Kentucky Medicaid Program At A Crossroads

On June 22, 2016, Kentucky Governor Matt Bevin (R) announced the release of Kentucky HEALTH (Helping to Engage and Achieve Long Term Health), a Medicaid section 1115 demonstration project proposal. Kentucky has experienced tremendous change over the past few years in an effort to transform its Medicaid program, including a shift to Medicaid managed care in 2011 and Medicaid expansion, under the Affordable Care Act (ACA), in 2014.

Kentucky has made national headlines for enrolling Kentuckians in Medicaid and private insurance to achieve one of the two biggest drops in the uninsurance rate in the country, from 20.4 percent (December 2013) to 7.5 percent (December 2015).

As background, it is important to understand that Kentucky has one of the highest poverty rates in the nation (about 1 in 5 Kentuckians live in poverty), as well as some of the most challenging health status statistics in the United States. More than half of Kentucky Medicaid families have a full-time worker in the home, and an additional 14 percent of families have a part-time worker in the home.

Since Kentucky expanded Medicaid, nearly half a million Kentuckians have gained coverage through Medicaid. So far, we have seen an increase in preventive care use by Medicaid enrollees and a sizeable drop in uncompensated care by providers. While twenty-six states have expanded Medicaid as permitted by the ACA, another handful have pursued expanded Medicaid through a section 1115 waiver, which gives states the ability to implement "experimental, pilot, or demonstration projects that promote the objectives of the Medicaid and CHIP programs." (CHIP stands for Children's Health Insurance Program.) Currently, Ohio, Arizona, and Kentucky each have filed or plan to file an 1115 waiver proposal to modify their existing Medicaid expansion. Although these proposals (including Kentucky HEALTH) mark a deviation from how these demonstration waivers have been used thus far, the Centers for Medicare and Medicaid Services (CMS) will apply the same criteria in evaluating if Medicaid program objectives are met:

1. Increase and strengthen overall coverage of low-income people in the state;
2. Increase access to, stabilize, and strengthen providers and provider networks available to serve Medicaid and low-income populations in the state;
3. Improve health outcomes for Medicaid and other low-income populations in the state; or
4. Increase the efficiency and quality of care provided to Medicaid and other low-income populations through initiatives to transform service delivery networks.

While section 1115 waivers were in use long before the ACA, the ACA requires "opportunity for public comment and greater transparency of the section 1115 demonstration projects." So, in Kentucky, a thirty-day public comment period started on June 22, when Governor Bevin publicly released the proposal. Following submission to CMS, a second thirty-day comment period will begin, when anyone can submit comments to CMS.

The Foundation for a Healthy Kentucky agrees that public input is integral to designing a Medicaid program that is responsive to the needs of low-income Kentuckians.

To that end, we held a stakeholder convening on May 12 to facilitate a discussion on components of existing Medicaid 1115 waivers elsewhere and what stakeholders would like to see implemented in Kentucky. A full report of the convening input can be found here. Approximately 130 people attended the convening (including physical and behavioral health providers, consumers and consumer advocates, public health professionals, academic researchers, health system representatives, and payers) and provided their input and perspectives.

Some highlights of the input provided follow.

1. Participants had diverse perspectives on cost-sharing and penalties, from opposing any cost-sharing in Medicaid to proposing specific premium and copayment amounts. Participants were unified in opposing penalties to enforce cost-sharing provisions.
2. Participants were supportive of implementing incentives for healthy behaviors such as smoking cessation and use of health risk assessments.
3. Discussion of benefits ranged from retaining current Medicaid benefits to expanding existing benefits (that is, expanded substance use treatment) to adding new benefits (that is, financial support for housing as well as help finding suitable housing, Uber as reimbursable transportation, among other social and economic support services). Participants overall felt that medically necessary services should be covered for all enrollees.
4. Participants spoke of the need to streamline and accelerate the reimbursement process for providers; increase reimbursement rates for providers; and add new categories of services and providers to be reimbursed (that is, community health workers, telehealth, and home health care).
5. Participants noted the need for systems improvement in the current Medicaid care delivery and payment system, such as simplifying administrative processes used by providers; expanding provider scope of practice; and increasing uniformity and consistency in processes among Medicaid Managed Care Organizations.

Participants saw an 1115 waiver as an opportunity for Kentucky to explore new ways of delivering and paying for care and for moving beyond coverage issues to addressing access to and quality of care to really improve health outcomes. But many participants expressed opposition to making any changes to the existing Medicaid expansion program.

A number of statements and blogs have already been written about Kentucky HEALTH, noting concern about many of its components. (Read another blog post here.) The Foundation for a Healthy Kentucky released an initial statement about the waiver on June 22. As referenced in the foundation's statement, the waiver contains some positive components that stakeholders at the May 12 convening said they would like to see: substance use treatment expansion, streamlining of Medicaid managed care organization processes, and healthy behavior incentives. As a mission-driven organization that is data- and evidence-based in its work, the foundation also finds areas of concern.

1. Loss of dental and vision benefits from the core Medicaid package: Oral health affects overall health, and low-income Kentuckians "are disproportionately affected by bad oral health" as compared with higher-income Kentuckians. The Kentucky Center for Economic Policy believes cutting dental care services could lead to higher health care costs by increased emergency department (ED) use and by preventable oral health problems going untreated.
2. No retroactive eligibility: Removing retroactive eligibility will leave people who are eligible for Medicaid without coverage, and providers who serve them won't be reimbursed.
3. Monthly premium payments at all income levels: There is evidence that premiums can be a barrier to coverage for low-income individuals. A study found that enrollment dropped when premiums were instituted in Kentucky's CHIP.
4. Monetary penalties for nonpayment of premiums: For those making less than 100 percent of the federal poverty level ($11,770 or less for an individual), nonpayment of premiums results in copayments of $3 to $50. Stakeholders at the May 12 convening were opposed to penalties for failure to pay cost-sharing.
5. Lockout periods for nonpayment: A study found that when Oregon implemented lockouts for nonpayment, enrollment dropped. More concerning was that almost three-quarters of those who were disenrolled remained uninsured.
6. Lockout periods for not enrolling on time: No other state has implemented lockouts for failure to enroll according to requirements. This increases the risk that low-income Kentuckians will be locked out of needed health care services.
7. Mandatory work or volunteer work requirements. For nondisabled adults without dependent children, the proposal requires them to do volunteer work from five to twenty hours, starting on the fourth month of Medicaid enrollment. It is not clear from the proposal if people already employed part- or full-time would be exempt. Not fulfilling that mandatory work requirement results in suspension of benefits. CMS has not approved mandatory work requirements so far (CMS has approved mandatory work referral only) in any other state proposal and has indicated that work requirements are not consistent with the purposes of Medicaid.
8. Loss of nonemergency transportation. CMS has stated that such transportation is "an important benefit for beneficiaries who need to get to and from medical services, but have no means of transportation." Evaluations from Indiana and Iowa, which have removed such transportation from their Medicaid programs through 1115 waivers, so far have been inconclusive.
9. Diminished smoking cessation benefits: The waiver proposal indicates that in-person counseling (individual and group) is no longer included in the Medicaid benefits package. In Kentucky, a state with one of the highest smoking rates and smoking-related death rates in the country, evidence-based therapies should be covered and incentivized through Medicaid (and other insurance plans).
10. ED penalties: Nonemergency use of the ED will carry a $20 to $75 fee. These fees are much higher than the $8 maximum currently allowed under federal regulations, and higher than the fees implemented by Indiana through a 1916(f) waiver. Despite commonly held beliefs, studies have found that higher ED use by Medicaid enrollees is driven by "unmet health needs and lack of access to appropriate settings."

It will be important to listen to the input provided during the public comment period and to look to lessons learned in other states and from past health services research literature. The US Department of Health and Human Services has given us some indication of how it will review Kentucky's proposal by reiterating that "[w]e are hopeful that Kentucky will ultimately choose to build on its historic improvements in health coverage and health care, rather than go backwards."

The Foundation for a Healthy Kentucky is committed to addressing the unmet health care needs of Kentuckians by increasing access to care, reducing health risks and disparities, and promoting health equity.

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