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Kentucky Hospitals Joining Bevin Lawsuit Over Medicaid Changes

Gov. Matt Bevin
J. Tyler Franklin
Gov. Matt Bevin

A trade group representing every Kentucky hospital is getting involved in Gov. Matt Bevin’s lawsuit against 16 Kentuckians challenging the state’s impending changes to Medicaid. Those changes, including a community engagement requirement, lock-out periods and premiums, are set to roll out beginning in July.

In January, 16 Kentucky residents filed a federal lawsuit in the U.S. District Court for the District of Columbia, arguing Bevin's changes — dubbed Kentucky HEALTH — are illegal.In February, Bevin filed a separate federal lawsuit in the Eastern District of Kentucky, naming the residents as defendants and asking for a ruling that the approved changes are lawful.

The Kentucky Hospital Association is now intervening in Gov. Bevin’s lawsuit, and wrote in a court document that hospitals in Kentucky will "suffer an injury" if the court doesn't rule that Kentucky HEALTH is legal.

If the program is ruled unlawful and Kentucky is stopped from making changes to Medicaid, Bevin has previously said he would roll back the entire state Medicaid expansion program. That threat seems to have had resonance with the Kentucky Hospital Association. Senior Vice President Nancy Galvagni told trade journal Inside Health Policy that hospitals plan to work with patients with Medicaid insurance to meet the new requirements.

“We’re supporting the waiver because we support expansion,” Galvagni told IHP. “We want to have the expansion in place, and if it’s contingent upon the waiver being in place, we want to make the waiver work."

The Kentucky Hospital Association’s attorney said the primary reason KHA is joining the lawsuit is to make sure hospitals' interests are considered. Wesley Butler with Lexington-based law firm Barnett Benvenuti & Butler said that KHA’s member hospitals need to be part of whatever arguments are made because health providers will be a big part of the implemented changes.

“We recognize that the government has to make some difficult choices to manage a large program," Butler said. "We would much rather us be proactive in managing those issues rather than allowing them to deteriorate as the program tends to do with a lack of innovation.”

The lawsuit makes a similar argument.

“The absence of health care providers in this legal dispute would omit a principal party that actually provides the necessary health care services for a government health care program,” the lawsuit states. “If the implementation of Kentucky HEALTH is found to violate the Constitution, its invalidation will have a state-wide impact on Kentucky health care providers.”

The lawsuit currently in D.C. federal court is pending under Judge James Boasberg, a judge appointed by former President Barack Obama, a Democrat. Meanwhile, the majority of district judges in the Eastern District of Kentucky were appointed by a Republican president.

Hospitals Depend On Medicaid Expansion

Kentucky expanded Medicaid in 2014 to adults without dependents and also many parents. Traditionally, Medicaid in Kentucky had only covered pregnant women, people with disabilities and very low-income parents prior. Around one in four Kentuckians is now covered by Medicaid, a fact that Bevin has said is unsustainable financially.

A recent study might explain why hospitals want to be part of the lawsuit. Researchers from the University of Colorado found that hospitals in states that expanded Medicaid were 84 percent less likely to close than hospitals in states that did not expand Medicaid.

“You take those people who are previously uninsured and are pure charity care, and you put them on Medicaid, and that has the strongest financial impact in those areas," said co-author Gregory Tung, an assistant professor of health systems and policy at the Colorado School of Public Health.

Kentucky had one of highest gains in insurance coverage nationwide.

And if judges rule Bevin's plan illegal and he makes good on his threat to completely do-away with Medicaid expansion, it would have a devastating impact on hospital finances.

Hospitals in Kentucky had $552 million in charity care costs in 2015 after the state expanded Medicaid. That compared with $2.4 billion in those costs from 2012. Charity care is when a hospital allows a patient not to pay because they do not have insurance.

Tung said what affect Kentucky HEALTH will have on Kentuckians' health insurance coverage will determine the impact on hospital financial stability. If the program shrinks the number of people with Medicaid coverage and increases the amount of uninsured residents, that will have a negative impact.

"If it’s done in a way that effectively transitions people into other type of [insurance] care and employment, and shrinks the uninsured population, that could potentially have a potentially positive impact [on hospitals]," Tung said.

Lisa Gillespie is WFPL's Health and Innovation Reporter.

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