TOPEKA — The fate of a new Medicaid enrollment system in the works since 2009 is up in the air until state officials can decide how to replace funding for the project lost due to Gov. Sam Brownback’s recent decision to terminate a $31.5 million federal health reform grant.

The Affordable Care Act grant was awarded to the Kansas Insurance Department earlier this year, ostensibly to help design and implement a state-based, online health insurance purchasing exchange required by the reform law. But approximately $30 million of it had been earmarked by state officials to help pay for the Medicaid Eligibility Determination, or K-MED, project.

The current enrollment and eligibility process for those signing up for Medicaid or the Children's Health Insurance Program is one that relies on submission and review of paper forms. The new system would be essentially paperless and allow applicants to submit enrollment information online.

Antiquated system

The state's current enrollment system is considered woefully antiquated, a fact highlighted by recent processing backlogs that left thousands of eligible Kansans waiting months before they were cleared for admission to the program. The backlog, which began in 2007 and persisted off and on until March of this year, was resolved soon after Brownback took office.

The decision to apply the health reform innovator money to the Medicaid project was made after most of the $40 million initially obtained for the K-MED project from the federal Health Resources and Services Administration was lost to federal budget cuts.

Officials from several state agencies working on the Medicaid project agreed the online eligibility system also could be the technology backbone for the new insurance exchange, which each state is expected to have up and running by January 2014.

"Holding pattern"

As envisioned by the Affordable Care Act and state planners, the online insurance exchange or clearinghouse would be used to seamlessly sort out Kansans eligible for an expanded Medicaid program and those eligible for federal subsidies to help them purchase private health insurance.

But now, officials at the Kansas Department of Health and Environment, which oversees the state's Medicaid program, are scrambling to replace the funds, which were being counted on to cover a major portion of the project’s cost, which has been estimated to be between $64 million and $105 million.

“We’re in discussions with some of our legislative leaders as well as some of the federal folks about how we move forward – how we continue this if we continue along with the design we have in place right now,” said KDHE Secretary Robert Moser. “So, until those questions are answered, we’re just in a holding pattern.”

Competing considerations

When Kansas Insurance Commissioner Sandy Praeger applied for the so-called innovator grant, Brownback somewhat reluctantly supported the application.

But once the grant was announced, the governor – on at least one occasion – publicly defended it and the idea of a state-based health insurance exchange.

His comments defending the grant were in response to criticism raised at a meeting of conservative Republicans in Johnson County who charged that he had backtracked on his campaign pledge to fight implementation of the reform law “every step of the way.”

Then, earlier this month, Brownback said he opted out of the grant because it came with too many strings attached.

More strings?

But another source of federal money that state officials have been considering to replace the lost innovator dollars may have similar strings attached.

The U.S. Department of Health and Human Services has made new funding available specifically to help states upgrade their Medicaid enrollment systems.

The offer is attractive to state officials because it would pay up to 90 percent of project costs, leaving states to cover only 10 percent. But the regulations governing use of the money require the "integration" of Medicaid systems with the health insurance exchanges required by the Affordable Care Act.

To get the so-called "90/10 money," the regulations say Medicaid system transformation projects “should be undertaken in full partnership with Exchanges.”

Asked whether the agency planned to stick to the original plan of integrating its new Medicaid system with the exchange (PDF) being planned by the insurance department, Moser said it would depend on “where the funding would come from.”

Moser said officials are discussing the possibility of seeking the 90/10 funds, but he said they also are considering “the usual funding that’s available for IT with Medicaid.”

He acknowledged using the regular information technology (IT) funding would require the state to shoulder a significantly higher percentage of the project’s cost.

“Can we afford it? I can’t make that decision on my own,” Moser said. “That’s why we have to involve our legislative leaders and our federal partners.”

Political atmospherics

A resolution adopted unanimously last week by the Kansas Republican Party central committee warned GOP office holders against using any federal money to design, develop or implement an exchange or any part of an exchange, “including those components related to Medicaid,” if done to comply with the Affordable Care Act.

Some delegates said the resolution did not preclude the use of federal funds to finish the Medicaid eligibility system.

But John Pyle, chairman of the Republican Party in Ellis County, said he believed the resolution spoke specifically to the Medicaid project.

“What this resolution means is that we don’t want anything to do with ObamaCare, and we’re telling our state officials that we don’t want Medicaid to have anything to do with it either,” Pyle said.

State Rep. Charlotte O’Hara, a conservative Republican from Overland Park, is continuing her insistence that the state reject all federal money tied in any way to implementation of the Affordable Care Act.

“I would oppose any acquisition of further federal grants to go forward with how K-MED is currently proposed, because again K-MED and health exchanges are one in the same,” O’Hara told KHI News Service.

State Rep. Don Hill, a moderate Republican from Emporia, said the Medicaid project is important for the state and that he doesn’t want to see it jeopardized by the political fight over federal health reform.

“I’m really disappointed we’re in jeopardy of losing that project,” Hill said. “It’s going to be expensive if it has to be funded with Kansas resources, but I think it’s very important.”

→ Related story: Insurance exchange expert questions return of innovator grant