TOPEKA — Citing the federal government's debt obligations, Gov. Sam Brownback said Tuesday he will return a $31.5 million federal grant intended to help implement the new federal health care law.
Kansas had applied for the money last December as part of its effort to integrate the state's complicated health insurance databases and policy networks into a user-friendly system.
The "early innovator" grant, awarded to Kansas and six other states in February, would have helped pay for an online exchange system where people could compare health insurance policies and buy one that best fit their needs.
Kansas had proposed to build a model system that could be adopted by other states striving to meet the Jan. 1, 2013 deadline for developing an exchange system.
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The deadline is part of the health care reform law approved by Congress and signed by President Obama. The Health and Human Services Department will operate exchange systems in states that don't create their own.
"There is much uncertainty surrounding the ability of the federal government to meet its already budgeted future spending obligations," Brownback said in a prepared statement. "Every state should be preparing for fewer federal resources, not more. To deal with that reality Kansas needs to maintain maximum flexibility. That requires freeing Kansas from the strings attached to the Early Innovator Grant."
State Rep. Jim Ward, a Wichita Democrat who is on the Joint Committee on Health Policy Oversight, called Brownback's move "unconscionable." When conservative leaders are cutting social services across the state, why would the state turn away money intended to make a more user-friendly health insurance marketplace, he asked.
Ward said exchanges have nothing to do with the controversial parts of the federal health care act, such as mandating coverage. All it does is create a marketplace similar to what many people use when shopping for a flight online, he said.
The state will still have to create an exchange system of its own or let the federal government run it, he said. "There's going to be a cost associated whether we do it or the federal grant does it."
Kansas isn't the first to reject the grant. Oklahoma Gov. Mary Fallin, a Republican, came under pressure from conservatives and sent back her state's $54 million grant in April.
Kansas officials say the state will still find ways to lower health insurance costs and simplify the process of choosing the right plan.
Linda Sheppard, head of the Kansas Insurance Department's accident and health division and Affordable Care Act project manager, said her office will meet again with stakeholders and a steering committee that is planning the exchange system to see where they want to move next.
One option is to let the federal government operate the exchange, she said. But that could mean big changes for consumers because Kansas' system is designed to meet its needs and a uniform federal exchange may be significantly different.
"We've never seen anything like this before. Nobody has a federal exchange implemented in their state right now," she said. "So we don't really know."
Another option would be to apply for another federal grant designed for states that are not "early innovators." It's unclear how much funding that could provide because the state's request would have to be analyzed by federal officials. The grant request would also require Brownback's support.
Robert Moser, secretary for the Kansas Department of Health and Environment, said in a statement that the most important issue with health care is slowing its costs and that the early innovator grant doesn't address that. He noted that officials are conducting public health care meetings statewide aimed at providing the best solutions to health care cost and access.
State Rep. Brenda Landwehr, who chairs the Committee on Heath and Human Services and is on a subcommittee examining how Medicaid recipients would be handled in a future insurance exchange system, said she supports Brownback's decision because federal officials have changed their deadlines and mandates too many times.
"We can't deal with that, and there's no reason we should deal with that," she said.
Landwehr, an ardent opponent of the federal health care reform law, said Kansas still has about $1 million in federal money to build an exchange. But it will fall to the legislature to decide how the complicated system would work, and she said the House doesn't seem to want an exchange system.
She acknowledged that foregoing the federal money could mean Kansas has to use more of its general fund to pay for an exchange or other health care improvements. But she said other grants could fill that void and that it is better to work free of the federal government's mandates.
"If we're going to do something we're going to do it because it's right for Kansas, not because the federal government said we're going to do it," she said.