Kansas will forgo more than $120 million in combined state and federal money for its Medicaid system in the wake of state budget cuts that spared public education.
Gov. Sam Brownback’s office simultaneously announced his signing of the budget and $97 million in cuts to state spending on Wednesday.
More than half of that will come out of the state’s Medicaid system, which provides health coverage for low-income Kansans and accounts for 20 percent of the state’s general fund budget.
Brownback cut higher education and most state agencies by 4 percent, excluding public safety, K-12 education and state hospitals. These moves are expected to leave the state with $87.5 million in its general fund at the end of June 2017.
Lawmakers had included a provision in the budget bill to shield K-12 education from cuts, a restriction Brownback followed.
The Kansas Department of Health and Environment and the Kansas Department for Aging and Disability Services, the two agencies that administer Medicaid, will see a combined reduction of $57.4 million. Most of that comes from Medicaid.
That will trigger a loss of about $72 million in federal funding, because the federal government provides $1.28 for every $1 the state spends on Medicaid.
Health care providers who serve Medicaid patients will see their reimbursement rates drop by 4 percent in July, a move budget director Shawn Sullivan framed as a budget necessity if the governor was to leave K-12 education untouched. Spending on public schools makes up half of the budget.
“Do we like reducing provider reimbursements? No, we don’t,” he said.
The Medicaid reductions will require approval from the federal Center for Medicare and Medicaid Services, Sullivan said.
Former Gov. Kathleen Sebelius, a Democrat who served as secretary of Health and Human Services in the Obama administration, criticized the move. She said it comes after the state passed up more than $1 billion in federal aid to expand Medicaid.
“They’re turning that down and now they will shave even more dollars out of the state side by cutting pay to doctors and hospitals,” Sebelius said. “I think the result is likely to be that more doctors will just refuse to take Medicaid patients. In the long run, I think it is a very short-sighted way to save money.”
Brownback spokeswoman Eileen Hawley said the governor “has taken aggressive action to balance the budget, and he has worked very hard to do that in a way that protects public safety and core services for people.”
Home-based services for disabled Kansans and 95 critical-access hospitals in rural Kansas would be exempted from the cut to provider rates statewide, Sullivan said.
That means that physicians, dentists, pharmacies and hospitals in urban areas, such as Wichita and Kansas City, will account for most of the $38 million cut to provider reimbursement rates.
“There are people out there who think larger, urban hospitals can absorb this level of cuts,” said Bruce Witt, director of governmental relations for Via Christi. “The fact is that’s really not the case. It has had very detrimental effects to us. We’ve had to eliminate jobs, and these are high-paying jobs – they’re not low-income jobs.”
He said Via Christi estimates the reimbursement cuts will equal a revenue loss of around $2.8 million to $3 million for its health system.
Patients will be affected, said Jon Rosell, executive director of the Medical Society of Sedgwick County, which represents 1,250 doctors.
“It’s going to be harder to gain access to care for our most vulnerable population,” Rosell said.
He said Medicaid already pays less than other forms of reimbursement, so the cuts will place a greater burden on doctors who accept those patients.
“They have a loyalty to their patients and want to provide care but also have a responsibility to keep their doors open and pay employees,” he said. “It puts them in an untenable predicament.”
More cuts ahead?
Sullivan warned that more cuts for Medicaid could be on the horizon if the Kansas Supreme Court rules against the state in a pending school finance case.
“When you exempt K-12, then the other two big slices of the pie of the state budget are Medicaid or higher ed, so if we are ordered to put in … $40 million, then one can assume that the biggest impact of that will be, much like these cuts, to Medicaid and higher ed,” Sullivan said.
Sen. Jim Denning, R-Overland Park, the vice chairman on the Senate budget committee, doesn’t like the Medicaid cuts, but he said he doesn’t see any other options after efforts to roll back a tax exemption for business owners went nowhere this session.
The budget also enables the state to delay a $96 million payment to the state’s pension system until 2018, and the governor has already announced plans to sweep $185 million from the state’s highway fund. Denning said that with those sources already tapped, “it was pretty obvious to me that he (Brownback) was going to have to go in and cut Medicaid.”
Some critics say lawmakers shirked their duty by leaving the cuts up to the governor.
“We’re a citizen Legislature,” Denning said when asked about the rationale for deferring to the governor.
“We don’t know the details of the agencies. The agency cabinet members, they work with the governor every day, so we just left it up to him and them to decide what they can do within their agencies. … We thought they could be more prudent and do less damage,” he said.
Higher education will be cut by $30.7 million, a 4 percent overall cut to the regents system.
However, universities did not see equal cuts in state aid, as they have in the past. The governor relied on a new calculation proposed by Senate Republicans that cuts universities’ funds based on their total operating budgets.
That means the University of Kansas and Kansas State University each will see 5.1 percent cuts because they receive more money from federal and private grants and have higher tuition.
KU and K-State had asked Brownback to veto that provision.
Sullivan said the governor wanted to respect the Legislature’s intent and that he didn’t think a budget would have passed without this provision.
Tim Caboni, vice chancellor for public affairs at KU, lamented that the cut “disproportionately affects KU and K-State, despite the tremendous role they play in growing the Kansas economy.”
Senate Minority Leader Anthony Hensley, D-Topeka, blasted the policy as “political favoritism” meant to help the Republicans who represent the smaller regents universities at the expense of the Democrats who represent Lawrence and Manhattan.
Sen. Jacob LaTurner, the lawmaker who crafted the provision, represents a district that includes Pittsburg State University, which will see a 2.8 percent cut under the policy change.
“Those massive universities are able to absorb these cuts better, and they know it,” LaTurner said.
Wichita State University will see a 3.8 percent cut of $2.8 million.
Contributing: Gabriella Dunn of The Eagle
State cuts by department
(Some amounts have been rounded)
▪ Health and Environment: $40.1 million*
▪ Higher education: $30.7 million
▪ Aging and Disability Services: $17.5 million
▪ Children’s Cabinet: $3.4 million
▪ Children and Families: $3.2 million
▪ Commerce: $455,581
▪ Agriculture: $395,775
▪ Administation: $376,063
▪ Water Office: $250,000
▪ Wildlife, Parks and Tourism: $206,080
▪ Historical Society: $174,513
▪ State Library : $161,001
▪ Governor’s office: $125,000
▪ Board of Tax Appeals: $31,783
▪ Labor: $12,483
Total: $97 million
*Health services account for $39.9 million of the cut to KDHE, while environmental services account for the rest.