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Government Report Questions $270 Million Estimate For Kentucky’s Medicaid Changes

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Kentucky estimates that it will spend $271.6 million in 2019 and 2020 alone to overhaul the state’s Medicaid program, according to a federal audit. That’s almost four times as much as the next highest ranking state is spending.

The findings published Thursday come from the Government Accountability Office, a federal watchdog which compiled spending estimates from five states working to tighten accessibility to the health insurance program for low-income people.

The GAO asked Kentucky, Indiana, New Hampshire, Arkansas and Wisconsin for their calculations on how much it has and will cost to put work requirements in place.

Kentucky reported the greatest expenses, reporting that more than three-fourths of its calculated $271.6 million in 2019 and 2020 would come from technology costs. A smaller portion would go toward paying private Medicaid insurance companies to administer the program. Some of the costs, the state said, would go in part toward hiring staff to help figure out who gets an exemption from the work/volunteer requirements.

Indiana, in comparison to Kentucky, estimated it would spend $35.1 million on a similar program.

Cabinet for Health and Family Services Spokeswoman Christina Dettman wrote in a statement that the report only represents the maximum amount that Kentucky has been approved to spend, “rather than the amount spent, which is significantly lower.”

“Kentucky’s share of those costs is covered through savings from shutting down the duplicative and expensive KYnect system, and our investment in user-friendly, comprehensive and national award winning technology for Kentucky HEALTH is expected to save $2.4 billion over time, while also improving the health outcomes of Kentuckians,” Dettman said.

The federal government will pick up the tab for the majority of states’ costs for work requirement programs, but Kentucky estimates it will spend $70 million of in state money. Dustin Pugel, a policy analyst at the Kentucky Center for Economic Policy, said that’s a big chunk of change for Kentucky.

“$70 million in our state budget is a lot,” Pugel said. “Especially for plans that by their own estimates, will result in at least on itself, well, 95,000 people losing coverage.”

Kentucky officials have previously estimated that around 95,000 people will eventually no longer have Medicaid, either because they’re kicked off the program for not fulfilling requirements or they’ve found new insurance through an employer.

The GAO report questioned whether some of this federal spending is allowed under the law and in contracts with states.

Kentucky Governor Matt Bevin spearheaded the changes to the Medicaid program when he was first elected in 2015. The changes include making some adults work, volunteer or take educational courses to keep their health coverage. Additional requirements include paying co-pays or premiums to keep coverage and losing automatic dental and vision coverage. Some enrollees would be exempt because of a caregiver status or being too sick to work, among other reasons. According to the Kaiser Family Foundation, a majority of Medicaid enrollees already work, or are not because they’d qualify for one of those exemptions.

But the proposed changes have been tied up in courts and haven’t been implemented. On Friday, a federal court of appeals heard oral arguments in a lawsuit between the federal government and a group of Kentuckians that is keeping the program from moving forward.

According to the Associated Press, the three judge panel expressed skepticism about whether the Medicaid law actually allows states to make enrollees work to keep coverage. That case, experts say, will likely land in the U.S. Supreme Court.

The changes in Kentucky and in other states have been politically divisive. Senator Ron Wyden, D-Ore. and Representative Frank Pallone, Jr., D-N.J., requested that the GAO look into the estimated costs to implement the changes in the five states.

In its report, the nonpartisan GAO questioned whether the expenditures meet the federal requirements that the work requirement demonstration projects be budget neutral, meaning that a federal project doesn’t create a spending deficit.

The GAO recommended that the federal government require states to provide cost estimates before approving projects like Kentucky’s. It also said these estimates should be made available to the public in a transparent way.

In a letter in response to the GAO, the federal Department for Health and Human Services disagreed with all of the report’s recommendations, including that administrative costs should be made public.  HHS also said experience shows those costs are relatively small and that there was no value in making them available to the public.


Through the end of 2018, Kentucky spent $99.5 million on the changes to the program. As of that date, Indiana, New Hampshire and Arkansas collectively had spent $29 million, though those states had later approval dates.

The GAO also said in the report that the federal government approved spending from Kentucky and Indiana that the feds had previously said they would not pay for. For example, Kentucky got approval  to pay $42 million to the state’s Workforce Development Cabinet to help Medicaid enrollees with job searching and job training.

“Twice [it’s] explicitly mentioned that you're not allowed to do this, yet we spent $42 million on just that, which is more than three of the five states highlighted in the GAO report spending on their entire administration budget for their waivers,” Pugel said.

Federal officials told the GAO the Center for Medicaid Services didn’t review the contract and took Kentucky’s word that costs were going toward technology, which is allowed.

GAO also said payments to Medicaid insurance companies might also not be allowed, though they’ve already been made or will be made in the future. Indiana, Kentucky and New Hampshire are requiring these insurers to help enrollees meet work requirements and refer enrollees to job training. GAO said Medicaid usually only pays insurers for an enrollee’s actual health care bills.

This post has been updated.

Lisa Gillespie is WFPL's Health and Innovation Reporter.