All Expansion Plans Are Not Created Equal: A Deep Dive into the Deliberations of the Upcoming Senate Select Committee on Healthcare Access

By Sheldon Weisgrau | Oct. 21, 2019

After years of inaction, a Senate committee will finally take up the most urgent health policy issue in Kansas: the expansion of the Medicaid (KanCare) program. The Senate Select Committee on Healthcare Access will meet on October 22-23 to consider an expansion plan developed by Senate Majority Leader and Select Committee member Jim Denning.

To recap, under federal law, states have the opportunity to expand eligibility for Medicaid to those who earn up to 138% of the federal poverty level (FPL) – about $17,000 per year ($1,436 per month) for an individual and $29,000 per year ($2,453 per month) for a family of three. The federal government finances 90% of the cost of expansion. Thirty-six states and D.C. have taken advantage of this opportunity. Kansas is one of only 14 states that have declined.

The expanded eligibility level of 138% FPL would be a considerable boost in Kansas. Currently, adults without dependent children are not eligible for KanCare at all, and parents are eligible only at household income below 38% FPL, or about $8,100 per year ($675 per month) for a family of three.

The 90% federal financing also represents a substantial boost for Kansas. Under the current KanCare program, the feds cover only 55% of health care costs and the state picks up the remaining 45%. About 150,000 Kansans would be expected to enroll in an expanded KanCare program.

WHAT’S IN THE PROPOSED PLAN?

As detailed in the Sunflower State Journal, a subscription-only online publication, Sen. Denning would propose three options for expansion, each of which would require federal approval to implement.

• Option 1: Eligibility for KanCare would be expanded to 100% FPL. Those between 100-138% FPL would be directed to the Affordable Care Act (ACA) Marketplace to purchase private insurance with the assistance of tax subsidies.
• Option 2: Expand eligibility to 100% FPL and offer those between 100-138% FPL a choice between receiving KanCare or buying private insurance with subsidies in the Marketplace.
• Option 3: Expand eligibility to 138% FPL as called for in federal law.

As part of the first two options, the state would request that the federal government waive the requirement for full expansion up to 138% FPL in order to receive the 90% federal funding match. Without such a waiver, the federal government would cover only 55% of the cost, the state’s current match rate for the KanCare program. As a result, these partial expansions would cover fewer people, but cost more than full expansion to 138% FPL.

MORE ABOUT WAIVERS

Another part of the proposal would couple the request for these Medicaid waivers – known as “1115 waivers” – with a request for a waiver under section 1332 of the ACA. The 1332 waiver would establish a reinsurance program to cover the highest cost patients in the state’s ACA Marketplace. A reinsurance program – which has been successfully implemented in a number of other states – would lower the cost of premiums of plans in the ACA Marketplace and make these plans more affordable.

Reinsurance – which is essentially insurance for insurance companies – costs money, however. Under Denning’s proposal, the state would finance the program with two streams of revenue:

• A federal share, in which savings from the lower tax subsidies that result from lower Marketplace premiums are passed through to the state
• A state share, which would come from a tax on tobacco and vaping products

Other provisions of Sen. Denning’s plan include:

• A requirement that those at 100-138% FPL who are covered by an expanded KanCare program pay premiums toward their coverage
• A voluntary work referral program
• A tiered benefit package that would provide extra benefits, such as dental coverage, to beneficiaries who take part in wellness incentives, such as preventive care exams

CAN THIS PLAN WORK?

The Alliance for a Healthy Kansas is extremely pleased that the Senate Select Committee is taking on this issue. With the help of our partners across the state, we have been working for years to get to this point – a serious discussion by members of the Senate on the most effective way to expand KanCare. But we’re concerned, as well, that the plan that is ultimately adopted be one that can be implemented without undue barriers and delays.

First, it is not clear that the federal government has the authority to waive the federal funds matching rate and allow a 90% match for partial expansion to 100% FPL. Such authority is not spelled out in section 1115 of the Social Security Act and has never before been granted.

In addition, a fundamental rule for waivers is that they must be budget neutral to the federal government – i.e., they cannot cost the feds more money than the program would without the waiver. A partial expansion cannot meet this test.

As described above, the federal government would cover 90% of the costs of expansion. With a partial expansion, some or all of those with income from 100-138% FPL would purchase private insurance in the ACA Marketplace. For them, the federal government would effectively pay for about 98% of the cost of their coverage through tax subsidies. As a result, partial expansion would cost the feds more than full expansion and the budget neutrality requirement could not be met. The federal government has already denied waiver requests from other states for partial expansions.

Waiver requests are complex documents that are costly and time consuming to prepare and review. We’re concerned, therefore, that the process of developing and reviewing requests for partial Medicaid expansions that ultimately cannot be approved will substantially delay the implementation of a workable expansion plan.

Second, while we fully support the concept of reinsurance and lowering Marketplace premiums through a 1332 waiver, we see no reason to link that proposal to Medicaid expansion. The waivers will be reviewed separately and savings or expenses realized in one cannot be considered in the review of the other.

In addition, the proposal to tax tobacco and vaping products would likely provoke considerable opposition from the tobacco industry and others. We do not want to endanger KanCare expansion or postpone its implementation by tying it to other controversial measures.

Other issues that we will be watching closely include the amount of the premiums that will be required for beneficiaries between 100-138% FPL – these premiums are typically capped at 2% of household income to mirror the amounts that would be paid in the private Marketplace; the administrative costs and burden of the work referral program – administrative costs are covered at a 50% federal match, not the 90% match for health care costs; and the scope of the expanded benefit package and required incentives – we want to ensure that all beneficiaries receive the full scope of Medicaid-covered benefits.

We are thrilled that the Senate Select Committee will finally address KanCare expansion. But not all expansion plans are created equal. Sen. Denning’s proposal is a complex plan with a lot of moving parts, some of which are not directly related to expansion. The states that have had the most success with Medicaid expansion – those that have covered the most people at the lowest cost with the fewest barriers and delays – have been those that have implemented relatively simple expansions of eligibility. We would like to see the same type of plan for Kansas. We’ve waited long enough.

Sheldon Weisgrau is the Alliance for a Healthy Kansas’ Senior Policy Advisor. Contact Sheldon at sheldon@expandkancare.com.