Facing shortfall, Kentucky mulls ending Medicaid expansion

FRANKFORT, Ky. (AP) — Warning of a nearly $300 million potential shortfall in its Medicaid program, Kentucky officials say they could eliminate health coverage for more than 480,000 people to balance the state's budget.

Kentucky's Medicaid program spends about $11.5 billion every year, but most of that money comes from the federal government. Cabinet for Health and Family Services Secretary Adam Meier told state lawmakers Thursday that Kentucky's share of that budget will be $296 million short by 2020 — money that must come from the cash-strapped state.

More than 1.4 million people receive Medicaid benefits in Kentucky, or about one-third of the state's population. Federal law requires the state to cover most of those people. But 480,000 people were added to the Medicaid rolls when former Democratic Gov. Steve Beshear chose to expand the program to cover able-bodied adults. The state is not required to cover those people.

"The expansion population is an optional population," Meier told a panel of state lawmakers when they asked what could be done to avoid the shortfall.

Republican Gov. Matt Bevin has threatened to eliminate the Medicaid expansion before. He campaigned against it during his run for governor in 2015, arguing it was too expensive and did not make people healthier.

Instead of eliminating the expansion, Bevin changed who would be eligible for it. People would have to pay monthly premiums and either get a job, volunteer or go back to school to keep their benefits. He estimated the changes would reduce the state's Medicaid rolls by 95,000 people and save state taxpayers $300 million over five years. But a federal judge blocked those changes before they could take effect in July.

Meier told lawmakers the state had been counting on those savings to help avoid the shortfall. Other options include cutting benefits, such as vision, dental and pharmacy.

"That's certainly not anything we would want to do," Meier said. "We also have a constitutional obligation to come in under budget. Unlike the federal government, we can't just print more money. We can't run a deficit."

Meier said the agency would not make those big decisions without first consulting with the GOP-controlled state legislature. That gives lawmakers a chance to find an alternative when they return to work in January. One idea, pitched by a group of hospitals, would be to tax health care providers. A version of that plan would generate an estimated $372 million in 2020.

The proposal has interested Republican Sen. Ralph Alvarado, an emergency room doctor running for re-election in November who says he supports the Medicaid expansion. He said he wants lawmakers to have a hearing on the proposal, but added he's already getting pushback from independent providers who say they could not afford to pay the tax and would likely stop seeing Medicaid patients.

"There's worry that it is really going to limit access," he said. "But it's time to have that conversation. It's time to say, do we want this? If so, how do we pay for it?"

Democratic state Sen. Morgan McGarvey likes the proposal, calling it a "wonderful tool that the General Assembly should look at so that we don't unplug the Medicaid expansion" because he said it makes people healthier and improves the state's workforce.

"Medicaid expansion is an investment in Kentucky we should continue to make, not a cost we should cut," he said. "People's lives are not a cost for state government."

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