Kelly wants medical marijuana to expand Kansas Medicaid. Will she send both up in smoke?
Gov. Laura Kelly pitched it as a win-win, a way to bring Kansas in line with most other states on two fronts: Cover the cost of Medicaid expansion with tax and licensing revenue from legalized medical marijuana.
Thirty-nine states have extended eligibility for the federal health insurance program, intended for disabled and low-income people. Three-dozen states, including neighboring Missouri and Oklahoma, have medical marijuana programs, according to the National Conference of State Legislatures.
“This proposal not only allows us to recover from the economic uncertainty of the pandemic but emerge from it stronger than before,” Kelly said in a news conference Monday.
But Kelly faces significant political challenges in selling the idea.
Although medical marijuana has some bipartisan backing, Republican leaders say they won’t support the governor’s proposal. Advocates for the policies fear that their linkage could effectively kill them both in a Kansas Legislature with a GOP supermajority. It is also not clear if there would be enough revenue from medical marijuana to pay for Medicaid expansion by 2022 — the proposed timetable — and sustain that funding into the future.
“I’m not going to say that something needs to be stripped out of her bill,” said Erin Montroy co-president of the Kansas Cannabis Business Association.. “I will say that I think keeping them together may kill two issues for no reason.”
Kelly has yet to formally introduce the bill to the legislature and medical marijuana policies nationwide run the gamut of revenue prospects and implementation timelines.
In her proposed annual budget, Kelly included $19 million to cover Medicaid expansion for the first half of next year. Her office said Monday medical marijuana would “more than offset” the costs of Medicaid expansion. Though no exact figures have been released Kelly said that previous estimates put medical marijuana revenues at $50 million.
An analysis by the Kansas Health Institute last year estimated that the state’s share of the cost to expand Medicaid to an additional 132,000 low-income Kansans would be $63.8 million a year. (Ninety percent would be covered by the federal Affordable Care Act).
A 2015 review by the Marijuana Policy Project, however, showed no state with a medical marijuana program at the time generating that much annual revenue. On Thursday, the policy project said Ohio, Kelly’s model for Kansas, did not come close to $60 million a year.
In an email, the governor’s spokesman, Sam Coleman, said the revenue would come primarily from licenses and compliance fees for businesses that produce and sell. A small portion, he said, would come from taxes.
Application fees for patients, he said, would be $50.
Coleman did not immediately respond to questions regarding the cost to businesses and how many licenses the state would give out. Further revenue details, he said, would be available once the bill is formally introduced.
Missouri charges $25 per application to its estimated 70,000 patients. Applying to go into business as a marijuana cultivator can cost as much as $10,000.
In Ohio, application fees for businesses range from $2,000 to $20,000, licensing from $18,000 to $180,000. Renewals run from $20,000 to $200,000.
How much money?
Karen O’Keefe, Director of State Policies at the Marijuana Policy Project, said it is possible that Kansas could successfully fund Medicaid expansion through medical marijuana, but it would depend on what level of regulation the state established.
Garnering enough money would require a broad-based system with few restrictions on patients and doctors. Even then, O’Keefe said, Kansas runs the risk of using the sick as a revenue source.
“We tend to think that if a government wants to raise money on cannabis it should be adult use (recreational) sales not medical sales that are taxed for revenue purpose,”O’Keefe said. “It’s already people who are facing serious illnesses and financial shortfalls.”
If Kansas models their program on Ohio, as Kelly indicated Monday, the state would only make about $4.6 million a year in taxes on cannabis, O’Keefe said. That does not include estimated revenues from licensing fees. Revenues, she said, tend to rise in the years immediately following legalization.
Implementing a program like Oklahoma’s, which has few restrictions, could bring in about nearly $177 million annually, O’Keefe said.
Unlike many other states, Oklahoma doesn’t limit the medical conditions for which patients can seek treatment. With nearly 400,000 patients, the Sooner State’s marijuana program is expected to grow to a $1 billion industry this year.
“The broader the conditions are the more revenue you’ll bring in,” she said.
In Missouri, patients purchased nearly $10 million in marijuana between October and January, according to the Missouri Department of Health and Senior Services.
In addition to state sales tax of 4.225%, Missouri levies a special 4% tax on marijuana sales. That means the state has already collected more than $800,000 in sales taxes, not to mention application and licensing fees. The program was originally expected to raise $24 million a year to fund services for military veterans.
“We think that’s just sort of scratching the surface,” said Jack Cardetti, spokesman for the Missouri Medical Cannabis Trade Association.
Lisa Sublett, founder of the patients rights group Bleeding Kansas Advocates, said she was excited to see Kelly pushing for medical Marijuana. But in terms of patient access the Ohio plan, passed by a conservative legislature, is among the nation’s worst.
“Ohio is extremely restrictive, it’s been a nightmare for patients,” she said. “It’s been an absolute cluster. I don’t know why anyone would want to look towards Ohio.”
With 54 operating dispensaries, the state’s policy only allows patients with a specific list of conditions to access medical cannabis and limits the available products.
Despite her concerns, Sublett said, Kelly’s bill is a starting point and lawmakers could be pushed towards less restrictive provisions before anything is passed.
It is also unclear how quickly Kansas could have a program up and running. O’Keefe said implementation times range from four months to several years.
Missouri voters in November 2018 approved the constitutional amendment creating the state’s medical marijuana program. It took nearly two years to begin sales, with the first dispensaries opening up in October 2020.
And the industry is hardly matured: only 35 of the state’s 192 licensed dispensaries had received their final approval to open by the end of January.
‘Still mulling it around’
Kelly’s proposal, which was met with opposition from opponents of medical marijuana and Medicaid expansion alike, is one of three medical marijuana bills brought to the state legislature this year.
In a press conference Wednesday, Kelly said she had yet to hear from Republicans in the legislature about her proposal.
“I think they’re still mulling it around,” she said.
Despite concerns that the combination of the policies could hurt their prospects, Montroy and Daniel Shafton with the business association were optimistic that lawmakers were committed to coming to a solution with Medicaid expansion this year. In addition to Kelly’s proposal Rep. John Barker, an Abilene Republican, and Sen. John Doll, a Garden City Republican, have each proposed a legalization option.
“It’s our job to put out a balanced bill that the body will agree to vote on because if it’s too far one direction, restrictive like Ohio or two far one direction, open like Oklahoma there are going to be senators that object,” Shafton said.
“Everyone who’s working is willing to come together and find a bill that they do think can pass.”
Although Doll said he’d support the governor, Barker, whose bill is also modeled off the Ohio framework, said he wouldn’t, even though their marijuana proposals are similar.
“The governor’s plan yesterday may have soured (my) bill,” Barker said.
Like party leadership, Barker voiced opposition to expanding Medicaid.
In a statement Monday, Senate President Ty Masterson, didn’t say where he stood on medical marijuana, but that funds from it shouldn’t go to a “welfare program for able-bodied adults.”
“Any new revenue stream should be returned to the people, while we preserve Medicaid for those whom it was intended - the elderly, the disabled, and other vulnerable Kansans,” Masterson said.
Other Republicans immediately pushed back on the concept of passing medical marijuana at all. In a statement, Monday, House Majority Leader Dan Hawkins said the proposal would lead to Kansans sitting at home smoking “supposedly medical” marijuana.
“You don’t have immediate revenues, it’s still illegal by the feds, it’s a cash business which makes it sometimes become a corrupt business,” said Rep. Brenda Landwehr, a Wichita Republican. “People who want marijuana legalized can get Congress to do it.”
But for Doll and Sen. Cindy Holscher, an Overland Park Democrat who has been pushing for medical marijuana for years, the governor has just placed another option on the table.
Holscher said lawmakers on the other side of the aisle seem “intrigued” by the concept of medical marijuana and after years of hearings on the topic many of the initial myths and concerns have been dealt with.
“It’s an option, it’s a well thought out bill, as far as how the program would work and how it would be paid for,” Holscher said. “The people who are opposed to Medicaid expansion aren’t necessarily opposed to medicinal cannabis … maybe it entices some, maybe it doesn’t entice the right number.”
This story was originally published February 7, 2021 at 5:00 AM with the headline "Kelly wants medical marijuana to expand Kansas Medicaid. Will she send both up in smoke?."
