In Depth: Beshear Medicaid Plan Gets Mixed Reviews

by Tony McVeigh on January 20, 2011

Gov. Steve Beshear’s plan for balancing Kentucky’s Medicaid budget is getting mixed reviews in Frankfort.

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The Medicaid budget approved by state lawmakers assumed Kentucky would receive $238 million in federal stimulus funds. But the state’s getting only $138 million, leaving a $100 million deficit.  

To close the hole, Gov. Steve Beshear wants to transfer $166 million from fiscal 2012 to fiscal 2011. With federal matching funds, the state should have $600 million for anticipated expenditures. It would also allow Kentucky to pay health providers the maximum rate allowed by Medicaid.    

Right now, Beshear says the second year is balanced, but if a deficit does surface in 2012, it can be covered with savings from managed care.

“It is a short-term fix, but it’s much more than that,” said Beshear. “It is also part of a multi-pronged strategy for the future of the Medicaid program.”

Gov. Beshear says failure to adopt the budget amendment could devastate programs that provide health care to 820,000 of Kentucky’s most vulnerable citizens.

“We have an opportunity here to act in a bipartisan manner to adopt a reasonable approach to solving an immediate problem,” said Beshear. “The other good news is that the solution to this immediate problem is also a solution to a much longer range problem.”

Without his plan, Beshear says Medicaid reimbursements to hospitals would have to be cut by 30 percent. That would be untenable, says Mark Neff, incoming chair of the Kentucky Hospital Association.

“A 30 percent cut in hospital reimbursement over a six month period could equate to about $250 million for the state, for our acute care, our rehab and psychiatric hospitals – a tremendous impact,” said Neff. “That impact would flow right through to each community that we serve, in terms of a domino effect.”

Sheila Schuster of the Kentucky Mental Health Coalition says such drastic cuts could force Community Mental Health Centers to either furlough or layoff employees, reduce services or close offices, especially in rural areas.

“Not only will the staff be cut, but the services will be cut and we will not be able to generate as much revenue,” said Schuster. “So, there’s a domino effect as we go forward. And those dollars are dollars that are in those local communities with buying power and so forth.”

Gov. Beshear claims his proposal has bipartisan support, but Senate President David Williams isn’t buying it. And Williams, who likely will face Beshear this fall in the 2011 governor’s race, is openly critical of the administration’s management of the Medicaid program. He says the governor promised to save $125 million in Medicaid efficiencies this fiscal year, but so far he’s only saved $86 million.

“He has had three years to get the cost containment measures under control in the Medicaid budget, and he hasn’t done that,” said Williams. “We just had a cost containment task force that met for several months. His administration did not come forth with any recommendations whatsoever concerning cost containment.”

And as for the governor’s plan to spend money set aside for next year during the current year, and use managed care savings to cover any second year deficit, Williams says, “That dog won’t hunt.”

“And if we decide not to give an amendment then it’s their responsibility to manage this money,” said Williams. “And if because of their mismanagement there has to be a reduction in reimbursements for providers, then that’ll have to happen.”

The governor’s proposal will be in the form of an amendment to the Medicaid budget, which means lawmakers will have to reopen the budget when they return on February 1st.

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