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On January 1, 2017, the KHI News Service became part of KCUR public radio’s new initiative, the Kansas News Service. The Kansas News Service will continue to cover health policy news and broaden its scope to include education and politics. All stories produced by the former KHI News Service are archived here. Stories and photos may be republished at no cost with proper attribution and a link back to KHI.org.

Study: Medicaid expansion improving some states’ budgets

Researchers project expansion costs in Kentucky, Arkansas completely offset through 2021

By Andy Marso | April 09, 2015

As a legislative session focused on the Kansas budget problems winds to a close with no decision on Medicaid expansion, a new study says some states that have expanded eligibility have seen their budget situations improve.

The State Health Reform Assistance Network, a partnership of the Robert Wood Johnson Foundation and Princeton University, studied the effects of Medicaid expansion on budgets in eight states.

The study found that those states realized about $1.8 billion in combined savings and new revenue from expanded Medicaid eligibility. The money came mostly from the federal government picking up a larger share of the health care costs for those newly eligible for comprehensive Medicaid coverage, which created state budget savings on programs that serve the uninsured, pregnant women and people with physical disabilities or mental health needs.

The states in the study — Arkansas, Colorado, Kentucky, Michigan, New Mexico, Oregon, Washington and West Virginia — also gained new revenue by taxing insurance providers.

The study’s authors concluded that in Arkansas and Kentucky, budget savings are expected to offset the states’ share of expansion costs through at least fiscal year 2021.

Kansas is one of 22 states that so far have declined to expand Medicaid eligibility under the federal Affordable Care Act since the expansion went into effect in 2014.

Expanding Medicaid access to Americans who make up to 138 percent of the federal poverty line was one of the cornerstones of the ACA, which President Barack Obama signed in 2010. Federal tax dollars fund 100 percent of expansion from 2014 through 2016, before gradually stepping down to a 90-10 federal-state cost share. A 2012 U.S. Supreme Court decision allowed states to decide whether they will participate in the expansion.

Little movement after hearing

Advocates of Medicaid expansion in Kansas — led by the state’s hospital association — made their strongest push yet this session and succeeded in getting a legislative hearing on the issue last month.

Photo by Dave Ranney Susan Mosier, acting secretary of the Kansas Department of Health and Environment, testified during a legislative hearing that Medicaid expansion would cost the state more than $100 million annually. But a recent study found that eight states where eligibility has been expanded have seen $1.8 billion in combined net savings and new revenue.

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But there has been little movement since that hearing, where a member of Gov. Sam Brownback’s Cabinet said expansion could cost the state more than $100 million annually. Susan Mosier, secretary of the Kansas Department of Health and Environment, also said the state should fully fund waiting lists for Kansans with disabilities seeking daily living support services before extending medical coverage to more low-income Kansans.

Brownback said at a recent news conference that he was still open to expansion and that talks with the Kansas Hospital Association continue.

But he said concerns remain about the disability waiting lists and the cost of expansion. He also said he wants any expansion agreement with the Obama administration to include a work or job training requirement for new Medicaid recipients, similar to one the state recently instituted for food stamp recipients.

The federal Centers for Medicare and Medicaid Services has allowed for Medicaid expansion revisions such as cost-sharing and premium assistance in states like Arkansas. But it has yet to approve any work requirements.

Brownback said he’s looking for a plan that can “thread the needle” between what the hospitals want, what his administration wants and what the Obama administration is willing to negotiate.

“That’s why we continue to meet,” Brownback said. “I don’t know if the administration will show any more flexibility. I don’t know what we can come up with for resources to be able to get our wait list down so we have money to be able to do it. But if this is a possibility, let’s continue to see if it’s something that could work.”

Right now any plan the Brownback administration agrees to must be approved by the Legislature under state law. Time is running out to change that during the 2015 session, which is now down to a few final weeks that begin April 29.

During those weeks lawmakers will be focused on how to close a $667 million shortfall between the budget the Senate passed for the next fiscal year and what the state is projected to take in.

Shifting costs

The State Health Reform Assistance Network’s study suggests expansion could contain budget savings by shifting costs to the federal government. An Urban Institute study published last month by the Kaiser Family Foundation found similar results in Connecticut, Washington and New Mexico.

State officials there reported cost savings from expansion because of shifts in existing Medicaid-related expenses, and savings in the state’s behavioral health system and prisons system.

Those systems treat large numbers of people with mental illnesses. A study published this week by the American Mental Health Counselors Association found that population is better served in states that have expanded Medicaid.

The Urban Institute researchers also found that after expanding Medicaid, Connecticut, New Mexico and Washington reported less uncompensated care — a major issue for hospitals in Kansas.

Medicaid expansion was intended to offset reductions in federal payments for Medicare and for hospitals that treat large numbers of uninsured patients. Without expansion, some hospitals say they are now reaching a financial breaking point.

Conservative think tanks that oppose expansion have said states that expanded eligibility are besieged by hidden costs that make the program more expensive than projected — including a “woodwork effect” in which residents who were already eligible for Medicaid but had not enrolled begin to take advantage of it.

Expansion would extend coverage to individual Kansans who make $16,105 or less per year and families of four who make about $32,913 or less. KDHE estimates about 151,000 Kansans who were not previously eligible would sign up for Medicaid if eligibility as expanded to the level called for in the ACA.

Many of them now fall into a “coverage gap” within the ACA: They make too much to qualify for Medicaid under current Kansas income guidelines — some of the nation’s most restrictive — but too little to qualify for federal subsidies to help buy private insurance from an online exchange.

A study published earlier this month by the Kaiser Family Foundation found that racial and ethnic minorities are disproportionately affected by the coverage gap.