Medicaid Expansion: What Does It Mean for Kentucky

By Patrick Reed | 2/12/17 3:00 PM

Prior to 2014, there were more than 400,000 uninsured patients in Kentucky that still received medical care from hospital and provider networks, often through expensive emergency room visits. After Kentucky adopted the expansion of Medicaid as part of the implementation of the Affordable Care Act, many of those uninsured patients qualified by falling below the higher income threshold, and signed up for government-assisted care.

Three years in, the expansion of Medicaid in Kentucky has significantly reduced the uninsured rate in the commonwealth – from nearly 19 percent in 2013 to just under 7 percent in 2015. It has also enabled patients to receive preventive screening for cancer, diabetes, and other health conditions. Uncompensated medical care in the state’s hospitals has decreased, and thousands of new jobs in the health care sector have been created.

However, critics of Medicaid expansion say that the added demands it places on the state’s budget are unsustainable. With the change in presidential administrations and a Republican majority in both houses of Congress, a movement to repeal the Affordable Care Act is in the works, which could end Medicaid expansion and leave hundreds of thousands of Kentuckians back where they were prior to 2014 – without health insurance.

In this episode of Kentucky Health, Dr. Wayne Tuckson speaks with executives from the Kentucky Medical Association and the Kentucky Hospital Association about the impact Medicaid expansion has had on the state’s overall health care system and the health quality of its citizens, and about what services and benefits need to be maintained if a reform of the Medicaid system does take place.

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Patrick Padgett is the executive vice president of the Kentucky Medical Association, representing physicians, and Michael Rust, FACHE, is the president and CEO of the Kentucky Hospital Association. Both executives have been with their respective organizations for more than 20 years.

“We’re recognized as one of the leaders in expanding coverage,” Rust says. “It’s been good for the state. We have more people covered than we’ve ever had. Our mission is to see that those people get the coverage they need. It’s the mission of both the KHA and the KMA.”

Expansion Leads to Improved Access and Outcomes
Before the Affordable Care Act was enacted, most Kentuckians obtained health insurance from three sources, Padgett says. Many received insurance through their employers, or purchased coverage on the open market if they were self-employed and could afford it. The rest of the population received coverage through one of two government programs: Medicare (for all Americans over age 65) or Medicaid (mainly for persons whose incomes fell below the federal poverty line). Before Medicaid expansion, Padgett says, Medicaid was traditionally a program for the aged, the blind, the disabled, for children, or for pregnant women.

The Affordable Care Act took effect in various stages after its passage in 2010, and in 2014 it opened a federal exchange website offering insurance plans. States were given the option to build their own exchanges, and former Kentucky Gov. Steve Beshear oversaw the creation of the Kynect exchange, which launched in fall 2013 for 2014 enrollment. In addition to offering commercial insurance plans (with premiums that were often subsidized by the federal government), the Kynect exchange also served as a site for Kentuckians who qualified to sign up for Medicaid coverage, which was expanded through the ACA to cover persons who had an annual household income up to 133 percent of the federal poverty line (about $16,000 for an individual).

“When the federal government expanded Medicaid, and made it available for more people to be eligible, a lot of people picked up Medicaid in Kentucky,” Padgett says. “Some picked up commercial insurance, but the vast majority of them were on Medicaid…. In Kentucky, for the first time, we had a lot of men – adult men – on Medicaid who had never been on Medicaid before. So all of these people came on Medicaid that had traditionally not been on there.”

Rust says that this expanded population covered people who were out of work, people who were working part-time jobs with no benefits, and even a substantial amount of people who were working full-time jobs but still lacked health insurance provided through their employer and did not earn enough money to exceed the new annual income limit. Expanded Medicaid “has been a real asset for these folks, because they needed the coverage,” he says.

How the Expansion Has Benefited Providers
Expanded Medicaid in Kentucky has also benefited hospitals and physicians by replacing the high uncompensated care costs both groups incurred with stable, if modest, payments through the Medicaid system. Prior to the ACA, hospitals provided care to uninsured patients and received some reimbursement for indigent care through the Disproportionate Share Program (DSP), a part of traditional Medicaid.

The program still exists and covers part of hospitals’ safety-net care, Rust says, but only for services provided at the hospital, typically in an emergency room setting. Patients who lacked insurance prior to 2014 rarely, if ever, were able to purchase drugs prescribed during these visits or visit a specialist for a follow-up exam if needed, he says.

Since more Kentuckians are now enrolled in Medicaid, Rust says that hospitals are now reimbursed more quickly and at a higher rate than through the DSP, and just as importantly, the patients are able to purchase drugs and see primary care physicians and specialists. Padgett notes that the DSP never provided reimbursement to physicians, who nevertheless practiced, and still practice, what he calls “charity care” for uninsured patients. He also says that although Medicaid traditionally reimburses physicians at a lower rate than private insurance, it does provide a guaranteed revenue stream, and payments are processed quickly.

“I think physicians become physicians to help people, that’s what they feel good about,” Padgett says. “It’s not that I think it’s about payment, although we could talk about that, but when a physician counsels someone on losing weight…. that’s a very difficult conversation to have, but physicians will have it…. because they want their patients to get better, whether they get paid for it or not.”

To that end, the Medicaid expansion has enabled physicians – and hospitals and other medical centers – to expand their preventive service counseling and outreach initiatives, Rust and Padgett state. “We’re going out into the communities and trying to improve the health of the citizens of the commonwealth,” Rust says. “We’re giving blood pressure screenings, obesity, diabetes, prostate exams, mammograms, etc., throughout the state. But we expect our utilization to go down, because if we meet our goal, we’re going to have a healthier population in the state of Kentucky. And I think a lot of that goes with the ACA, and what the ACA’s role is, is to make ourselves healthy.”

The Perils of Repealing Without Replacing
Critics of Kentucky’s Medicaid expansion say that the state cannot afford to pay for its share of the covering the new enrollees, which under the ACA is scheduled to max out at 10 percent in 2020. After promising to repeal the expansion during the 2015 gubernatorial election, Kentucky Gov. Matt Bevin submitted a waiver to the Obama administration in summer 2016 that requested permission for the state to make changes in how it administered expanded Medicaid in Kentucky. The changes included mandating small premiums from enrollees as well as work or volunteer requirements, plus withdrawing guaranteed dental and vision benefits.

Now that the Trump administration has taken the reins in Washington along with a Republican Congress intent on repealing the ACA, the future of Medicaid expansion as it currently exists in Kentucky – and in the U.S. – is in doubt. Both Rust and Padgett acknowledge that there are imperfections in the current Medicaid model that need to be fixed, but strongly urge caution to government leaders who want to scrap the expansion.

Rust says that hospitals – especially rural hospitals – have benefited greatly from expanded Medicaid since so many of their previously uninsured patients now have coverage that encompasses primary care visits, preventive screenings, drug purchases, and major surgeries. He feels that these rural hospitals are now starting to evolve into more targeted and effective facilities for their patient populations and are establishing continuity of care frameworks that will improve the overall health of Kentuckians. These improvements will be threatened if a larger number of patients lose their insurance, he says.

Padgett and Rust both isolate two other issues as the most important concerns currently facing both hospitals and physicians in Kentucky: the transition to electronic medical records; and the cost of malpractice insurance. Both feel that the expenses associated with moving to entirely electronic recordkeeping has cut into hospital and physician profits in recent years, and Padgett says that the cost of malpractice insurance is keeping Kentucky from attracting talented physicians from out of state. The guests are optimistic that tort reform legislation currently working its way through Frankfort will help to establish a fixed, predictable, yet still fair compensation structure for plaintiffs in Kentucky medical malpractice suits going forward.

Asked to predict the future of the current model, Padgett says “I hope that we see that the government makes changes that will allow us to continue with the Medicaid expansion that we’ve had, but that will create systems that actually make people healthier.”

Rust has an equally cautious, but still optimistic, view about what lies ahead. “I believe that we will see repeal of the Affordable Care Act,” he says. “I hope that Congress puts in a replacement plan when they do the repeal. If they do a repeal and don’t replace it right off, I hope that they just let it continue until they do a transition period.”