Bevin says ending Kynect will cost ‘small fraction’ of estimate; warns lack of deal with feds means Medicaid expansion ends

By Al Cross
Kentucky Health News

FRANKFORT, Ky. — Gov. Matt Bevin says shutting down the Kynect health-insurance exchange will cost “a small fraction” of the $23 million estimate given by then-Gov. Steve Beshear’s administration.

“It’s not going to be anywhere close to 23 million dollars,” Bevin told journalists in a Tuesday afternoon briefing on the state budget, which he was to present to legislators with his State of the Commonwealth address a few hours later.

Bevin told Terry Meiners of WHAS Radio on Jan. 13 that the shutdown of Kynect would cost $1 million to $2 million, but be would not confirm that figure when asked about it in the briefing. He said then that he had discussed the matter with Deloitte Consulting, which set up the exchange.

“We don’t know what the number is, but it’s going to be a fraction of 23” million, he said, urging reporters not to “hype people who are just making stuff up,” such as saying the cost could be even more. “The exact number we don’t know, but it will be a fraction of that, a small fraction.” In his speech, he said it would be “small single digits.”

Former state health secretary Audrey Tayse Haynes told Kentucky Health News that Deloitte has lowered its estimates due to experience in another state, but by about half for less. Haynes said Bevin appeared to be counting on the federal government to pay 90 percent of the cost, which she said is in doubt. “They told us back in the spring or summer that there wouldn’t be any match to take down something that was working successfully,” she said.

Kynect has garnered national praise, but Bevin reiterated that it is redundant because the same functions — buying federally subsidized health insurance or signing up for Medicaid — can be performed on the federal insurance exchange, HealthCare.gov. Advocates of Kynect say Medicaid signup would be more difficult, because the federal exchange refers potential Medicaid recipients to their state agencies.

As for the 1 percent fee on all Kentucky health-insurance policies that funds Kynect, Bevin said “if it does not serve a purpose then it will go away.” The fee is in law, which only the legislature can change. An executive order by Beshear changed the original purpose of the fee and created Kynect, so Bevin can abolish it. “Kynect is going away,” he said. “A year from today there will not be Kynect.”

However, Haynes said the state will still have to have a call center for its residents, in addition to the federal call center. “We’re going to have a different kind of duplication of services,” she said. The current call center, in Lexington, employs 175 people, she said.

The much larger part of Kentucky’s embrace of federal health reform, expansion of Medicaid through higher household-income limits, is untouched by Bevin’s budget because his administration is negotiating with federal officials for changes to the program that would make it less costly.

The federal government is paying the entire cost of the extension through this year. States will begin paying 5 percent next year, rising in annual steps to the law’s limit of 10 percent in 2020.

“We have budgeted . . . as if we are making no change,” Bevin said. “It would be imprudent of us not to budget for that.” Medicaid is one of the areas exempt from the 9 percent budget cuts that Bevin’s budget calls for in most state agencies, with the goal of shoring up state pension systems.

The Beshear administration, citing a study it paid for, argued that the expansion would pay for itself by bringing hundreds of thousands of people into the health-care system, generating jobs in the system and tax revenue from it. The state gained about 10,000 health-care jobs last year, but that was less than the projections, and some of those jobs would have been created anyway.

“Expanded Medicaid does not pay for itself,” Bevin said in his speech. “Let’s dispel that myth right now.”

Bevin said the negotiations to change Medicaid will be for the entire program, not just the expansion. “All of that will ultimately lead to a change in structure that will be affordable to the people of Kentucky, or it will not,” he said.

He said much the same in his speech, but added, “If we cannot get it done we will not have the ability have expanded Medicaid in the state of Kentucky.”

Budget Director John Chilton said in the briefing, “Those are very complicated issues there that require a lot of thoughtful consideration.”

Other areas exempt from the 9 percent cut include basic funding for school districts, including health insurance; and money for implementation of the anti-heroin bill the General Assembly passed last year. A few areas other than pensions would get increases, such as drug treatment, social workers, correctional employees, state police and children’s advocacy centers, which fight child abuse and neglect.

Due to the exemptions and increases, the proposed reduction in non-pension spending from the last budget is only 2.5 percent. That is still a major cut, but Bevin starts with a huge political advantage, a state Senate that is controlled by Republicans. And he seems to think that they will stick with him, telling journalists, “I will not sign a bill that’s tremendously different from what we’re going to put out.”

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