Kentucky expects to pay $272 million in fiscal years 2019 and 2020 on information technology and administrative costs for Gov. Matt Bevin’s proposed changes to the state’s Medicaid program, roughly twice the combined expense of four other states overhauling their own Medicaid programs, according to a new federal report.
That sum does not include the nearly $100 million that Kentucky paid from 2016 to 2018 to prepare for Bevin’s controversial Medicaid changes, which include work requirements for able-bodied adults, premiums, monthly reporting duties and coverage lock-out periods for failure to comply, according to the U.S. Government Accountability Office, the watchdog arm of Congress.
Critics of Bevin’s Medicaid proposal, called Kentucky HEALTH, pounced on the GAO report.
“We’re setting up this enormous, unnecessary bureaucracy,” said Jason Bailey, executive director of the Kentucky Center for Economic Policy in Berea.
“We’re doing work requirements, we’re doing premiums, we’re doing these special accounts where people can build up credits for picking up trash on the side of the road so they can go to the dentist to get their teeth pulled,” Bailey said. “And we’re outsourcing this to private contractors like Deloitte, who do not exactly work for free. They expect to make a profit.”
It’s not certain that Kentucky HEALTH will take effect. Twice in the last two years, a federal district judge in Washington has struck down Kentucky’s plan for work requirements as “arbitrary and capricious,” ruling that they would interfere with the central purpose of Medicaid: providing health care. A federal appeals court heard oral arguments in the latest legal challenge on Friday.
Also, Democratic Attorney General Andy Beshear has said he would drop Bevin’s Medicaid proposal if he is elected governor on Nov. 5, calling health care “a basic human right.”
In a report issued last week, the GAO said the U.S. Centers for Medicare and Medicaid Services should not have approved Medicaid waivers, or “demonstrations,” for Kentucky, Arkansas, Indiana, New Hampshire and Wisconsin without requiring the states to accurately disclose the projected costs of altering their Medicaid programs.
Some of these restructured Medicaid programs will cost taxpayers even more than they presently do by creating large bureaucracies to monitor recipients’ work hours, collect money from them and banish some from health coverage, the GAO said. With Medicaid, the federal government pays for most costs and leaves states to make up the difference.
“CMS has acknowledged that demonstrations, including those with work requirements, may increase Medicaid administrative costs — and therefore overall Medicaid spending,” the GAO wrote. “Yet CMS is not factoring these costs into its approval decisions, which is counter to the agency’s goals of transparency and budget neutrality.”
The combined 2019-20 administrative expenses for Medicaid waivers in the other four states will be $137 million, the GAO said.
In Kentucky, an estimated 620,000 people will be affected by Bevin’s proposed changes, mostly adults added to the program during Kentucky’s Medicaid expansion under the Affordable Care Act, the GAO said. Overall, more than 1.3 million Kentuckians are enrolled in Kentucky’s $9.7 billion-a-year Medicaid program.
Kentucky’s projected two-year waiver expenses include $220.9 million for new information technology system capabilities to communicate, track and verify information on work requirements and $50.7 million to Medicaid managed care organizations for administering work requirements, the GAO said. The federal government would pay 87 percent of the total, the GAO said.
Both the Bevin administration in Frankfort and CMS in Washington criticized the GAO’s findings.
“The GAO report is poorly framed and represents the maximum funding approved for implementation of the waiver, rather than the amount spent, which is significantly lower,” said Christina Mora Dettman, spokeswoman for the Kentucky Cabinet for Health and Family Services. She did not disclose what the state of Kentucky expects its final expenditures will be as of next year.
Dettman said Kentucky’s share of the costs should be covered by savings from Bevin’s order closing KYnect, a one-stop website that allowed Kentuckians to shop for health insurance and either be approved for a private plan — possibly with tax credits to make the plan more affordable — or else be enrolled in Medicaid if they were near or below the poverty line.
In its response, CMS said administrative costs usually make up about 5 percent of overall Medicaid spending, which is not much.
“Experience with administrative costs under the Medicaid program suggests that we can expect administrative costs over the life of a demonstration to be a relatively small portion of the total cost,” CMS said in its written response. “Therefore, we believe making this information available as part of the transparency requirements would add little to no value informing stakeholders about the potential critical impacts of a state’s (Medicaid) demonstration application.”
Traditionally, Medicaid covers the poor and disabled. Under former Democratic Gov. Steve Beshear, Kentucky participated in the federal expansion of Medicaid during the Great Recession to cover the “working poor” — people living at up to 138 percent of the federal poverty level.
Bevin, a Republican who succeeded Beshear in 2015, has called for changes to require able-bodied adults between the ages 19 and 64 to complete 80 hours a month of “community engagement” in order to keep their coverage. That could mean a job, attending school, vocational courses or community service.
“There is dignity associated with earning the value of something that you receive,” Bevin has said. “The vast majority of men and women, able-bodied men and women … they want the dignity associated with being able to earn and have engagement.”
Bevin’s changes also would require people to pay premiums up to $15 a month for their insurance. Basic dental and vision coverage would be eliminated, but people can earn those benefits back through activities in a rewards program. Those activities include doing things like getting a physical, completing a diabetes or weight management course or participating in an anti-smoking program.
The majority of adult Kentuckians enrolled in expanded Medicaid already work, but they often hold low-wage jobs that don’t offer health insurance or other benefits, according to the Kentucky Center for Economic Policy.