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Kentucky's Medicaid Waiver

Renee Shaw and guests discuss Medicaid. Guests: Adam Meier, secretary of the Kentucky Cabinet for Health and Family Services; Rep. Addia Wuchner, R- Florence, chair of the House Health and Family Services Committee; Jason Bailey, executive director, Kentucky Center for Economic Policy; and Rep. Joni Jenkins, D-Shively, member of the House Health and Family Services Committee.
Season 25 Episode 23 Length 56:34 Premiere: 07/25/18

Kentucky’s Proposed Medicaid Waiver

You could call it a case of incredibly bad timing.

A little more than a day before the state was to implement its new Medicaid program called Kentucky HEALTH, a federal judge blocked the launch. That last-minute decision sent state officials scrambling, and as a result, nearly half a million Medicaid enrollees in the commonwealth temporarily lost dental and vision coverage as well as access to nonemergency medical transportation services.

The Kentucky Cabinet for Health and Family services is working to restore those benefits as it awaits a new ruling on its waiver application to the federal Centers for Medicare and Medicaid Services (CMS).

KET’s Kentucky Tonight explored these recent developments with Medicaid coverage in the commonwealth. The guests were Adam Meier, secretary of the Kentucky Cabinet for Health and Family Services (CHFS); Rep. Addia Wuchner (R-Florence), chair of the House Health and Family Services Committee; Rep. Joni Jenkins (D-Shively), member of the House Health and Family Services Committee and member of the Medicaid Oversight and Advisory Committee; and Jason Bailey, executive director, Kentucky Center for Economic Policy.

First, Some Background
In January, Kentucky became the first state in the nation to win federal approval to place a work requirement on certain Medicaid recipients. The state’s waiver primarily applies to Kentuckians who had signed up for Medicaid under the program’s expansion in 2013. Medicaid expansion in Kentucky was initiated by Gov. Steve Beshear after the passage of the federal Affordable Care Act enabled states to offer Medicaid coverage to citizens whose household income is at or below 133 percent of the federal poverty level.

Under the Bevin administration’s 1115 demonstration waiver, most able-bodied adults in both traditional and expanded Medicaid will have to work, volunteer, or pursue job training for 20 hours a week to qualify for Medicaid coverage. Beneficiaries will also have to pay modest monthly premiums and copayments for some services. State officials call the new program Kentucky HEALTH, or “Helping to Engage and Achieve Long Term Health.”

The waiver also cut vision and dental coverage, which are optional benefits under Medicaid rules. But enrollees could purchase that coverage separately, by applying credits to an accounts program created by the waiver called My Rewards. Beneficiaries earn those credits by performing certain tasks, like having preventive health exams, getting their GED®, or completing a smoking cessation program.

Cabinet for Health and Family Services Secretary Adam Meier says his staff had been preparing for the transition to Kentucky HEALTH long before federal officials approved the waiver in January. In fact, Meier says they’ve spent the last 18 months developing new information technology systems across state government to track the benefit changes, collect premiums and copays, track work and job training activities, and manage My Rewards accounts.

At the same time, though, a lawsuit challenging the Bevin administration’s waiver was winding through the courts. The suit charged that approval of the waiver would result in thousands of Kentuckians losing their health coverage. Kentucky HEALTH does include lock-out periods for those who fail to comply with its various requirements. Plus, the Bevin administration acknowledged that some 95,000 people would drop off Medicaid rolls under the waiver, but officials said that would happen because people would transition to private or employer-provided health insurance.

What Happened to the Benefits?
Meier says the final transition to the new IT systems started on Monday, June 25, so everything would be ready for the July 1 launch of Kentucky HEALTH.

But at 4 p.m Friday, June 29, U.S. District Judge James Boasberg issued his ruling on the legal challenge. He said federal approval of Kentucky’s waiver application was “arbitrary and capricious” because regulators did not adequately consider the thousands of people who might lose coverage under the plan. Boasberg blocked the launch of Kentucky HEALTH, and sent the state’s plan back to CMS for further consideration.

In Frankfort, state computers were still making the transition to the new IT system. Meier says stopping the process at that point would have been like rebooting your home computer while it was doing a systems upgrade.

“It’s not something that we can just switch on and off overnight because of the downstream impacts and the unintended consequences that could happen,” he says.

Yet there were still consequences. On July 1, according to Meier, the IT systems for Kentucky HEALTH and the My Rewards accounts were operational, but the state couldn’t legally use them because of the court decision. That meant some 460,000 people who had dental and vision benefits at the end of June no longer had the coverage as of July 1 because the new computer systems saw those benefits as optional until purchased by the enrollees using their My Rewards credits.

“It wasn’t something that was done in retaliation,” Meier says.

Instead, he says it was simply impractical for the computer systems to determine who was still eligible for those benefits. Meier says he warned lawmakers ahead of time that such a loss of benefits was possible if the court ruled after his staff initiated the computer transition.

Meier says a computer fix should be ready by August 1 so providers can check a person’s eligibility for dental and vision services. He says his staff is also working on a manual work-around to make that information available even sooner.

The Blowback
Health care advocates and consumer groups quickly criticized the Bevin administration for the snafu. Jason Bailey of the Kentucky Center for Economic Policy says the court ruling should not have been a surprise since health care experts had long warned of a fundamental flaw in the state’s proposed waiver: that it would reduce the number of people eligible to participate in a program that’s designed to provide access to medical care.

Bailey says the bureaucratic problems that resulted in the temporary loss of dental and vision coverage offers an important lesson.

“That was a glimpse of what we will see if the full waiver goes into effect,” Bailey says. “People will lose coverage because they’ll get tripped up by the red tape that’s created by this waiver.”

Democratic Rep. Joni Jenkins questions why the state wants to make dental and vision benefits optional in the first place. She says those constitute a small percentage of the overall Medicaid costs borne by the state.

“I think that it’s very important for this population to receive access to dental and vision benefits,” Jenkins says. “We know that folks that get preventative dental care maintain their health better than folks that don’t.”

Jenkins says people who don’t have dental coverage will seek care in emergency rooms, which will cost the state even more. Plus, she contends that Medicaid coverage for those services makes it possible for rural dentists and optometrists to remain in business.

Republican Rep. Addia Wuchner commends Meier and the CHFS staff for working to quickly restore the lost benefits. She adds that the state has every right to decide which optional Medicaid benefits it wants to provide enrollees.

“There are 15 to 18 mandatory [benefit] programs that come through Medicaid; there are 28 optional programs,” Wuchner says. “Not all states provide all the optional programs. Kentucky has always been very generous in our care that we’ve provided through traditional Medicaid.”

What’s Next
The Bevin administration is making no changes to its waiver application because Meier says the court decision found nothing illegal with Kentucky’s proposal. Instead CMS will reconsider the existing application.

“It’s not actually a resubmission,” Meier says. “The legal ruling… vacated the approval of the waiver, so it’s as if [CMS] never approved it, so the application is still pending.”

A new 30-day public comment period will open on July 19. Once that closes, Meier hopes CMS will issue a new decision on the waiver early this fall. He says he’s optimistic that it will be approved.

But consumer advocates still contend the work requirement, premium payments, and other policy changes will make it harder for low-income people and working families to stay on Medicaid.

“When we create these bureaucratic barriers to coverage, people will lose it,” Bailey says. “When people lose coverage, their health declines, and in a state that has such poor health… that’s the last thing we need.”

But supporters of the waiver argue that people should not fear the new requirements. Wuchner says work requirements for those receiving Supplemental Nutrition Assistance Program (SNAP) benefits and Temporary Assistance for Needy Families (TANF) have been in place since 1996. She says one goal for the Bevin administration’s proposal is to get people more engaged in their communities and on a path to a good paying job.

“Some want to see this [work requirement] as a stick,” Wuchner says. “I think it’s a carrot… and a way of building the responsibility to have the benefits that are important to you and to your family.”

Jenkins contends many Medicaid enrollees already work and the requirement to report those hours will an unnecessary burden, especially for those without easy access to a computer. The Democrat says she fears the Bevin administration is more interested in shrinking the Medicaid roles than in helping people find gainful employment.

“We know what gets people good jobs: job training,” Jenkins says. “We could do that without making their health insurance the carrot for it.”

Paying for Medicaid
Another goal of Kentucky HEALTH is to reduce the state’s Medicaid costs. The federal government used to pick up the entire tab for those who gained coverage under the Medicaid expansion enacted by former Gov. Steve Beshear. By 2020, the state will have to pay 10 percent of those costs. For the current biennium, that amounts to $350 million for Medicaid expansion, according to Meier.

So far the state has spent about $10 million to implement Kentucky HEALTH. Meier says additional funds will be needed to provide the wrap-around services going forward, but he says those expenses should be offset by lower benefit costs as enrollees transition off Medicaid to commercial health insurance.

But according to the Wall Street credit rating agency Fitch, the state’s Medicaid administration costs have increased more than 40 percent in the last biennium, partially because of the infrastructure needed to track the work requirements. Bailey argues that the state is wasting money on more bureaucracy to track all the new requirements.

“It is a extremely complex and expensive system, and that’s dollars we’re not spending for health care or child care or training or things that we know help move people forward,” says Bailey.

Meier says short of raising revenue to pay for higher Medicaid costs, the state only has two options: reduce the number of enrollees, or cut optional benefits like vision and dental services, prescription drug coverage, physical therapy, and hospice care. He says that’s why it’s important that federal regulators approve the state’s waiver application.

“If it’s denied, then we’re going to have to make some very tough decisions because we have a $300 million Medicaid shortfall,” says Meier. “This was one of our primary ways to mitigate that.”

Jenkins says if the state can afford to give tax breaks to the wealthiest individuals and corporations, then it can find the money to fund Medicaid. She says throwing people back into the ranks of the uninsured will cost the state even more.

“Folks are going to get their health care… and they’re going to get it in the most expensive, least effective way and that’s through the emergency room,” Jenkins says. “We will pay for that, as Kentuckians, 100 percent. If they were covered under expanded Medicaid, the most we would ever pay for that care is 10 percent. To me it’s simple mathematics.”

Wuchner stands by the waiver, saying it will be transformative in how it gets Kentuckians engaged in their own health and working for their benefits.

“This has brought an exposure to the blessing and the benefit of taking care of your health, and so as people become more responsible I think they’re now willing to be engaged,” Wuchner says. “I believe that those that have had that opportunity to have health insurance will want to keep it.”

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Kentucky Tonight, hosted by Renee Shaw, is a public affairs discussion program broadcasted live on Monday nights at 8/7c on KET and

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