KHI News Service

Kansas Medicaid makeover in the works

What's in store and how will Dr. Jeff Colyer find $200 million to $400 million in cuts?

By Mike Shields | March 07, 2011

Probably there is only one person in Kansas government whose job history includes training medics for Afghan freedom fighters and also serving as the official plastic surgeon for a squad of arena football cheerleaders.

That person is Dr. Jeff Colyer, whose diverse and crowded resume became more so in November 2010, when he was elected lieutenant governor.

Now, Colyer has been asked by Gov. Sam Brownback to “remake” the state’s Medicaid system with instructions to find ways to save or cut between $200 million and $400 million by the time the fiscal 2013 budget is presented to the Legislature next January.

Those numbers, though they haven't been presented to the Legislature or otherwise figured in public discussions, have been used by administration officials in private meetings with various representatives of Medicaid interest groups and during internal talks.

Kansas Department of Social and Rehabilitation Services Secretary Rob Siedlecki, a member of Colyer's Medicaid working group or subcabinet, recently told KHI News Service that the goal is to cut $200 million from Medicaid.

Major changes

Colyer told KHI News Service it was too soon to be specific about how much spending reduction is in store for the program.

"But, yeah," he said. "We need major changes for the next fiscal year. Now what the dollar number is, I can't tell you. But it's in that large range. We don't even have our new budget estimates yet...give us some time. But I know it's going to be on a large scale."

Annual Kansas Medicaid spending has doubled in the past decade and in the coming fiscal year is expected to reach about $2.8 billion, of which about $1.1 billion will be the state’s share. So, finding ways — within 12 months — to cut perhaps 20 percent or more of that is considered a formidable task.

And, of course, not all agree that fast, major cuts in Medicaid are necessary or desirable, but when Colyer describes it, the state has no choice.

"The situation is this," he said. "The state is broke. We are $8 billion underwater on the state pension plan. We're in financial straits that are the most difficult in my lifetime. Here's the hard situation: You cannot have continuous 10 and 15 percent increases in any program. Everybody gets that. So, we're just dealing with reality."

In other places and times where similar or even less dramatics cuts in Medicaid services or payments have been tried or proposed the results have been mixed or incomplete and rarely, if ever, popular.

Arizona Gov. Jan Brewer last month was informed by the federal government that her state could drop some 250,000 people from its Medicaid program without federal repercussions. The legislature hasn’t yet acted on that but a lawsuit is already threatened. Arizona has one of the most generous Medicaid programs in the nation and Brewer is interested in ending coverage for childless adults.

Pennsylvania's governor last week shut down that state's Medicaid coverage for about 41,000 working poor adults. In Washington state, about 17,500 childless adults were removed from the program.

Kansas has one of the country's most restrictive Medicaid programs with a smaller percentage of its population enrolled than all but about seven states. It has never allowed childless adults to participate unless they have serious disabilities. So, dropping childless adults from the program here is not an option.

In Texas, Republicans in the legislature last month proposed cutting Medicaid reimbursements to long-term care facilities by 33 percent and hospital Medicaid payments by 10 percent. And some there have suggested the state drop out of Medicaid altogether. The proposed cuts have sparked outrage from editorial writers, AARP and others.

In Kansas, last year, then Gov. Mark Parkinson ordered a six-month reduction in Medicaid reimbursements to doctors, hospitals and other providers. That 10 percent cut was widely unpopular with providers and their legislators. In fact, future Lt. Gov. Jeff Colyer, then in the Kansas Senate, was the first to take the floor calling for reinstatement of the cuts.

"This is the worst possible choice we could make," Colyer said at the time.

States across the nation from New York to California this year are grappling with Medicaid costs as part of their budget troubles and they have looked for savings either through reducing services, cutting payments or both. Kansas isn't among those states — not this year anyway.

Breathing room

Instead, the governor has recommended continuing a practice started by his predecessors of shifting state highway money into the state general fund, which among other things will help make up for reduced federal Medicaid assistance to the states.

"The highway fund gave us a year's breathing room," Colyer said. "That's a one-time opportunity because the (roadwork) bids came in about $200 million under this year. That's the only reason that we've got this opportunity. The whole point of this is we've got time, but not much, to do this in a thoughtful manner and we've got to remake a Medicaid program so that it fits with the 21st century. Doing more of the same is not an option."

For the past two years, Kansas' share of Medicaid spending dipped significantly thanks to about $520 million in increased federal aid for social services authorized by the federal economic stimulus law of 2009. That extra federal help dries up in the coming fiscal year, which means that to keep pace with earlier Medicaid spending Kansas and other states must replace the vanished federal dollars with their own money or make cuts.

Historically, cuts to Medicaid have always meant fewer services for patients or reduced payments to doctors and other providers.

Colyer said the Brownback administration's goal is to improve care for Medicaid patients while saving taxpayers money. He wouldn't say if cuts to services or payments were being considered. But he didn't rule them out, either.

Different paradigm

"I think there is a different paradigm," he said. "This is a question of how are we going to get the best service for our taxpayer dollars and get the best outcomes for our patients and do it in a financially responsible way. It isn't just an either-or. We're looking at this in a different light. I'm just saying everything is on the table, not just a cut here and a cut there. Many times it means doing things differently."

Colyer has been meeting once or twice a week with a group of Medicaid agency chiefs, including Siedlecki, Andy Allison of the Kansas Health Policy Authority, Dr. Robert Moser of the Kansas Department of Health and Environment and Secretary of Aging Shawn Sullivan.

He also has been meeting with spokesmen for hospitals, consumers, doctors and others, seeking their ideas for ways to trim the program's costs.

He said once all the ideas are collected and vetted by the subcabinet and administration staff, he will hold some public meetings to discuss the possible changes and then formalize a plan.

"I'm not ready to announce a timeline," he said, "but there will be a number of public meetings for major input. I expect that to happen largely over the summer and we're talking to lots of different stakeholders and lots of agencies are involved, as you know."

Bracing for cuts

Meanwhile, in the absence of details about what direction the administration plans to go, many people are bracing for cuts they fear will harm their constituencies.

"I think we're all wondering where that money will come from and how that will affect Medicaid beneficiaries' ability to access the services they need to stay healthy," said Anna Lambertson, executive director of the Kansas Health Consumer Coalition. "Whether it comes out of transportation or child care or whatever, we're not sure."

Lambertson said her group this week would be presenting the administration some cost-cutting ideas it considers viable but protective of consumers.

Likewise, hospital and doctor groups are feeding the administration ideas they hope will stave off or minimize any reductions in Medicaid reimbursements.

The debate over whatever plan Colyer comes up with is down the road and most likely will reach full flower about the time it is presented to the Legislature.

Who's Who: Dr. Jeff Colyer

All options on the table

What other states are doing about Medicaid

"My first question would be — if they want to cut $200 million to $400 million in Medicaid expenditures — is how does that impact on people who have to rely on Medicaid," said Senate Democratic Leader Anthony Hensley of Topeka, "people that get community-based services or live in nursing homes and rely on Medicaid to support them. There's a real human side of this issue I think we'd have to take a very close look at. And my first impression is this would have a hugely adverse impact upon people and their daily lives, and I would certainly caution the administration that if they want to go down this road, they have to explain to the people of Kansas what kind of toll this would take."

Audio clip

Sen. Minority Leader Hensley: Medicaid cuts not necessary

Revenue problem

Hensley also said he didn't agree with the administration's assumption that Medicaid must be quickly and significantly reduced.

He noted there are proposals pending from conservative Republicans in the Kansas House to eliminate the state's corporate income tax, which historically has brought in between $200 million and $400 million a year, or about the same amount the administration seeks to save in Medicaid spending.

"We know we have a problem with the Medicaid funding," Hensley said. "But what we really have — I think more so — is a revenue problem. And if cutting $200 million to $400 million out of Medicaid is all in the name of providing for a corporate tax cut or eliminating the individual income tax — or, which I've heard the governor make mention of, at least reducing the individual income tax — then I would say we need revenue to provide the basic functions of government. And I look at Medicaid as being one of those essential basic functions and certainly one of the most important basic functions. We have a lot of people who are disabled and older Kansans who have run out of income and they need help to continue to survive."

Colyer said the administration wasn't linking the Medicaid cuts to potential new tax breaks.

"You're not seeing us out front on that," he said of the tax-cut proposals. "But we do need to redo the economic growth package. If we can grow the Kansas economy, there will be more resources for Medicaid. We can solve that by following the (governor's) roadmap for Kansas and getting the economy moving and that will allow us to deal with the budget deficit."