Governor Steve Beshear's Communications Office
Gov. Beshear, health care providers urge General Assembly to approve Medicaid rebalancing plan

Press Release Date:  Wednesday, January 19, 2011  
Contact Information:  Kerri Richardson
Jill Midkiff

Failure to pass plan would mean devastating $600 million cut to Kentucky’s neediest, 30 percent cut to provider rates

FRANKFORT, Ky.—Governor Steve Beshear and health care providers joined together today to urge the General Assembly to pass legislation when they return next month that would balance the Medicaid budget in FY11. Legislative action is needed to prevent devastating cuts to the program that provides health care to more than 800,000 of Kentucky’s most vulnerable citizens.

“Today I call on the General Assembly to pass this important correction to our Medicaid budget,” said Gov. Beshear.  “With thousands of Kentuckians joining the program every month, its passage is critical to ensuring vulnerable Kentuckians get the services they need, and that health care providers do not see unnecessary drastic reductions in reimbursement payments.” 

The 2010-2012 enacted budget assumed the state would receive $238 million from the federal government in higher, or enhanced, federal matching rates.  However, final action at the federal level will result in the state receiving only $138 million, leaving a $100 million shortfall or gap in the FY2011 Medicaid budget.  The FY2012 Medicaid budget is balanced.  The administration’s proposed budget-neutral rebalancing plan to solve the FY2011 Medicaid Benefits shortfall reallocates $166.5 million of General Fund dollars from FY2012 to FY2011. 

  • $139 million of this amount will provide the state match necessary to fund approximately $600 million of FY2011 anticipated expenditures, and is comprised of $100 million, resulting from the lower than budgeted federal matching rate, and $39 million of remaining cost containment measures. $27.5 million will allow Medicaid to process payments within FY2011 at the highest possible federal match rate.  This cash management strategy results in more federal funds being accessed to pay expenses during the highest match period, maximizing the federal funds. 
  • The funds moved from FY2012 to FY2011 will not be needed in the second year of the biennium, as cost containment measures will be put in place to reduce the expenditure growth in that year. 

“I look forward to working with Governor Beshear to solve this very serious issue,” said Rep. Rick Rand, Chairman of the House Appropriations and Revenue Committee.  “Delivering these health services to some of our most vulnerable citizens is worthy of our full attention.  This amendment to the state budget, as proposed, will help prevent any additional cuts to our medical provider community and keep our budget balanced.”

“A 30 percent cut in hospital Medicaid reimbursement for a six month period would equate to a loss of approximately $247 million in Medicaid payment to Kentucky’s acute care, rehabilitation and psychiatric hospitals, and result in Medicaid payments covering only approximately 55 percent of what it actually costs hospitals to treat Medicaid patients,” said Michael T. Rust, President of the Kentucky Hospital Association.  “Kentucky’s’ hospitals will continue to provide quality care to patients.  However, cuts of this magnitude would have a devastating impact not only on hospitals but on local communities.”

“The long term care profession understands the challenges the Governor and General Assembly face in balancing the budget in the current economic climate,” said Ruby Jo Lubarsky, President of the Kentucky Association of Health Care Facilities.  “However, if a plan to balance the budget over the biennium is not approved, a 30 percent cut to Medicaid services would have disastrous consequences in providing quality long term care services in Kentucky.  A cut of this magnitude would affect providers’ ability to provide quality care to those Kentuckians needing care the most, and would ultimately impact residents’ access to quality care.  We know the Governor and lawmakers face a challenging task and we will continue to provide fiscal solutions to meet the care needs of our residents.  Cuts would be devastating to nursing homes and resident quality care.”

Gov. Beshear noted that if the funds are not reallocated from FY12 into FY11, the impact to the program and its providers will be devastating.  The $139 million in state funds equates to almost $600 million in Medicaid expenditures.  Since half of the fiscal year is already over, to reduce spending by $600 million in the last half of the year doubles the impact of the reductions.  In addition:

  • Federal requirements associated with the enhanced match rate prohibit states from reducing eligibility or benefits, tying states’ hands from making program cuts through June 30, 2011.
  • The only available option to reduce spending quickly in FY11 would be to drastically cut provider reimbursement rates.  On average, provider rates would have to be cut approximately 30 percent or more to make up the $600 million shortfall by June 30, 2011. 

“A reduction of this magnitude in provider rates is unacceptable,” said Gov. Beshear.  “It is unnecessary and would be crippling to the Kentucky economy, impacting thousands of health care jobs and would mean many in the program would have less access to adequate health care.”

“Medicaid supported medical and nursing care are crucial to the wellbeing of our Commonwealth’s most vulnerable citizens,” said Gary R. Marsh, President & CEO of Masonic Homes of Kentucky Inc. “Among our most vulnerable are the elderly and the disabled that depend on these services. Solving the Medicaid budget shortfall by making drastic cuts in these services we believe is the wrong answer. We applaud and support Kentucky Governor Steve Beshear’s decision to exhaust every means necessary to avoid drastic cuts that would most likely seriously erode Kentucky’s health care infrastructure, and would hamper local communities that depend on these dollars to attract and retain skilled health care workers in our rural communities.”

“Failure to pass this legislation would permanently harm an already chronically unfunded behavioral health public safety net,” said Shelia Schuster, PhD, Executive Director of the Kentucky Mental Health Coalition.  “It would force Community Mental Health Centers (CMHCs) to either furlough or layoff employees and possibly reduce services or close offices, especially in rural communities.  The most dire consequence will be for the individuals served and supported by the CMHCs.  The detrimental clinical impact for individuals will result in more institutional care and less community-based care, which is contrary to what we all know are best practices.”