SNAP Works and Shows Where Economic Progress Still Needed

The Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps, played a key role in helping cushion Kentucky’s economy from the depths of the Great Recession. It continues to be a critical lifeline and economic stimulus for people and parts of the state facing ongoing economic challenges.

SNAP is designed to automatically help boost the economy when it falters. More people become eligible for the program when jobs are lost and incomes decline. That feature both supports families during hard times and counteracts the economic drag of lower spending.

The recent history of SNAP in Kentucky makes this clear. Between 2008 and 2013 — as the Great Recession hit and its effects lingered — the number of Kentuckians receiving SNAP benefits increased by 221,000. But as the economy improved since then, the number of SNAP recipients fell by 25 percent and returned to its level before the recession hit.

Source: Cabinet for Health and Family Services.

Without SNAP kicking in, recessions would be deeper, longer and more painful. As the Center on Budget and Policy Priorities reports, “after unemployment insurance, SNAP is the most responsive federal program providing additional assistance during downturns.”

This role for SNAP also extends to economic problems that crop up at a local level. While SNAP enrollment has fallen across the state since 2013, the decline has been greater in counties experiencing a more robust recovery while the program has continued to play a larger role in counties facing economic barriers.

Twenty Kentucky counties, many of them in central and northern Kentucky, have had a greater than 30 percent decline in SNAP enrollment over the last three years, even while many of those counties have had growing populations overall. In contrast, 10 eastern Kentucky counties have seen SNAP enrollment decline by a more modest 15 percent or less. And a number of eastern Kentucky counties — including Letcher, Harlan, Perry, Knott, Floyd and Pike — have more people receiving SNAP now than in 2008, despite population loss over that time in those areas.

The loss of coal jobs in those counties beginning in 2012, and the ripple effect in communities, plays a big role in that difference. SNAP picked up some of the slack in local economies and ensured many families could meet basic needs. But the lag in those counties — on top of the longstanding high poverty rates that existed in those places already — underscores the serious need for other public investments to help create jobs and transition the economy.

SNAP does its job very well. In addition to economic stimulus, it protects families from hardship and hunger, reduces the depth of poverty, supports employment and has low error rates and administrative costs. Kentucky would have much to lose if Congress pursues changing the structure of SNAP to a block grant, which would make it unresponsive to economic conditions, or if the state creates barriers to access this vital program.

House Plan Unwinds Coverage Gains and Makes Harmful Changes to Medicaid Program

By several measures, Kentucky has been the nation’s biggest winner from the Affordable Care Act (ACA). Nearly seven years later, those gains and more are at risk in the recently released American Health Care Act (AHCA) – which not only fails to replace the ACA, but goes beyond it to restructure the Medicaid program in a way that will further reduce access to coverage and benefits. Together, these changes will rip health insurance away from 24 million Americans according to the Congressional Budget Office.

Proposal Unravels Medicaid Expansion and Restructures Medicaid to Shift Costs to States

Per-capita-caps = an end to Medicaid as we know it

The AHCA proposes a highly consequential change to Medicaid in the form of capping payments to a certain dollar amount per enrollee starting in 2019, and then adjusting for inflation (medical-related inflation to begin with, though that formula is vulnerable to cuts in future). Because Kentucky would be on the hook for all the costs above and beyond what the federal government provides, the state would have to choose between increasing its share of payments, cutting benefits, scaling back the number of people enrolled or cutting already too-low payments to hospitals, clinics and other kinds of providers. This funding method also doesn’t take into account spikes in costs due to things like new, expensive medications, outbreaks that are more expensive to treat like the opioid addiction crisis or the larger share of older patients as baby boomers begin requiring more costly care.

This squeezing of federal funding for Medicaid could restrict coverage for all Medicaid recipients — including kids, seniors and people with disabilities.

Unwinds Medicaid expansion by freezing enrollment and ending the enhanced federal match

The plan would freeze enrollment for the Medicaid expansion in 2020, which means no new people would be able to join the program after that point in time and be subsidized with the so-called enhanced “Federal Medical Assistance Percentage” (FMAP). The FMAP is the percent of Medicaid costs that the federal government pays. For Kentucky, traditional Medicaid is 70 percent paid for by the federal government and 30 percent paid for by the state. In contrast, for Medicaid expansion, the federal government pays an enhanced FMAP of 90 percent.

The federal government would still pay 90 percent of the cost for existing Medicaid enrollees, but that group would disappear as they cycle out of the program because of income or other eligibility changes. According to a report from the National Academy for State Health Policy, Kentucky saw 13,000 people cycle between Medicaid and marketplace coverage in 2014 because changes in their incomes made them eligible or ineligible for Medicaid. In the Medicaid program as a whole, 19 percent of Kentucky recipients covered in 2012 were no longer covered in 2013. The result is a death by attrition for expanded Medicaid in Kentucky.

The cost of paying for expanded Medicaid with the lower state matching rate is hefty — an earlier estimate put it at $712.7 million in 2019 for Kentucky above what we would otherwise pay with the enhanced match. It is extremely unlikely that our legislature would be willing to pick up that tab in future years.

Between reducing the enhanced federal match and freezing enrollment for the expansion as well as instituting a per-capita-cap across the board, the Congressional Budget Office estimates that 14 of the 24 million fewer people with coverage would come from reduced Medicaid enrollment. By comparison, a little over 11 million people gained coverage from expanded Medicaid since 2014.

Plan Threatens Private Insurance Market and Reduces Premium Assistance for Low-income and Older Kentuckians

Help for buying insurance based on age, not income

The new plan would still offer tax credits for helping people purchase insurance plans, but not based on income. Rather people would receive a tax credit between $2,000 and $4,000 based on age, ranging from 30-60 years old. This puts older, low-income Kentuckians at a significant disadvantage. As an example, a 60 year old earning $20,000 per year in Pike County would see a $6,410 decrease in her tax credit and a $6,000 decrease in Muhlenberg County under the AHCA compared to the ACA. The plan cuts credits for some low-income people even while people with incomes higher than what is eligible for subsidies under the ACA (up to $115,000) could get tax credits for purchasing insurance. And the credits don’t come close to covering the cost of insurance, particularly for older Kentuckians, who under this law could be charged up to five times as much as a young adult (compared to only three times more now).

The “continuous coverage” requirement would likely damage private insurance market

Under the AHCA plan, there is still a requirement for insurance companies that they cannot turn people away or charge exorbitant premiums for those with preexisting conditions; this is called “guaranteed issue.” At the same time, the plan removes the individual mandate that requires everyone have insurance – but the mandate is necessary to make guaranteed issue work without destabilizing insurance markets. The way the plan proposes to fix this problem is by introducing a “continuous coverage” requirement. This provision says that once enrolled you have to stay enrolled without a lapse of more than 63 days. If you do experience a gap in coverage for longer than 63 days, insurance companies would be able to increase premiums by 30 percent.

In practice, this creates incentives for healthy people to avoid the 30 percent penalty by not enrolling in coverage until they are ill, leaving sick people in the insurance pool and making insurance more expensive, which we’ve written about here. Ultimately, that can mean skyrocketing premiums, large drops in coverage and weaker coverage for insurance markets. The Congressional Budget Office estimates that there would be a decline of nine million people by 2026 between the employer-based and individually purchased insurance markets based on changes in the AHCA.

The AHCA Would Set Back Our Health and Economy

Fundamentally restructuring Medicaid, unwinding the Medicaid expansion that has provided coverage for 440,000 Kentuckians, reducing help for low-income and older Kentuckians to purchase insurance, and destabilizing private insurance markets are all reversals of the healthcare successes we’ve experienced as a Commonwealth. These damaging policy changes are being made in the AHCA to pay for large tax cuts for the wealthy and corporations in the bill. Another concerning consequence is that it scales back the lifespan of the Medicare Trust Fund, putting pressure on future lawmakers to further cut healthcare for seniors.

Kentucky has seen enormous gains because of the ACA. Our rate of uninsured has been cut dramatically, our providers have seen an 80 percent decrease in uncompensated care and low-income Kentuckians are already reporting better health. There are 1.3 million Kentuckians covered by Medicaid, and 130,000 who get insurance through the individual insurance market, all of whom are put at risk in some way by this plan. Lawmakers in Washington should reject this plan, and any other healthcare proposal that jeopardizes our health and our economy.

Updated March 14, 2017

Too Many Kentuckians Remain Underemployed

A close look at the employment level of Kentucky’s working age population shows more progress is needed to reach full economic recovery, as we recently noted. Another measure, called the underemployment rate, also shows there remain many Kentuckians who want more work than they are able to find.

Three groups of people make up the underemployment rate. The first is those classified as unemployed, meaning they are without a job but have looked for work in the past four weeks. The second group consists of “marginally attached workers,” meaning individuals who are not in the labor force but report they want to work, are available for employment and have looked for a job within the last year. And a third group is those who are working part-time for economic reasons, meaning they work less than 35 hours a week but report wanting to work full-time and being available for full-time employment.

In 2016, 9.7 percent of Kentucky’s labor force was underemployed, as shown in the graph below. While that number has improved substantially from the depths of the Great Recession, it is still above the 9.3 percent rate of 2007 and significantly above the 6.9 percent rate reached in 2000.

Source: Economic Policy Institute analysis of Current Population Survey data.

A still-high share of part-time workers who would rather be full-time is a piece of the problem. In 2016, 23.1 percent of Kentucky workers were part time, about the same share as the last few decades. But the percentage of part-time workers who report doing so for economic reasons remains elevated at 16.8 percent in 2016, as shown in the graph below (and no, this has nothing to do with the Affordable Care Act). In contrast, that share was only 14.7 percent in 2008 and as low as 9.2 percent in 2000.

Source: Economic Policy Institute analysis of Current Population Survey data.

These numbers remain elevated because Kentucky still lacks needed jobs, including full-time opportunities. Our situation begs for more policy efforts that spur additional job growth so we can get back to full employment, along with policies that improve job quality and remove barriers that keep people from obtaining work. We also need to guard against policies that, despite false promises, will make things worse or fail to create jobs. We outlined more about what to do, and what not to do, in our previous blog and here.


130,000 Kentuckians in Individual Market Would Lose Coverage from Health Reform Repeal

A partial repeal of the Affordable Care Act would likely result in close to half a million people becoming uninsured in Kentucky, including those who buy health coverage directly from an insurance company. According to the Urban Institute, 130,000 Kentuckians who are individually insured would lose coverage. Because the ACA requires everyone to have insurance or face a penalty, a larger, healthier and younger pool of plan-holders has made it possible for insurance companies to cover people who have conditions that make them more expensive to cover like asthma, diabetes, and even pregnancy. Repeal would undo that and create what’s called a “death spiral.”

Source: Urban Institute analysis using HIPSM 2016.

What Is a “Death Spiral?”

The Affordable Care Act (ACA) has been very successful in getting Kentuckians insured through the expansion of Medicaid and by offering subsidized insurance plans to low-income Kentuckians. Uninsured rates have also gone down thanks to the ACA ban on insurers denying coverage based on preexisting conditions and the requirement that everyone have insurance coverage or else face a penalty. These two provisions are related – it’s only with healthy, less medically expensive people gaining coverage that insurers could afford to cover sicker people with higher medical expenses. As a result of this relationship, removing the individual mandate, as well as the loss of federal subsidies for Qualified Health Plans through the marketplace, would trigger what is known as a “death spiral,” Here is how the death spiral would work:


Although some have claimed that the ACA is already in a death spiral, evidence has not shown this to be true. According to the American Academy of Actuaries and Standard & Poor’s, you would expect to see declining enrollment in the ACA marketplaces or continually escalating premiums. But nationally, marketplace enrollment has grown each year since 2014. And the sharp rise in insurance premiums this past year was a “one time pricing correction” not likely to be seen again in coming years.

As Kentuckians have taken advantage of federally subsidized Qualified Health Plans since 2014 through the ACA, the individual insurance policy market has expanded. Furthermore, because the share of employers offering insurance as a benefit has been falling — from 54.4 percent in 2012 to 47.8 percent in 2015 – there has been an increasing reliance on individual insurance policies.  More broadly the economy was nearing recovery in 2015 from the hit it took during the Great Recession. All of these factors combined so that people felt they could start buying insurance again. With repeal, that’s not likely to continue.

The ACA Repeal Would Hurt All Kentuckians

The ACA had a wide-ranging impact on the healthcare of Kentuckians. Besides the roughly half million Kentuckians enrolled in either the  Medicaid expansion or  Qualified Health Plans whose coverage would be jeopardized from a repeal of the Affordable Care Act, chaos in the individual insurance market, loss of patient protections and loss of billions in federal funding would be felt in every corner of the commonwealth. Even before Congress finalizes legislation to repeal parts of the law, President Trump can shock the healthcare sector, specifically the individual insurance market, through actions like the executive order he signed just after his inauguration. It did not detail what exactly what parts of the ACA would or wouldn’t be enforced, but that very ambiguity is enough to give insurers a second thought about participating in the individual market this coming year.

The complexity and interdependent nature of the law makes it nearly impossible to remove parts of it without causing damage to the whole healthcare system, including people who buy insurance individually. This is not the time to move backward on the gains we’ve realized as a commonwealth. Congress can and should improve on the ACA, so that more Kentuckians have quality, affordable healthcare. Instead it is tilting full steam toward repeal.


Testimony for Congressman Yarmuth’s ACA Repeal Forum

Click to view as a PDF.


Good afternoon, my name is Dustin Pugel and I’m a research and policy associate with the Kentucky Center for Economic Policy, a think tank that seeks to improve the quality of life for all Kentuckians through better public policies.

Communities thrive when they have a strong foundation made up of things like good education, safe streets, and affordable, quality healthcare. The Affordable Care Act (ACA) has empowered Kentucky to bring healthcare to half a million of our most vulnerable, protect ourselves from harmful insurance practices, strengthen our healthcare system and boost our economy. There are so many reasons not to move backward on the progress we’ve made.

I want to briefly run down what experts believe a repeal of the ACA would mean for the commonwealth. Many people forget, but it was originally called the “Patient Protection and Affordable Care Act,” so I think it’s helpful to talk about what repeal would mean in these terms:

  • What kinds of affordable care are in jeopardy,
  • What patient protections are poised to be lost,
  • And finally, how those changes will hurt our economy, jobs and state budget.

Affordable Care:

In considering a repeal’s effect on affordable care, first and foremost, an estimated 486,000 Kentuckians would lose insurance coverage. That loss of insurance coverage is a tripling of the number of uninsured in Kentucky. This decline would come from people losing Medicaid and federal insurance subsidies, people no longer being required to be insured (known as the individual mandate) and the individual insurance market entering into what is called a death spiral.

Because a repeal would disproportionately harm states that expanded Medicaid and saw large decreases in their uninsured, Kentucky is among the states with the most to lose. In fact, we would have the third largest increase in the rate of uninsured in the country.

These same plans to repeal would also result in a huge decline in 2019 federal spending in the commonwealth on Medicaid expansion and insurance policy subsidies. Between 2019 and 2028 Kentucky would receive nearly $50 billion less in federal dollars. This federal money injected into our economy has resulted in large employment gains in the healthcare sector and steep declines in the amount of money healthcare providers spend on uninsured patients, called charity or uncompensated care. Nationally, the Urban Institute expects there to be a $1.1 trillion increase in demand for uncompensated care between 2019 and 2028 if repeal moves forward.

Patient Protections:

When it comes to the protections we would lose as Kentuckians, the healthcare reform law is expansive and complex, but a few critical protections stand out, such as:

1.9 million privately insured Kentuckians as well as 863,000 seniors on Medicare could lose free preventative care like immunizations, blood pressure screenings and cancer screenings.

1.4 million Kentuckians, including children, could see caps placed on the amount an insurer would spend over each person’s lifetime, or even each year — cutting off coverage for the sickest individuals when they most need it.

Women could be charged premiums as high as 57 percent more than men.

All insured Kentuckians could lose protection from being overcharged by insurance companies. Since the ACA was passed, companies have refunded Kentuckians $33.3 million that weren’t needed for administration or care.

The ACA also included a provision that corrects a glitch in Medicare prescription coverage that led to some prescription drugs becoming too expensive. But an ACA repeal would mean disabled and older Kentuckians would pay more for prescription drugs, or else forgo them entirely. The average savings for affected Kentuckians was $1,108 per person in 2015 alone.

One especially popular part of the law is the requirement that insurers not deny coverage to someone with a preexisting condition. One of the biggest problems lawmakers will encounter when attempting to repeal the ACA is that the preexisting conditions provision creates a double bind.

On the one hand, if it is repealed, 1.9 million Kentuckians with conditions like asthma, diabetes, cancer and even pregnancy could see their premiums dramatically increase, or simply be denied insurance coverage all together. On the other hand, if the preexisting coverage protection stays, but the individual mandate is repealed, then insurers will be left with expensive, sick enrollees, while the healthy, inexpensive enrollees leave the market. The end result is what’s called a death spiral, when insurers have to increase costs, so more people pull out because they can’t afford it, until insurance companies decide not to offer individual plans anymore. This would be devastating for the hundreds of thousands of Kentuckians who buy insurance directly from an insurance company.

Economic Ripples:

The billions of federal dollars that have been pumped into Kentucky have had a major impact on our economy. If repeal moves forward and that money suddenly evaporates, every part of the state will feel it.

According to the Commonwealth Fund, of the 45,000 jobs that would be lost in 2019 because of repeal, 38 percent would be in the healthcare sector. The rest would come from construction, real estate, retail, finance and other industries.

Over five years beginning in 2019, Kentucky’s business output would lose nearly $41 billion in value in addition to $24 billion less in federal spending. With such a dramatic drop in our state’s economic activity, the state would see $718 million less in revenue in the midst of a health crisis and a massive pension liability that has already pushed lawmakers to undermine critical state services.

ACA repeal would wreak havoc on Kentucky:

The Affordable Care Act has been a lifeline to Kentuckians who either gained healthcare coverage through the Medicaid expansion and insurance subsidies, or have been protected from harmful practices banned by provisions in the law. Our economy has benefitted from a large influx in federal funds that have boosted job growth and invigorated local economies.

Instead of building on these successes, repealing the ACA would wreak havoc on our healthcare system and reverberate throughout the commonwealth. People would be left without access to needed treatment, healthcare providers would see their revenues shrink and potentially lead them to close their doors, and state government would be forced to further cut vital services as it deals with a smaller state coffer. Congress can and should improve on the ACA, and any public healthcare program, so that more Kentuckians have quality, affordable healthcare, but instead it is tilting full steam toward repeal. Kentucky’s representatives in Washington should be aware of the damage that would cause back home.

Job Growth Claims from Right to Work Not Backed by Evidence

Proponents of Right-to-Work (RTW) argue that Kentucky would attract more jobs if such a law was in place, especially in manufacturing. But the evidence does not show our RTW neighbors have grown jobs more successfully than Kentucky in recent years, and academic research on the subject also doesn’t find a link between RTW and job growth.

Looking at statewide manufacturing job growth in Kentucky and our RTW neighbors, all are still below December 2007 employment levels before the Great Recession hit, but Kentucky is the closest to regaining the jobs that were lost.

rtwSource: Economic Policy Institute Analysis of Current Establishment Survey (CES) data.

At the local level, data from the Quarterly Census of Employment and Wages (QCEW) allows comparisons of the manufacturing sector in counties on either side of the Ohio River in the Louisville Metropolitan Statistical Area (MSA). Since Indiana went RTW in February 2012, manufacturing has fared better on the Kentucky side of the MSA than on the Indiana side.


Source: Bureau of Labor Statistics, QCEW.

More importantly, when researchers control for other factors they have found no evidence of an impact from RTW on job growth, as in a careful analysis of Oklahoma. A study by the Center for Business and Economic Research at the University of Kentucky also found no discernible positive impact from RTW on states’ economic growth.

While research hasn’t found a link between RTW and job growth, RTW is associated with lower wages. Controlling for other factors, workers in RTW states make 3.1 percent, or about $1,558 less a year (in 2015 dollars). Wage erosion harms workers, their families and our economy negatively, including by reducing demand for the kinds of goods manufacturers produce. Low and stagnant wages are already a central problem facing the economy, and we don’t need to make it worse.

Kentucky is wiser to focus on economic development strategies that improve our workforce skills, infrastructure and quality of life rather than approaches that reduce wages while failing to deliver the jobs that are promised.

The Path to a Stronger Commonwealth: Prioritizing Investments in Our Communities Over Tax Breaks for the Powerful

Kentucky faces a choice: cleaning up our tax code of special interest tax breaks so we can invest in excellent schools, a healthy and skilled workforce, modern infrastructure and other building blocks of thriving communities in the Commonwealth; or continuing to allow our tax code to be manipulated for the benefit of just a few, while essential investments fall farther behind. This report explores these two choices and provides direction for the road ahead. Moving forward means raising new revenue to invest in the foundations of thriving communities by cleaning up our tax code, eliminating breaks those at the top have managed to put there. Moving backward means undermining investments in a stronger state by failing to clean up tax breaks and continuing with more tax giveaways for those at the top.

You can view the report here.

New Medicaid Waiver Plan Keeps Approach from Problematic Original Proposal

The Bevin administration submitted its waiver proposal to the Department of Health and Human Services (HHS) today, keeping the problematic approach that was in the original plan with modifications in a handful of areas.  The proposal includes work requirements, premiums, lockout periods and other measures that would reduce the number of Kentuckians covered, some of which have been consistently rejected by the federal government in other state proposals.

The revised proposal includes the following measures:

Work Requirements for Participation

The plan includes a requirement that non-disabled adults without children engage in certain work and/or community requirements beginning after three months in the program. These activities start at 5 hours a week and ramp up to 20 hours a week after 1 year. Failure to do so results in suspension of benefits. One small change in the new plan is that caretaking for a disabled adult dependent or a non-dependent relative such as an elderly parent counts toward the work requirement.

Work requirements have been consistently rejected by HHS in waiver proposals, and rigorous evaluations show attaching similar requirements to safety net programs doesn’t work to reduce poverty.

Premiums with Lockouts for Failure to Pay and Other Penalties

Members will have to pay $1 to $15 in premiums a month based on income. After a year in the program, premiums continue climbing for those with incomes above the poverty line, up to $37.50 a month. A change in the new plan is that premiums are paid per household rather than per individual as originally proposed. Co-pays from the current program are eliminated for those paying premiums, though those co-pays are often not collected currently.

Enrollees must pay premiums within 60 days of becoming eligible. Those above the poverty line who do not pay are locked out of the plan for six months; they can re-enroll before that time if they pay three months’ worth of premiums and take a financial or health literacy course. For those below the poverty line, members not paying premiums keep benefits but must begin contributing co-pays and will lose access to their MyRewards account mentioned below. In the new waiver plan, those considered “medically frail” will not lose coverage if they do not pay premiums (and they are exempt from co-pays), but they also lose access to their MyRewards account if premiums are not paid.

Premiums have been attempted in past Medicaid experiments, and strong evidence suggests they significantly reduce the number of people covered.

Elimination of Vision, Dental and Transportation Benefits

Dental coverage would no longer be part of the regular Medicaid benefits package despite Kentucky’s poor oral health, and neither would vision coverage (the elimination of vision and dental benefits are delayed for the first three months of the demonstration in the revised plan). Also eliminated is help with transportation for non-emergency medical visits. The revised plan reinstates benefits for allergy testing and private duty nursing, which had been eliminated in the original proposal through a State Plan Amendment.

Elimination of Retroactive Coverage and a Lockout for Those Who Miss Signing Back Up

Currently, Medicaid provides retroactive coverage to new members for up to three months prior to enrollment. However, the proposal would make coverage start on the first day of the month payment is received (a pre-payment can be made to begin coverage for those not yet determined eligible). Because some people may not seek coverage until they have a serious health problem, this could mean facing unpayable health care bills.

If a member does not re-enroll for coverage before the expiration of each 12-month period, he or she loses coverage. The member then will have three months to re-enroll and if they do not must wait an additional six months to reenroll unless they take a financial or health literacy course. According to the Center on Budget and Policy Priorities, that’s something “no state has proposed doing.”

Complex New Administrative Systems

As before, the plan includes complex and expensive administrative systems to approve and track work and community engagement activities, financial and health literacy courses, and healthy behavior activities; to charge and collect premiums; to assess, manage, and track the costs and benefits of employer-sponsored health insurance programs; and to maintain two Health Savings Accounts (HSAs) – one for a high deductible account and the other for what’s called a MyRewards account.

Medicaid members would have a $1,000 deductible each year, though the plan contributes $1,000 to each member in a health savings account to make the payment. Half of the unused deductible each year will go into a second health savings account, called MyRewards. The MyRewards account is also set up to receive funds for certain health, community and job training activities. The monies in that account can be used for benefits not covered, and a new provision allows them to be used to pay fees associated with taking the GED. Monies are taken out of the account as a penalty for non-emergency use of the emergency room and potentially for “excessive missed healthcare appointments,” which is new to the final waiver request.

Attempts to Link Medicaid to Private Employer-Based Insurance

The waiver proposal attempts to link Medicaid to employer-provided insurance for those employers that offer coverage to workers who are Medicaid recipients. Members with access to these plans are encouraged — and ultimately required — to enroll in the employer-sponsored plans, and are given monies for the premiums (minus the Medicaid premium payment above). Medicaid pays for benefits the employer does not provide. According to a recent study of similar ideas, there are challenges with such programs and “more research is needed” to know how to administer them.

As in the original waiver proposal, the plan would result in fewer Kentuckians covered — in fact the proposal contains the same estimate of numbers of people who would lose coverage as in the original plan. (Data from report presents “member months,” and the table below converts that to number of members by dividing by 12).

waiver 1

Source: KCEP calculations from Kentucky HEALTH document.

Now that the waiver request has been submitted to HHS, there will be a 15 day review period to ensure the application has been completed correctly. Then the federal comment period will be opened for 30 days, and during that time comments can be made through the HHS waiver website by searching for Kentucky’s 1115 waiver. Once that period ends there is no deadline for approval or rejection, but past demonstration waivers have taken 6-12 months of negotiation during this phase.

Kentucky has been on the right track for the past two and a half years, and erecting barriers, reducing benefits, and creating confusing and expensive administrative systems will only move us backward on our health progress. It is crucially important that during negotiations between HHS and state officials the gains we have made are preserved.

Five Takeaways from Kentucky’s Year-End Revenue Results

Revenue receipts are in for June 2016, the final month of Kentucky’s last Fiscal Year (FY), showing modestly strong General Fund growth of 3.7 percent since 2015. Here are five big takeaways:

Revenue Growth Itself Isn’t Remarkable as It Almost Always Grows from Year to Year

Kentucky collected $372 million more in FY 2016 than in FY 2015. And while this increase shows Kentucky’s economy is growing – with people earning and spending more, thus paying more income and sales taxes, for example – it is the norm for our economy, and therefore revenue, to grow.

revenue growth

Source: KCEP analysis of Office of the State Budget Director data.

After the Great Recession, revenue dropped two times in FYs 09 and 10, but in the 6 years since, has grown every year — 3 times at a rate higher than in FY 16. Over the last 20 years, revenue has declined only 3 times, and has grown at a higher rate than in FY 16 8 times.

Whether revenue is growing enough is a different matter (one we can say more about in August when the state publishes quarterly economic data). For a long time in Kentucky, revenue growth has not been keeping up with economic growth, meaning our ability to sustain a certain level of crucial investments is eroding. And given Kentucky’s large pension liabilities and pressure to reinvest in education, human services and other areas, the gap between what we are generating and what we need is substantial.

It Is Unclear at this Point Whether We’ll Have a Surplus

It will be another month before state officials reconcile expenditures with revenue and announce if there was a surplus in FY 16. This process will account for necessary governmental expenses – unbudgeted expenditures such as natural disasters like the recent flooding in western Kentucky – as well as how much was actually spent by various agencies of state government compared to what was budgeted. Governor Bevin announced cuts of 4.5 percent for many parts of state government in FY 2016 and 2 percent for higher education.

Relative to the original forecast on which the 2016 budget was built, revenue collections were $292 million higher than expected (or 2.9 percent). Part of that difference can be attributed to improvement in our economy since January  2014 when the forecast was created, and some is due to the difficulty of predicting receipts two years out.

Compared to the official revised forecast from January of this year, revenue was just $49 million higher (0.5 percent) – a small difference in the context of a $10.3 billion General Fund.

Strong Revenue Growth is Needed to Address a Deepening Structural Deficit

Experts have predicted that if Kentucky does not address the holes in our tax code – especially the billions in tax breaks inserted into our tax laws by powerful interests – we face a structural deficit that could grow to $1 billion by 2020. That means a growing challenge in finding the money we need to invest in public schools, affordable colleges and universities, health and human services, and other services essential for thriving communities. The most recent two-year budget reflects this growing crisis, which pitted our pension liabilities against higher education, services for vulnerable Kentuckians and many other areas that received their 16th round of budget cuts since 2008.

Kentucky’s Individual Income Tax is Crucial to the State’s Ability to Improve

Sales and use tax growth outpaced individual income tax growth (IIT) by 0.8 percentage points in 2016 compared to 2015. But looking back over the years since the recession, the IIT has grown 41 percent or $1.2 billion while the sales tax has grown 23 percent or $645 million. Over the long term, income taxes grow more than sales taxes do.

income growth

Source: KCEP analysis of Office of the State Budget Director data.

The kind of tax reform Kentucky needs strengthens both income and sales taxes and resists jumping onto the income-tax cutting bandwagon that has been popular (and devastating) in other states. Cutting income taxes would weaken the strongest source of revenue growth we have to invest. The idea that shifting to a more sales-tax reliant system would make up for these losses is misguided: not only does it increase income inequality by asking even less of those at the top and more of everyone else, but it also ignores the problem that, in the context of growing income inequality, sales tax-reliant states struggle to generate enough revenue. That’s because a shrinking middle class means weakening demand for the purchases that generate sales taxes.

The Road Fund is Hurting Because Lawmakers Took Too Long to Raise the Gas Tax Floor

Despite action in the 2015 session of the General Assembly to raise the gas tax floor and adjust the rate setting process going forward, Kentucky roads and bridges – and therefore our motorists and economy – were not sufficiently protected from falling gas prices over recent years. With the tax based on the wholesale price of gasoline, declining global oil prices have impacted Kentucky revenue. Even though the Road Fund’s second biggest source of revenue, the motor vehicle usage tax, grew by 11.9 percent or $52 million in 2016, the entire fund shrank by 2.9 percent or $44 million to $1.5 billion. The gas tax itself shrank $100 million in FY 2016.

Continued Higher Education Cuts Place Kentucky Among Worst in Country

Kentucky is continuing its tumble to the bottom as one of the worst states in funding cuts to higher education, a new report from the Center for Budget and Policy Priorities shows.  Kentucky ranks 6th-worst among states in percentage cuts to higher education since 2008 and is in the bottom 10 among states in other funding categories, according to the report. This disinvestment once again threatens to limit students’ access to higher education, as well as our state’s opportunities for economic growth.

While most states have begun to restore higher education funding after cutting during the recession, Kentucky continues to cut, including with last-minute cuts for 2016 by Gov. Matt Bevin and with additional cuts coming in July when the new fiscal year begins — all together a 4.5 percent cut. These continued cuts make it harder for students to afford college and for the state to invest in our communities and grow jobs and businesses.

“As Kentucky continues to cut, we start reversing all the gains made by past education improvements,” Ashley Spalding, research and policy associate at the Kentucky Center for Economic Policy, said said. “We are sliding backwards, when what we should be doing is investing in our education institutions, which in turn is investment in our communities. We should follow the lead of the majority of states and start increasing funding for higher education again, instead of balancing our state budgets on the backs of students.”

Some “lowlights” of Kentucky in the report:

  • Since the recession, Kentucky has cut higher education funding 32 percent, one of 8 states to cut more than 30 percent since 2008. Kentucky’s ranking of 6th-worst among states in percentage cut since 2008 is a fall from 11th-worst in last year’s report.
  • Kentucky is one of 11 states that are continuing to cut higher education in the current year, in contrast to 37 states that are increasing funding. Five states actually increased per student funding by more than 10 percent this year.
  • Kentucky is one of three states that has cut funding for the past two years joining Vermont and Arkansas.

In order to stop Kentucky’s higher education funding slide, lawmakers should clean up the tax code by ending some of the billions of dollars in tax breaks that drain revenue so we have the resources to better invest, Spalding said.

For the average student, federal and state aid has not kept pace with rising costs, the report found.

“More young people could afford college and gain for themselves and the economy the benefits of greater earnings if states reversed their declining support for higher education,” said Michael Mitchell, senior policy analyst at CBPP and lead author of the report.

You can view the report here.