The Medicaid Oversight and Advisory Committee meeting was held on Monday, August 24, 2009, at 10:00 a.m., in Room 131 of the Capitol Annex. Representative Jimmie Lee, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Representative Jimmie Lee, Co-Chair; Senators Walter Blevins Jr., Dan "Malano" Seum, and Katie Kratz Stine; Representative Joni L. Jenkins.
Guests: Bill Doll for the Kentucky Medical Association; and Jan Gould for the Kentucky Retail Federation.
LRC Staff: Miriam Fordham, Jonathan Scott, and Cindy Smith.
The first item on the agenda was a presentation on the impact of Kentucky stimulus funds on the Medicaid program by Betsy Johnson, Commissioner, Department for Medicaid Services, Cabinet for Health and Family Services and Neville Wise, Director, Administration and Financial Management, Cabinet for Health and Family Services. Commissioner Johnson said that Medicaid is the primary payer source for health care in Kentucky and Medicaid covers nearly half of all births in the Commonwealth per year. Medicaid provides health coverage to 1 out of every 3 children, and 1 out of every 7 seniors over age 65. Medicaid provides coverage to approximately 772,000 enrollees, representing about 20 percent of the Commonwealth’s total population. The budget for the Department for Medicaid Services (DMS) is $5.54 billion (actual expenditures) for FY 09 and is projected to be $5.7 billion for FY 10. She said DMS only spends 2 percent on the administration of the program and 98 percent goes to pay for benefits for enrollees. There has been a steady increase in eligibles over the last year. There was a deficit of $232 million in FY 09, which was an increase from $183 million.
Next, Commissioner Johnson spoke about the American Recovery and Reinvestment Act (ARRA) of 2009, which was signed into law by President Obama on February 17, 2009. The impact of ARRA on Kentucky Medicaid was that the Federal Medical Assistance Percentage (FMAP) increased, and the increase offered a temporary fix to the $232 million deficit for FY 09, with no projected deficit for 2010. She said that the FMAP rates are set annually pursuant to Section 1905(b) of the Social Security Act. She reported that in FY 2008, states’ FMAP rates ranged from 50.0 percent to 76.29 percent and in FY 2009, states’ FMAP rates ranged from 50.0 percent to 75.84 percent. Kentucky’s normal base rate is 70.13 percent.
Next, Neville Wise reported on the effect of the enhanced FMAP on the general fund. He said that the Cabinet finished a revised Medicaid forecast in May in collaboration with the Governor’s Office. They looked at the general funds and restricted funds that were available and added an additional $14 million to that due to the fact that Medicaid was losing about $14 million in revenue from other state agencies. There were also some new administrative costs to take care of, which left them with the new match rate. These figures showed that they could free up about $383 million that could help with shortfalls in other areas.
Representative Lee asked what percentage of growth was taken into the calculations based on growth in expenditures and the bad economy, how it was projected for the next fiscal year, and if that is included in what the estimate is of needed general fund dollars. Mr. Wise said that is included. He said originally they had budgeted for 1,000 new eligibles per month. He is assuming there will be around 3,000 new eligibles per month in the coming fiscal year, and they used the latest growth rate in expenditures that they had seen through last year to go forward into fiscal year 2010.
Representative Lee asked what plans have been made if the Cabinet’s projections are incorrect. Commissioner Johnson said it is a projection, and the Cabinet is charged with running Medicaid as efficiently as possible. They continue to work on cost containment strategies that they have been working on for the past year. In the end, possible cuts will have to be looked at for reimbursement. Under ARRA, eligibility categories cannot be cut in order to maintain the increased funding through 2010.
Representative Lee said he has a real worry because if the unemployment rate goes below the 10 percent, the adjustment would be made in July. The stimulus dollars can be taken away because, if the rate drops, an adjustment will be made in the match rate. He worries that the excess dollars were given away and not put back for later. Commissioner Johnson said when the Legislature adopted the plan, there was very clear direction that Medicaid could not add to their base. So they are not growing the program at this time, only maintaining within the resources they currently have. The year 2011 is still an unknown because there is no way to know what the unemployment rate will be.
Representative Lee asked if the growth rate is 9 percent. Mr. Wise said it is between 6 to 7 percent, plus eligible growth.
Senator Stine asked if the growth rate is connected to the unemployment rate. Mr. Wise said the federal share of funding they receive is connected to the unemployment rate, and it can be adjusted next July.
Senator Stine said if the unemployment rate goes down, then less people will be using the program. Commissioner Johnson said that is true. Representative Lee pointed out that even if the unemployment rate decreases, people will still be eligible for a certain amount of time until they are reassessed based on the income they have.
Representative Burch asked where the $383 million in extra dollars went. Mr. Wise said that GOPM would have to testify as to where it went, but that was the funding that Medicaid was able to free up to be used in some other place.
Senator Seum asked if the $232 million deficit was calculated with the 70/30 formula, or was calculated with the 80/20 formula because of the unemployment rate. He said that including the federal share and using the 20 percent rule, there is really only a deficit of $47 million. Commissioner Johnson said that is correct. Representative Lee said that technically there is no deficit because it was wiped out when the growth was figured. He said his concern is that, if there is a change in July 2010, the adjustment will put Medicaid back into a deficit and will take away the matching dollars since they were taken from the Cabinet and brought to the bottom line.
Representative Jenkins asked if the rules are still the same when Kentucky came under the new guidelines from the federal government. Commissioner Johnson said reimbursement to providers has not been cut.
Representative Jenkins asked when provider reimbursement had been
increased. Commissioner Johnson said dental and physician reimbursement has
been increased in the last few years.
Representative Jenkins asked if there are enough providers to take care of all the new enrollees. Commissioner Johnson answered that she is always concerned that some counties are not covered as well as they should be.
Next, Commissioner Johnson reported on the estimated additional federal funding under ARRA. She said that in SFY 2009, there is $303.4 million, and in SFY 2010, there is a projected addition of $486.9 million. She reported that the funding in 2011 is contingent upon the unemployment rate at that time. Commissioner Johnson said that the states’ requirements to receive federal Medicaid stimulus funds are that: eligibility standards are no more restrictive than those effective July 1, 2008; funding from increased match rate is not for deposit in the reserve or the rainy day fund; the percentage of required state matching funds is limited to the rate prior to October 1, 2008; certain expenditures are not eligible for increased funding; and payments to practitioners, nursing facilities and hospitals must meet prompt pay requirements.
Next, Commissioner Johnson spoke about the KCHIP enrollment initiative. She said that from November 1, 2008, through July 31, 2009, the initiative has resulted in the successful enrollment of 22,212 additional children. As of November 1, 2008 there were 377,095 children enrolled. As of July 31, 2009, there were 399,307 children enrolled.
Representative Lee asked if there has been some change in KCHIP because the family income has dropped for some children who were previously eligible under KCHIP to the point that the kids became Medicaid eligible and not KCHIP eligible. He asked if that is why a greater number of KCHIP kids have not been seen. Commissioner Johnson said they are doing outreach and education and getting children into the KCHIP program, but in the mean time while the economy is in a downturn, some children are going directly to the Medicaid program. Some KCHIP children are moving to Medicaid due to a drop in family income.
Representative Lee asked how much of the $30 million that was obligated for the increase in KCHIP kids has been used. Mr. Wise said in KCHIP it is a lot less than that because kids are coming in to Medicaid and KCHIP. They can move funding between the two funds to cover wherever the kids qualify.
Representative Lee asked if online registration is available for KCHIP. Commissioner Johnson said there is an application online, but it cannot be submitted online. The application can be printed out and mailed in, but the face to face contact has been eliminated.
Representative Burch asked if the initiative to increase KCHIP enrollment last year helped with enrollment numbers. Commissioner Johnson said since November of 2008, they have enrolled 22,212 new children.
Senator Seum asked if the 80/20 formula kicks in about 10 percent unemployment. Mr. Wise said as long as Kentucky is above 8.9 percent, Kentucky is at the highest possible match rate.
Senator Blevins asked what the total budget for Medicaid is. Mr. Wise said it is $5.769 billion.
Senator Blevins asked what the percentage of providers in Kentucky is that do not take Medicaid. Commissioner Johnson said those numbers are kept by county. There are at least five counties with no Medicaid enrolled dentists. All that information is tracked for access issues.
Senator Blevins commended the Cabinet on the small administrative costs for the Medicaid program. Commissioner Johnson said Kentucky has one of the lowest administrative costs in the nation.
Representative Lee asked about the excellence programs and what the plans are for the future to improve the programs. Commissioner Johnson said new programs are implemented to improve the health status of those enrolled in Medicaid and to save the programs money. These are sometimes a long term investment. Mr. Wise said it usually is just a percent reduction in what has historically been spent for that population.
Representative Lee asked how many people have been approved for the Michelle P. waiver, and how many are receiving supports. Commissioner Johnson said she didn’t have those numbers with her. But, they are working closely with Protection and Advocacy and have sent letters to the people on the waiting lists, and they feel good about the program at this time.
Representative Lee asked when the Cabinet would be sending their budget request to LRC. Mr. Wise said that request is sent to GOPM around November 15, 2009, and a copy will be sent to LRC at that time.
The meeting was adjourned at 11:01 a.m.