Decision means every Kentuckian will have opportunity to obtain affordable health insurance;
Expansion will create nearly 17,000 jobs and $15.6 billion in economic impact
FRANKFORT, Ky. – Calling it “the single-most important decision in our lifetime for improving the health of Kentuckians,” Gov. Steve Beshear today announced the inclusion of 308,000 more Kentuckians in the federal Medicaid health insurance program. The expansion, together with the creation of the Health Benefit Exchange, will ensure that every Kentuckian will have access to affordable health insurance.
The expansion – made in accordance with the federal Affordable Care Act (ACA) – will help hundreds of thousands of Kentucky families, dramatically improve the state’s health, create nearly 17,000 new jobs and have a $15.6 billion positive economic impact on the state between its beginning in Fiscal Year 2014 and full implementation in Fiscal Year 2021, he said.
“I have repeatedly said that I believe it is in the best interest of the Commonwealth and its citizens to provide better access to health care for our people. My only concern was the cost,” said Gov. Beshear. “We have now done the exhaustive research – and our conclusion matched what most other states have found: by expanding Medicaid, Kentucky will come out ahead in terms of both health outcomes and finances. In fact, if we don’t expand Medicaid, we will lose money.”
Several months of internal analysis – as well as outside studies conducted by the University of Louisville and the Price Waterhouse Coopers accounting and actuarial firm – determined that the expansion was a good deal for those families and for taxpayers. The reviews gathered information about possible impacts to citizen health, the state budget, workforce and economic development.
Medicaid currently provides health care for low-income or disabled citizens. After the U.S. Supreme Court upheld the ACA last year, states have the option to expand Medicaid eligibility to individuals who earn up to 138 percent of the Federal Poverty Level (FPL), with the guarantee that the federal government will cover the entire cost for the first three years.
The expansion will be effective January 1, 2014. By expanding, every Kentucky citizen will have access to affordable health care, either through Medicaid or through the Health Benefits Exchange – no one will fall into a coverage gap.
The Governor cited several key reasons for expanding the program, including:
- drastic improvements to Kentucky’s abysmal health rankings;
- millions in savings to the state budget and Kentucky taxpayers;
- billions in economic impact to the state, including nearly 17,000 new jobs;
- preventing costly penalties to businesses and protecting hospital funding; and
- broad support from health care advocates, county officials, and medical providers.
Access to Health Care Improves Kentuckians’ Health
About 640,000 Kentuckians are uninsured. By expanding Medicaid eligibility, an estimated 308,000 Kentuckians will qualify for health care coverage –– a population greater than the size of Lexington and Fayette County.
Gov. Beshear pointed to Kentucky’s dismal rankings in multiple health outcomes as one of the reasons to give lower-income Kentucky families access to reliable, quality health care. In 2012, Kentucky’s overall health ranking was 44th. Kentucky is at the bottom of many national health rankings, including 50th in smoking, 40th in obesity, 41st in diabetes, 50th in cancer deaths, 49th in heart disease, 43rd in high cholesterol, 44th in annual dental visits and 48th in heart attacks.
“I, for one, am tired of being at the bottom,” Gov. Beshear said. “Giving every Kentuckian access to affordable health care coverage will help us tackle these abysmal health outcomes. Our poor health has contributed to us being a poor state. Improved health will help improve our education levels and job opportunities.”
Multiple state and national reports show that when someone has or gains health coverage, there are measurable improvements in health status, including a decrease in delayed care and reduction of mortality rate. When larger groups gain health coverage, the workforce improves.
Conversely, if Kentucky chose not to expand eligibility, the state would create a coverage gap for hundreds of thousands of citizens. The Supreme Court ruling on ACA making expansion optional created a coverage gap for those who are not eligible for a state’s existing Medicaid program, but whose income is too low to qualify for premium subsidies through the Health Benefit Exchange. In Kentucky, up to 206,000 citizens would fall into this gap – not eligible for Medicaid benefits, but also unable to get subsidized coverage through the exchange.
“When people don’t have insurance, they skip regular checkups. They go without medicine. They delay examinations for early symptoms. When they do end up in an emergency room, their health problems can be much more advanced, and more difficult and expensive to treat,” said Audrey Tayse Haynes, Secretary of the Cabinet for Health and Family Services. “Expanding Medicaid offers hardworking Kentuckians the security of reliable medical care to keep them on the job and catch serious health threats before they become debilitating or fatal.”
Expanding Health Care Saves Kentucky Taxpayers Millions
The administration’s review of health care expansion included heavy emphasis on both its immediate and long-term financial impact for the state. The following issues emerged: 1) the costs the state will incur from other mandates of ACA; 2) savings the state will realize through shifting current state budget burdens to the federal government; and 3) generation of new state and local revenues.
Regardless of whether or not Kentucky expanded Medicaid, the federal law adds costs to state Medicaid programs, including substance abuse treatment coverage for existing Medicaid recipients, additional administrative costs and a loss of federal Disproportionate Share Hospital (DSH) payments that pay for indigent care.
Adding newly eligible citizens to Medicaid rolls creates an increase in tax receipts and state revenue, and allows the state to move some current state spending to federal spending. Those revenue-generating and cost-shifting steps add up.
However, with the other requirements of the ACA, upon full implementation of the federal law, it would cost the state more if we did not expand Medicaid. Without expansion, analysts estimate Kentucky would see a negative state budget impact of nearly $40 million by full implementation in FY21.
“When we examined expansion purely from a financial standpoint, there was no question that expanding offered much more benefit for our budget,” said state budget director Jane Driskell. “With the federal government covering the full cost of expansion for the first three years, combined with the ability to shift some of our current cost burden to the federal government, expansion will be a very large net positive to our taxpayers’ bottom line – an estimated $802.4 million.”
The federal government will fund 100 percent of the expansion costs for three years starting in 2014, and then will gradually decrease funding to 90 percent in 2020. Additionally, states can change their expansion plan at any time; if circumstances change and expansion is no longer a benefit to Kentucky, the state can pull back the expansion.
Expansion Generates Millions in Recurring Revenue; Creates Nearly 17,000 Jobs
Expanding Medicaid coverage to families at or below 138 percent of the poverty line will have an economic impact of $15.6 billion between FY14 and FY21, the first year of full implementation. Those funds will come from an increase in health care spending, increases in state and local tax receipts, and savings created by moving certain expenditures from the state to the federal government.
The increase in jobs will occur quickly. Kentucky is expected to create about 7,600 new jobs in the first year of Medicaid expansion alone, due largely to the additional $608 million in health care spending generated as a result of expansion. By 2021, expansion is estimated to be responsible for the employment of nearly 17,000 Kentuckians annually, with an annual average salary of more than $43,000.
Expansion Saves Money for Businesses, Maintains Funds for Hospitals
Expanding Medicaid avoids costly penalties for businesses with employees that would have met the 138 percent FPL threshold for Medicaid coverage. Expansion also provides reliable reimbursement for hospitals after the required reduction of DSH payments.
If Medicaid is expanded, companies whose employees qualify for coverage through Medicaid and are between 100 and 138 percent of FPL, face no penalties. However, if Medicaid is not expanded, those employers would be responsible for $3,000 in fines for every employee who instead receives a premium subsidy to purchase insurance elsewhere. These penalties would cost Kentucky employers an estimated $32 million to $48 million every year.
Hospitals use federal DSH payments to help cover the cost of treating low-income, uninsured patients. Because the Affordable Care Act assumed all low-income individuals would have access to coverage either through Medicaid expansion or a Health Benefit Exchange, the law reduces federal DSH payments to the states. For Kentucky, the reduction is an estimated $287.5 million through FY21. If a state expands Medicaid, many of the previously uninsured will be Medicaid-eligible and hospitals will receive reimbursement for their care. Without expansion and with the reductions in DSH payments, hospitals would be forced to find alternative ways to address the sudden drop in their budgets.
Broad Spectrum of Support for Expansion
Dozens of health care organizations, advocacy groups, county and local officials and private citizens have expressed their strong preference for Kentucky to expand Medicaid. These groups also see the financial and health benefits of providing access to health care to every Kentuckian. A list of those groups is attached.
“Expanding Medicaid is a major policy decision with significant long-term economic and health consequences,” said Susan Zepeda, president and CEO of Foundation for a Healthy Kentucky. “Our Kentucky Health Issues Poll shows that a vast majority of Kentuckians – more than 80 percent — favor providing access to affordable, quality health care for all Americans. We applaud the Governor’s decision.”
“Uninsured individuals often utilize emergency rooms for conditions which could be more appropriately and inexpensively treated by a primary care provider,” said Dr. Michael Karpf, executive vice president for health affairs at the University of Kentucky. “Expanding Medicaid coverage will create opportunities to improve access to care and improve the ability of organizations such as UK HealthCare to more effectively manage both acute and chronic conditions for our most vulnerable patient populations.”
“The Governor’s decision to expand Medicaid coverage to uninsured Kentuckians is significant for county governments. Fiscal courts pay a tremendous amount for the medical coverage of jail inmates. This coverage for catastrophic medical needs of inmates will greatly reduce jail medical costs for counties,” said Vince Lange, executive director of the Kentucky County Judge/Executive Association.
“Today, the Governor of Kentucky is making a decision that will provide the largest benefit to low-income Kentuckians in over 40 years,” said Natalie Harris, executive director of the Coalition for the Homeless. “The Coalition for the Homeless strongly supports this decision which will insure health care for over 95 percent of homeless Kentuckians from the present coverage rate of 15 percent.”
The ‘Arkansas Option’ is More Expensive, Costs Outpace Benefits
Arkansas plans to provide health insurance to individuals at 138 percent of FPL or below, but instead of enrolling them in Medicaid, Arkansas plans to purchase private insurance through their Health Benefits Exchange (HBE). While HBE rates are not yet available, preliminary information from the Congressional Budget Office and Massachusetts indicates that this option could be 50 percent to 66 percent more expensive than traditional Medicaid.
If that plan were applied to Kentucky, not only would costs exceed benefits by 2021, but we would likely never make up the loss. Beyond 2021, costs are expected to grow at nearly 4 percent annually, while the combined benefits would only increase at 2 percent, meaning that the gap would continue to expand over time.
Who is Eligible for Kentucky Medicaid
In Kentucky, Medicaid or Kentucky Children’s Health Insurance Program (KCHIP) benefits are currently available to:
- Adults if they have disability, serve as the caretaker relative for a child who is eligible for Medicaid and on average has income below 43 percent of (FPL), or are pregnant; and
- Children with family income up to 200 percent of FPL.
Expansion will allow more than 308,000 Kentuckians to access reliable, quality health care. The new threshold of 138 percent of FPL means a single person with no children earning less than $15,856 per year is eligible to sign up for Medicaid. A family of four with an annual income of less than $32,499 is also eligible.
Most of the Kentuckians who will be eligible are the working poor. This includes people who work at minimum wage jobs for fewer than 40 hours per week; individuals who are self-employed; or single parents whose children are covered through KCHIP.
Jana Bailey of Berea is one of the hundreds of thousands of Kentuckians who will have health insurance thanks to the expansion. She and her husband have four children, and while her husband has health coverage through his job, Jana does not. “I work part time, but we cannot afford health care coverage for me,” said Bailey. “I will no longer have the added stress of hoping nothing happens to me because I don’t have health care coverage. This program will greatly benefit my family as well as many others throughout our state who are in the same situation.”
Where to find more information:
A new state website houses information about the expansion, including the CHFS white paper and letters from supporters. Visitors can also explore county-by-county data such as how many citizens will be newly eligible for Medicaid, or how much county jails spent on medical care last year. Visit governor.ky.gov/healthierky to learn more.
Link to Press Release