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Ky. Officials Warn Of Shortfall, Consider Ending Medicaid Expansion

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The Medicaid program that pays for almost one in four Kentuckians’ health insurance has an estimated $296 million budget shortfall over the next two years, state officials said Thursday.

Adam Meier, the Secretary of the Cabinet for Health and Family Services, said during a legislative hearing that the estimated deficit in Medicaid funding for fiscal years 2019 and 2020 was caused by an increase in payment rates to services for people with developmental or intellectual disabilities, an increase in what the state pays to pharmacies and problems with technology.  

Meier said the Cabinet will have to look at cutting certain optional benefits in the Medicaid program, like dental, vision or pharmacy. He also said the administration could eliminate Kentucky's expanded Medicaid program, potentially taking away benefits from more than 482,000 people. 

“If we continue to be hundreds of million dollars short, we're gonna have to find a way to pay for it,” Meier said. “We can look at dental, vision, pharmacy, and we’ll have to weigh what is the cost of these budgets. Or we’ll have to look at the expansion population.”

The state would have to go through the federal government to cut dental and vision benefits, as well as pulling eligibility from the Medicaid expansion population.

Meier said his Cabinet would know more in the coming months about what the actual shortfall will be. The state's 2019 Medicaid budget shortfall is nearly 6.8 percent of the total budget. The 2020 budget shortfall represents about 1.5 percent of that year’s budget.

He said potential cost savings could come from state information technology reforms and value based purchasing, which would create financial incentives and penalties for Medicaid providers based on the quality of care delivered. But, Meier said, it’s unclear whether the reforms would help in time to make a difference.

“I think that will have the ability to save money," Meier said. "The question is, will they have the ability to save money soon enough to create that [savings]?”

Jason Dunn, a policy analyst with advocacy group Kentucky Voices for Health, said the shortfalls are not unprecedented. And Dunn said there are likely better ways to deal with the deficit than cutting benefits.

“In the grand scheme of things, it's probably smaller than other shortfalls we've had in the past as a percentage of the budget,” Dunn said. “So you know, I think it's a storm that can be weathered, and there's probably other ways to do it other than finding ways to reduce benefits, reduce coverage and reduce access.”

Budget shortfalls in Medicaid are pretty common from year to year. For instance, in 2016,Kentucky’s Medicaid program faced a $125 million budget shortfall; in 2011, it was $111 million. That deficit was partially made up for by cutting Medicaid mental health services.

And for fiscal year 2018, there was a $156 million shortfall. Gov. Matt Bevin orderedall three branches of state government to cut their budgets by 1.3 percent.

Kentucky's Constitution requires a balanced budget.

Lisa Gillespie is WFPL's Health and Innovation Reporter.

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