Unemployment and health programs battered by recession

0 | Legislature, Medicaid-CHIP

— One of the many hard realities of recessions is that they often cripple the safety-net systems that people turn to for help when they lose their jobs, their health insurance or both.

That reality is all too clear to Kansas legislators struggling to sustain state health insurance and unemployment insurance programs in the face of unprecedented revenue shortfalls.

The Kansas unemployment insurance system is virtually broke at a time when Department of Labor officials say they need about $15 million a week to pay benefits to out-of-work Kansans.

In addition, the Kansas Health Policy Authority is working keep up with surging applications for Medicaid and the Children’s Health Insurance Program with a staff depleted by budget cuts. The backlog is now above 16,000 though exact numbers won't be available until later this week, said Barb Langner, the agency's Medicaid director.

A 10 percent cut in Medicaid reimbursement rates ordered by Gov. Mark Parkinson to help deal with an anticipated $400 million shortfall in state revenues is also taking its toll on Kansans and the agency’s ability to provide needed services.

Unemployment insurance fund

On Tuesday, Kansas Labor Secretary Jim Garner told members of a Senate committee that the state would soon have to start borrowing money from the federal government to pay unemployment benefits. And to replenish the state’s unemployment insurance trust fund, Garner said the department was doubling the average unemployment tax rate assessed on employers to 4.37 percent in 2010 from 2.02 percent in 2009.

The increased tax — paid on the first $8,000 of an employee’s wages — is expected to generate $407 million in 2010, up from the $198 million raised in 2009. But even that is expected to fall far short of the more than $700 million that officials predict will be needed to pay claims.

The state paid more than $766 million in unemployment benefits in 2009, up dramatically from the $333 million paid in 2008.

Garner told members of the Senate Business and Labor Committee that despite protests from employers, higher tax rates are needed to restore the state trust fund and minimize the amount of money borrowed from the federal government.

“This is an insurance fund. And just like any insurance program, when a disaster strikes you see an increase in premium costs,” Labor Secretary Jim Garner told members of the Senate Business and Labor Committee on Tuesday.

But members of the committee said the increased assessments couldn’t come at a worse time for employers. Sen. Susan Wagle, R-Wichita, the panel’s chairwoman, proposed two bills to soften the blow. One would increase the wages taxed to $9,000 this year and $10,000 next year, a change that would spread the tax burden over more businesses. The second would essentially allow employers to pay only half of what they owe in the first quarter, excusing them from penalty and interest payments on the remainder.

“I know this is going to have an impact on the fund,” Wagle said. “I know we’re going to have to borrow more money. But there are employers who don’t know how they’re going to make that first-quarter payment.”

Medicaid assistance

On the health care front, members of the full Senate are expected this week to consider a proposal to use federal stimulus funds to restore the 10 percent cut in Medicaid rates. And an effort is being mounted in Washington, D.C. by hundreds of advocacy groups to extend Medicaid assistance being provided to the states.

The original economic stimulus bill contained $87 billion to help states sustain their Medicaid programs through 2010. The coalition is requesting that the assistance — an increase in the share of Medicaid expenditures covered by the federal government — be extended to June 30, 2011.

The Medicaid assistance Kansas is receiving — estimated by KHPA to total about $440 million — is in part based on the state’s unemployment rate. That is because many people who lose their jobs also lose their health insurance, forcing them into the ranks of the uninsured or onto public programs.

The Kaiser Commission on Medicaid and the Uninsured estimates that nationally every percentage increase in the unemployment rate increases the number of uninsured by 1.1 million and the number of Medicaid and CHIP enrollees by 1 million.

The Kansas unemployment rate rose to 6.3 percent in December of 2009 from 4.9 percent a year earlier.