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KHI News Service

Brownback budget-balancing plans rely on Affordable Care Act

Budget director says costs of health reform law justify repurposing funds

By Jim McLean | January 20, 2016

Photo by KHI News Service Gov. Sam Brownback is proposing to use $25.5 million in federal funding for the Children’s Health Insurance Program to free up state general fund dollars so they can be used to bridge the budget gap.

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For the third consecutive year, Gov. Sam Brownback is proposing to use money generated by a federal law that he opposes to help balance the state budget.

Brownback, an outspoken critic of the Affordable Care Act, is seeking to use federal funding authorized by the law to help close a projected $190 million gap in the fiscal year 2017 state budget.

Specifically, the governor is proposing to use $25.5 million in federal funding for the Children’s Health Insurance Program to free up state general fund dollars so that they can be used to bridge the gap.

The federal money, generated by a provision in the ACA that temporarily increased CHIP funding when Congress reauthorized the program, will take the place of state dollars that otherwise would have been spent to provide health coverage to Kansas children living in low-income families.

“It’s ironic that we’re relying on the Affordable Care Act to deal with the fiscal crisis that we’re facing,” said Shannon Cotsoradis, president of Kansas Action for Children, a nonprofit advocacy organization. “But more troubling is the fact that we’re redirecting dollars that were clearly intended at the federal level to go to children’s programs.”

The governor’s 2017 budget allocates $106.5 million for CHIP. Federal funds will be used to cover approximately 92 percent of that cost. The remaining 8 percent will come from state fee funds, not the state general fund, according to Budget Director Shawn Sullivan.

Defending the governor’s use of ACA dollars, Sullivan said the health reform law is costing the state more than it’s gaining.

“The additional costs of the ACA to the Kansas budget — when considering the Medicaid woodwork costs, the health insurance premium tax and other associated costs — far outweigh the benefit of this two-year S-CHIP enhanced federal match,” Sullivan said in an email. 

The “Medicaid woodwork costs” to which Sullivan refers are generated by people signing up for the program who were eligible but not enrolled prior to the passage of the ACA. Publicity surrounding the health reform law and Medicaid expansion are boosting enrollment, even in states like Kansas that haven’t expanded eligibility. 

A recent analysis published by the Kaiser Family Foundation estimated that if Kansas continues to reject expansion, its Medicaid expenditures would increase by 22.3 percent from 2015 to 2024. Expanding Medicaid eligibility, the report said, would add to the estimated cost growth but only slightly, increasing it to 23.1 percent. 

In August of last year, Sullivan proposed using $17.7 million in federal CHIP matching dollars to help avert a shortfall in the state’s current budget. At the time, he said the budget maneuver would not result in “any sort of expenditure reduction or major change in the (CHIP) program.”

[ Read the Georgetown University Health Policy Institute blog post on ‘The Bump in Federal CHIP Funding.’ ]

He provided similar assurances last week when briefing lawmakers on the 2017 budget.

In December 2014, Brownback used $55 million from a Medicaid drug rebate program that was expanded as part of the federal Affordable Care Act to help fill a $280 million hole in the state budget.

Cotsoradis said while using CHIP funds to offset state general fund dollars may not reduce existing services, it will prevent the state from using the additional money for its intended purpose.

“These are resources that could have been directed at targeted outreach to ensure that children who are eligible for public health insurance in Kansas get and keep that coverage,” Cotsoradis said.

In Kansas, 87.1 percent of children eligible for Medicaid or CHIP actually are enrolled, according to the Kaiser Family Foundation. That’s slightly less than the national average of 88.3 percent but about 10 percent less than the highest performing states.

Approximately 56,000 Kansas children are currently enrolled in CHIP.

Technically, Kansas children living in families with incomes up to 250 percent of the federal poverty level — $60,625 for a family of four — are eligible for CHIP coverage. But effectively, the eligibility threshold is several percentage points lower because it is pegged to the 2008 poverty level.

Cotsoradis contends that Kansas is missing an opportunity to use the temporary influx of federal funds to boost eligibility and provide coverage to more children.

Brownback has the authority to implement many of the revenue transfers and spending reductions he’s proposing. However, the Legislature must approve the proposed shift in the use of CHIP funds.

The $17.7 million the administration says it needs to balance this year’s budget will be part of a rescission bill that lawmakers are expected to consider soon. The $25.5 million in the governor’s latest proposal will be included in the 2017 budget bill, which likely won’t be voted on until late in the session.

The governor’s plan to balance the 2017 budget also calls for the elimination of a Medicaid pilot program intended to improve care provided to Kansans with severe and persistent mental illness. Sullivan said an analysis of the “health home” program showed that it improved health outcomes for participants but not enough to warrant the $13.4 million cost of continuing it.

The administration also hopes to save $10.6 million a year by making a controversial change in how prescriptions are managed in KanCare, the state’s privatized Medicaid program. It would allow the three private companies that operate KanCare to implement a “step therapy” program, which would require doctors to start their patients on relatively inexpensive drugs and allow them to move to more expensive alternatives only when they can show that it’s necessary. 

The nonprofit KHI News Service is an editorially independent initiative of the Kansas Health Institute and a partner in the Heartland Health Monitor reporting collaboration. All stories and photos may be republished at no cost with proper attribution and a link back to KHI.org when a story is reposted online.