Share

KHI News Service

Report says Medicaid expansion would pay for itself

Analysis released by Kansas health foundations says expansion savings also could bolster state budget

By Jim McLean | December 08, 2015

Expanding Kansas’ Medicaid program would generate enough offsetting savings to more than cover the cost of insurance for another 150,000 low-income Kansans, according to an analysis released Tuesday by six health foundations.

The analysis done by Manatt Health Solutions, a national health care consulting firm, shows that expanding Medicaid would lower state costs in several areas by enough to cover the annual $53 million cost of expansion, perhaps with money to spare.

“We think there is enough savings and new revenue that the cost of expansion can be covered through 2020,” said Deborah Bachrach, the lead author of the analysis and a former Medicaid director for the state of New York. “It’s even possible that the state may be able to generate additional dollars — that is dollars beyond those needed to cover the costs of expansion.”

The Affordable Care Act obligates the federal government to cover 100 percent of state expansion costs through 2016 after which it gradually phases down to a permanent matching rate of 90 percent in 2020.

Savings identified

Currently, Kansas spends nearly $30 million a year to cover a portion of the losses sustained by hospitals, clinics and mental health centers for care provided to uninsured patients. And it spends nearly $87 million annually to provide health care to prison inmates and mental health services to uninsured Kansans.

Much of that spending, Bachrach said, would no longer be necessary if Kansas expanded eligibility for its Medicaid program — known as KanCare — to adults earning up to 138 percent of the federal poverty level, which is annually $16,105 for an individual and $32,913 for a family of four. Kansas is among 20 states that have not expanded Medicaid eligibility.

The analysis says expansion also would reduce the number of Kansans seeking disability determinations, which would save millions more. Disability determinations in Oregon dropped from 7,000 to 1,400 in the first year after it expanded eligibility for Medicaid.

In addition, expanding KanCare would increase the $47 million generated by a privilege tax levied on the managed care organizations that operate the state Medicaid program since it was privatized in 2013.

“The potential benefit to the state budget alone indicates that legislators can no longer afford to simply say ‘no’ to KanCare expansion,” the foundation members of Kansas Grantmakers in Health said in a letter sent to Kansas legislators with a copy of the analysis.

The letter criticized Gov. Sam Brownback and legislative leaders for paying millions to a consultant to identify savings and efficiencies while ignoring Medicaid expansion, which they said “could be saving the state millions of dollars right now, while providing more than 150,000 uninsured Kansans health coverage.”

Tom Bell, president and CEO of the Kansas Hospital Association, said the new analysis of Medicaid expansion in Kansas corroborates studies done by his organization. “It says that not only does expansion pay for itself, it could actually help the state budget,” Bell said.

View larger photo

Tom Bell, president and CEO of the Kansas Hospital Association, said the new analysis corroborates studies done by his organization.

“It says that not only does expansion pay for itself, it could actually help the state budget,” Bell said.

A group that produces the state’s official revenue estimate, which the governor and Legislature are required to use in the budgeting process, recently lowered its projections for the 2016 budget year by $159 million, even though lawmakers passed the largest tax increase in state history in the 2015 session.

When the state closed the books on November, tax receipts topped the revised estimate by $7.7 million but few believe the budget problems have been solved. 

Expansion bill in the works

Bell said KHA is working with select legislators to write a Medicaid expansion bill for the 2016 legislative session.

“We want to get something introduced early in the session that is based on plans that have been adopted in other red states — states with Republican governors,” he said, noting that several lawmakers have expressed interest in the plan devised by Republican Gov. Mike Pence in Indiana.

Indiana’s expansion plan, approved by federal officials in January, requires beneficiaries to help pay for private coverage by contributing to a Personal Wellness and Responsibility, or POWER, account. The state also contributes to the account, which beneficiaries can use to cover out-of-pocket expenses.

The amount that beneficiaries are required to pay toward their coverage varies based on their income and is limited to no more than 2 percent of their income.

The recent closure of Mercy Hospital in the southeast Kansas community of Independence has prompted some legislative opponents of expansion to take a second look at the issue. However, Brownback and many Republican leaders remain strongly opposed, in part because they say they don’t want to extend coverage to non-disabled adults until support services that help Kansans with disabilities to live independently are provided to all who need them.

“We want to get something introduced early in the session that is based on plans that have been adopted in other red states — states with Republican governors.”

- Tom Bell, president and CEO of the Kansas Hospital Association

Kansans with disabilities currently receive health care through KanCare, but thousands are on waiting lists for support services.

In October, Melika Willoughby, Brownback’s deputy communications director, detailed the governor’s opposition to expansion in an email to supporters. She wrote that the governor believes it would be “morally reprehensible” for the state to provide health coverage to low-income Kansans “who choose not to work” before providing support services to all of the disabled Kansans now on waiting lists.

Rep. Dan Hawkins, a Wichita Republican who chairs the House Health and Human Services Committee, is among those opposed to any expansion plan that doesn’t also clear the waiting lists.

“The state has a responsibility to provide a health care safety net for the poor, disabled and elderly,” Hawkins recently wrote in the House Republican Caucus blog. “My concern begins when we expand that to able-bodied adults.”

The Kansas Department of Health and Environment, the state’s lead Medicaid agency, has estimated that eliminating the waiting lists for Kansans with disabilities will cost the state about $1 billion over 10 years, more than can be covered by the savings estimated in the Manatt analysis.

Bell and other expansion advocates say the governor’s insistence that any expansion plan sent to his desk also eliminate the waiting lists is a diversionary tactic intended to derail a discussion that is starting to gather momentum.

“We continue to see that as a separate issue,” he said.

The Manatt report cost approximately $50,000. It was paid for by the Sunflower Foundation, which jointly released it with the Kansas Health Foundation, the Health Care Foundation of Greater Kansas City, The REACH Healthcare Foundation, the United Methodist Health Ministry Fund and the Wyandotte Health Foundation.

Editor’s note: The Kansas Health Foundation is the primary funder of the Kansas Health Institute, the parent organization of the editorially independent KHI News Service.  

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.