Kentucky Will Receive Millions to Support Medicaid; Federal Medicaid Extension Still Leaves $100 Million Gap

Press Release

Governor Steve Beshear announced today that he has submitted the state's application for just over $137 million in Medicaid support, but warned that the federal funds still leave a $100 million hole in the state Medicaid budget. Gov. Beshear asked two legislative work groups to review and recommend ways to make up that shortfall.

"Congress did take action to provide some much-needed funds to the states so we can continue to provide medical care to our most vulnerable citizens," said Gov. Beshear. "However, our General Assembly assumed we would get millions more and balanced their budget based on that assumption."

State funding for Medicaid is matched at roughly a four to one basis, which means the $100 million gap represents a $470 million total program shortfall.

General Assembly Assumptions Too High
The General Assembly assumed in the budget for this fiscal year that Congress would pass legislation to continue additional funding for cash-strapped state Medicaid programs. Some 30 other states made similar assumptions. The budget passed by the General Assembly assumed $238 million would be provided for Kentucky from the federal government this year.

Congress passed the Education Jobs and Medicaid Assistance Act in mid August, which extends the enhanced federal matching rates (FMAP) for Medicaid programs to June 30, 2011. Kentucky will receive about $137 million for its program, about 58 percent of what was assumed.

That additional funding is $100 million less than the state budget projected.

"The General Assembly took a risk when assuming that Congress would provide the additional federal funds, and now will have to develop a solution to the resulting budget hole," said Gov. Beshear. "As I said repeatedly at that time, I was aware of the possibility of an extended higher Medicaid match rate, but I was not confident that it would happen. So in my original budget, I proposed a more conservative approach and did not include the $238 million. As we all know, the legislature did not agree with my approach and was unable to agree on how to balance the budget in the regular session. They did, however, agree on this assumption that the federal government would send more federal Medicaid aid our way, and the enacted budget counts on this funding. Now we must work to find solutions to close this gap."

Governor Calls on Legislative Groups to Respond
The General Assembly created two groups to focus on Medicaid issues, the Medicaid Oversight and Advisory Committee and the Task Force on Medicaid Cost Containment. These committees have been meeting jointly to discuss the Medicaid program and are poised to make recommendations about the program to the 2011 General Assembly.

"I'm calling on those groups -- today -- to immediately begin working on recommendations to address this budget shortfall created by the General Assembly," said Gov. Beshear. "With those recommendations, we can then begin to come together to find solutions to this problem."

Gov. Beshear's proposed budget counted on a series of cost containment measures in the Medicaid budget totaling $125 million in state funds, or $584 million in total program savings. The enacted budget counts on these savings.

The Cabinet for Health and Family Services, under the direction of Secretary Janie Miller, has already announced a first round of such measures, which includes steps such as:

* to reduce the unnecessary use of medical services, treatments and ER visits;
* to eliminate the ability of some patients to "doctor-shop" in order to obtain unnecessary drugsto manage pharmacy costs more effectively
* to increase efforts to collect payments from liable third parties for Medicaid services provided
* to stop paying hospitals for hospital acquired infections and errors
* to recoup payments to providers by partnering with the Department of Revenue, and
* to more aggressively identify fraud and abuse.

The Cabinet is working on the second round of actions to account for the remaining budgeted target for cost containment, and will be moving forward in the near future on these necessary actions.

Gov. Beshear said that the Cabinet will be available to discuss current cost containment plans and offer necessary support for the legislative task forces as they continue their work.

"In the coming months, my staff and I will be closely watching state revenues, and will be developing scenarios on how to re-balance the budget in light of this new shortfall," said Gov. Beshear. "I look forward to the recommendations of the legislative work groups on Medicaid, and am open to ideas from other legislators and legislative leaders on how to address this issue."

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