would have to cut about $600 million from the federal and state health plan for the poor and disabled this fiscal year. That could translate to a 30 percent cut in Medicaid payments to doctors, hospitals and other providers, state officials have said.
"It would severely impact employment," Lassiter said.
The state should be able to make up the resulting $166.6 million hole in next year's Medicaid budget through savings generated from a host of cost-cutting measures, including the expansion of managed health care plans.
The state has only one managed care plan — Passport Health Plan in the Louisville area — but it is now seeking proposals to expand the plans to other parts of the state and to other services, such as imaging and dental services.
Passport receives a fixed rate for each of its 164,000 patients regardless of the cost of that person's medical needs. The rest of the state is on a fee-for-services model, which means Medicaid pays a certain rate to a health-care provider depending on the service.
The other tweak to the state budget would include moving $18.9 million from the higher education budget for fiscal year 2012 to fiscal year 2011. The state needs to move the money to receive approximately $134.9 million in federal stimulus money, said John Hicks, the assistant budget director.
Some Republican legislators questioned whether the Cabinet for Health and Family Services could generate the projected savings in the Medicaid program, which has a budget of roughly $6 billion. Under the current budget, the cabinet was supposed to generate $86.6 million in savings this fiscal year.
"Do we know what we have actually saved?" asked Rep. Danny Ford, R-Mt. Vernon.
Lassiter said she did not have a breakdown of how much savings Medicaid has generated so far this year.
"I have all the confidence in the world (that the savings will be met)," Lassiter said.
Rep. Jimmie Lee, D-Elizabethtown, and chairman of a House budget subcommittee that oversees Medicaid, said he believes the cabinet will see substantial savings just by moving its radiology and imaging and pharmacy services to a managed care model.
"The impact of not doing this would be really disastrous," Lee said.
Rep. Jamie Comer, R-Tompkinsville, was the only member to pass on the bill.
The measure now goes to the full House for a vote.
The committee also unanimously approved another key higher education bill, House Bill 198. The bill would allow state universities to use their own money to finance some building projects.
Currently, universities must seek approval from the legislature before taking on debt, even if the universities can pay for the project without the state's help.
House Bill 225 — which would gradually increase the state's dropout age from 16 to 18 — also cleared the House budget committee. The measure, which has already passed the House Education Committee, now heads to the full House for a vote.