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Rising KanCare costs adding to state’s budget problems

By Jim McLean | November 19, 2014

State officials will need to find an additional $40 million to meet rising KanCare costs in the current budget year, according to caseload estimates compiled by the nonpartisan Kansas Legislative Research Department.

KanCare is the name of the state’s privatized Medicaid program.

Also, an anticipated increase in the number of children in the foster care system will require an additional $10.2 million in state funding in the current budget year, which ends June 30.

Gov. Sam Brownback and legislators will need to come up with the additional $50.2 million as they cut spending in other areas to address a projected $280 million revenue shortfall. The fact that there will be only six months remaining in the 2015 budget year when lawmakers go back to work in January will make the task more difficult.

The need for additional KanCare funding is the result of higher enrollment and a new federal tax on insurance companies. The three managed care companies that administer KanCare will be required to pay the tax, a portion of which will be passed on to the state.

“There is nothing we can do other than to write the check,” said Sen. Jim Denning, an Overland Park Republican. “This is going to be a big issue going forward.”

The premium tax, which was created to help fund the Affordable Care Act, is expected to increase next year at the same time that a reduction in the amount of Medicaid funding from the federal government is expected to decrease by $16.2 million

The state will need to increase the amount it expects to spend on KanCare in the 2016 budget year by $76.6 million, according to the KLRD estimates.

Sen. Laura Kelly, from Topeka, the ranking Democrat on the Senate Ways and Means Committee, said increases in KanCare costs are to be expected midway through most budget years. But she said the increases needed this year and next are “hugely problematic” because of the revenue shortfalls caused by the income tax cuts passed at Brownback’s urging.

“We have backed ourselves in a corner with those tax cuts,” Kelly said. “Even before the caseload estimates came out, we were underwater. But we have a responsibility and a moral obligation to respond to these needs, and we’re just going to have to figure out how to do that.”

Approximately 425,000 children, low-income parents, people with disabilities and seniors who can’t cover the cost of nursing home care are enrolled in KanCare.

Brownback and officials in his administration have said they expect the income tax cuts to stimulate job growth and to partially restore state revenues over time. However, the revenue estimates that the governor and lawmakers are required to use for budgeting project that the state will spend through the $380 million balance it had at the start of the budget year and still be $280 million short of what is needed to balance the budget. Next year’s shortfall is projected at $436 million.

The projected shortfalls have some members of the Legislature’s Republican majority talking publicly about revisiting the tax cuts. Denning, who serves on the KanCare oversight committee and as vice chair of the Senate Ways and Means Committee, has said he wants to “smooth out” additional cuts that are scheduled to take effect and consider requiring some business owners to resume paying personal income taxes on earnings exceeding $250,000.



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