In Depth: Lawmakers Conclude Medicaid Cost Hearings

Two days of legislative hearings on containing the spiraling costs of Medicaid in Kentucky were held this week in Frankfort.

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Medicaid is a joint state/federal program that provides medical services to the poor and needy. Right now, the federal government is picking up 80 percent of Medicaid costs in Kentucky, with the state covering the rest. In 1990, program costs were less than $1 billion. But by last year, those costs had risen to more than $5 billion. And enrollment, which was around 400,000 in 1990, is now almost 800,000 in a state of roughly 4 million people. In search of ways to contain costs, the General Assembly created a 12-member task force, co-chaired by Rep. Jimmie Lee, D-Elizabethtown, and Senate President Pro Tem Katie Stine, R-Southgate. “We’ll be hearing from a lot of different people this summer and our job – it is a difficult one – will be to sift through all the information and come up with some recommendations on how we can serve our Medicaid population while remaining good stewards of the tax dollars that the citizens of this commonwealth entrust to us,” said Stine.

At its first meeting, the Medicaid Cost Containment Task Force was briefed on the inner workings of the Medicaid program, its costs and benefits. When House Speaker Greg Stumbo, D-Prestonsburg, learned many of the benefits offered by Kentucky – like eyeglasses, dental and rehabilitation – are “optional,” he wondered if those could be areas for possible cuts.

“What’s the difference between what the minimum baseline standard is that the federal government provides and what we’re now providing?” asked Stumbo. “And then let’s determine how much money is actually being paid in those various categories, the difference being between what the minimum would be and what it would encompass and what we’re paying.”

Task force co-chair Jimmie Lee agrees optional benefits deserve more study, but doubts lawmakers will order any wholesale elimination of such benefits.

“You may work within that optional program to change the way we work with those individuals,” said Lee. “But I don’t see us saying, well you don’t need this and therefore, whether it’s going to be a cost saver. Because you have to look at the ramifications of not providing that care and where does the balloon get squeezed?”

The current budget assumes the state will be able to find more than $700 million in Medicaid efficiencies. And day two of the hearing found Medicaid Services Commissioner Betsy Johnson (pictured with Deputy Commissioner Neville Wise) testifying about actions that have already saved the state around $13 million. Those include pharmacy audits, prior authorization before certain drugs are dispensed, modified coverage of over-the-counter drugs, no payments for hospital-acquired conditions, like staph infections, and provider revenue intercepts.

“It’ll benefit the Medicaid program about tax refund time,” said Johnson, “because, guess what? If you owe the Medicaid program money but you’re owed a tax refund, you’re not going to be getting that tax refund this year. Because we’re not going to be refunding money that belongs to the Commonwealth of Kentucky.”

The task force is scheduled to meet twice monthly until the end of the year. The group’s recommendations will be the basis of legislation to be considered in next year’s legislative session, and beyond. Senate President David Williams, R-Burkesville, says it’s a good time to be tackling the problem, especially in light of recent passage of the National Health Care Act.

“Review of this Medicaid program in Kentucky during this transitional period is going to bring up a lot of impact and a lot of costs that are going to have to be assumed by the state government and employers of the state,” said Williams.

Congress holds the key to resolving the most immediate fiscal challenge facing Kentucky’s Medicaid program. The program faces a $1 billion deficit by year’s end if Congress fails to approve the continued use of stimulus dollars to cover a larger share of state Medicaid expenses. The state’s share of the potential deficit? Around $230 million.