By Chad Moore and Mark Van Blaricum*
June 18, 2009
Budget Dominates Session
In January 2009, the Kansas Legislature faced almost a $1 billion dollar shortfall in state revenues for the remaining fiscal year (FY) (January 1, 2009, to July 1, 2009) and FY 2010. In February, the Legislature passed a rescission bill that shored up the current budget year shortfall by cutting nearly $211 million in spending. It then turned to the FY 2010 budget, which was projected to have a more than $685 million shortfall compared with the prior year. Though a budget bill was passed, it required more across-the-board cuts by all state agencies.
As legislators reconvened on April 26, they again faced declining revenue or nearly $160 million less than was projected late last year. That forced more cuts for the current fiscal year. Legislators again had to turn to state agencies to cut spending. These cuts were for an additional 2.75%. The Kansas Health Policy Authority (KHPA), which is the agency charged with managing the Medicaid and State Children's Health Insurance (SCHIP) programs, determined that it needed to cut administrative and operating expenses by nearly 17% to meet the legislature's requirements.
The administrative cuts at KHPA have taken a toll on the agency's ability to manage the application backlog for its public assistance programs. That backlog was at 11,000 in April 2009 and is expected to hit 50,000 by year's end if the current trend persists.
Expansion of the State Children's Health Insurance Program (SCHIP)
During the 2008 Legislative Session, the Legislature authorized KHPA to increase the eligibility level for the SCHIP program from 200% of the Federal Poverty Level (FPL) to 250% FPL. Senate Bill 81 authorized such an expansion if Congress passed a SCHIP reauthorization bill.
Such a move during the 2009 session seemed in jeopardy in light of the budget situation; however, the Legislature did follow through on its prior-year commitment. With passage of the Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA), SCHIP, or HealthWave as it's known in Kansas, was expanded to include families with annual incomes up to $44,000 for a family of three. This expansion will help enroll over more than 9,000 Kansas children in HealthWave during the next four-year period.
Federal Stimulus Dollars Help Stabilize Medicaid Program
Budget Stabilization Funds
As part of the American Recovery and Reinvestment Act (ARRA), Congress set aside 10% of the overall bill's funding for states to use as "Budget Stabilization Funds" to prevent cuts in essential government services that would deepen the recession and slow or prevent a recovery. The Budget Stabilization Funds were disbursed to the states through (1) Education Funds and (2) Medicaid Reimbursements.
As Congress did in 2003, ARRA included Budget Stabilization Funds delivered to the states through temporary increases in the Federal Medicaid Assistance Percentage (FMAP). States spend their own money on Medicaid services and are reimbursed by the federal government based upon percentages that change each year to reflect the relative costs of each state's low-income healthcare needs. Kansas' Medicaid reimbursement percentage is approximately 60%.
Under ARRA, states get a special increase to their FMAP rate of 6.2% points. Depending on the state's unemployment rate, some states might receive an even greater increase in the matching rate to help stabilize Medicaid budgets hit by declining state revenues and increasing Medicaid enrollment. The time period for the FMAP increase is October 1, 2008, to December 31, 2010.
For Kansas, this means an additional $450 million for its Medicaid programs for the time period above, with $111 million of those funds arriving for FY 2009. To date, Kansas has received about $71 million in ARRA funds. KHPA notes that in FY 2009 Kansas used less than 30% of Medicaid ARRA dollars to preserve Medicaid ($31 million Medicaid State General Fund (SGF) reduction out of $118.5 million received in Medicaid ARRA funds).
In FY 2010, Kansas is projected to use slightly less than half of projected Medicaid ARRA dollars to preserve Medicaid (projected $98 million Medicaid SGF reduction out of $206 million in Medicaid ARRA funds Kansas is projected to receive).
Off-Session Health Reform Efforts from the Advocacy Community
On June 9, 2009, the Kansas Action for Children (KAC) kicked off a series of work-group sessions focused on covering more Kansas children through the Medicaid and HealthWave programs by hosting the Children's Health Coverage Summit. KAC brought together national speakers, community advocates, nonprofits, and KHPA staff to discuss how Kansas can enroll more eligible but non-enrolled kids. Speakers from Louisiana, Iowa, and Washington, DC, addressed some of the incentives available in CHIPRA, as well as specific strategies that Medicaid agencies can implement to address these issues. KAC will continue to host sessions throughout the summer specifically discussing enrollment, retention, and outreach to reduce the number of uninsured Kansas children.
Drug Testing for Recipients of Cash Assistance in Kansas
HB (House Bill) 2275 would have required the Kansas Department of Social and Rehabilitation Services to conduct random drug tests of recipients of cash assistance. This bill did not pass the Senate. The bill would have mandated drug tests for one-third of the state's cash recipients each year. Recipients receiving financial support in programs such as temporary aid for families, general assistance, and child care support would have been affected. Recipients who tested positive for drug use would face penalties and could ultimately be ineligible for cash assistance from the state. This requirement would have cost the state an estimated $800,000 in the first year and up to $1.6 million by the second year.
Increase Tobacco User Fee
House Bill 2327 introduced by the House Committee on Taxation instituted a $0.75-per-pack increase on the price of tobacco products sold in Kansas. The projected increase in revenue from this tax was
$68.7 million. The bill included a provision that would have structured a separate treasury account for this revenue to be used exclusively for Kansas health reform efforts. Some of these efforts included the following:
- Medicaid for Poor Parents: KHPA recommended expanding Medicaid to include parents earning up to 100% FPL or $1,467 per month for a family of three.
- Improving access to affordable health insurance for small businesses and young adults.
- Implementing a statewide Community Health Record.
- Expanding early detection for breast, cervical, colorectal, and prostate cancer to prevent illness and death from failure to timely detect those diseases; expanding the coordinated school health program; providing wellness grants for small businesses.
- Providing tobacco cessation programs for Medicaid recipients.
In light of the tough budget year, the prospect of any type of tax increase passing the Legislature was unlikely. HB (House Bill) 2327 did not move out of the Committee on Taxation.
*AHLA wishes to thank Chad Moore, Esquire, and Mark A. Van Blaricum, Esquire (Children's Mercy Family Health Partners, Kansas City, MO) for providing this alert.
The Healthcare Reform Educational Task Force is a joint endeavor of the Healthcare Liability and Litigation; Hospitals and Health Systems; In-House Counsel; Payors, Plans, and Managed Care; Physician Organizations; Regulation, Accreditation, and Payment; and Teaching Hospitals and Academic Medical Centers Practice Groups.