Kentuckians Who Lose Coverage from Medicaid Cuts Won’t Have Other Options

Many of Kentucky’s 1.4 million Medicaid enrollees would lose coverage from the radical cuts proposed in the American Health Care Act (AHCA) and the proposed Trump Budget. Because of the changes in the AHCA to the marketplaces, those left without Medicaid coverage wouldn’t have other affordable options for insurance, either. This toxic combination of slashing Medicaid and making private insurance more expensive will hit older and low-income Kentuckians especially hard.

According to a report by the Center on Budget and Policy Priorities, a large number of people near the poverty line will likely become uninsured as a result of large cuts to Medicaid, and then face prohibitively expensive private insurance plans.

The table below shows the increase in health care coverage costs, as a share of income, for individuals at the poverty line. Costs would skyrocket for low-income Kentucky seniors, especially, who would see coverage costs rise to nearly 60 percent of their total income. But even for a 30 year old living at the poverty line, a 6 percent, or $783 annual increase, (more than monthly fair market rent for a one bedroom apartment anywhere in Kentucky) in his or her total personal budget of $12,080 per year would not likely be manageable.

The picture becomes even bleaker for extremely low-income Kentuckians – those at half the poverty level ($6,040 for individuals). For a 60 year old Kentuckian, marketplace changes in the AHCA would mean the cost of coverage would cost more than he or she earns in a year.

The mechanisms by which insurance costs increase are numerous: at the heart of the AHCA is a massive cut to traditional and expanded Medicaid. Prior to the expansion in 2014, Medicaid was very restrictive in who could get covered, which is why allowing Kentuckians with a higher income to participate resulted in nearly half a million more getting covered. The AHCA sets Kentucky’s health back by ending the expansion, and then goes even further by making permanent and ongoing cuts to the traditional Medicaid program as well.

On top of those reductions in Medicaid coverage, the AHCA makes changes to the marketplace that increase health care costs for individual insurance policy holders in a few ways:

  • Moving from income-based to less generous age-based assistance for paying premiums.
  • Allowing insurers to charge older people up to five times more for coverage than younger people (as opposed to three times more under current law).
  • Repealing the Cost Sharing Subsidies, which help reduce out-of-pocket costs for low-income marketplace enrollees.
  • Allowing insurers to pay less of an enrollee’s total healthcare costs. The CBO estimates insurers will pay 65 percent on average versus the current average of 70 percent.

Combined, these Medicaid cuts and the individual marketplace changes would mean that for the hundreds of thousands of newly uninsured Kentuckians, there will be nowhere to turn for coverage; a perfect storm creating a devastating setback for the health of the commonwealth.

 

Pension Benefits Inject $3.4 Billion into the Economies of Kentucky Counties

As the governor and General Assembly consider additional cuts to pension benefits for employees, it’s important to understand the role such benefits play in local economies. In 2016, public retirees of the Kentucky Employees’ Retirement System, State Police Retirement System, County Employees Retirement System and Kentucky Teachers’ Retirement System received pensions totaling $3.4 billion.  That’s the economic equivalent of an entire industry — for comparison, the accommodations and food services industry in Kentucky generated $4.5 billion in earnings in 2015 while the construction industry generated $7 billion, according to the Bureau of Economic Analysis.

As the interactive map below shows, those pension checks are an important part of the economy in every Kentucky county. Over 94 percent of Kentucky Retirement Systems (KRS) retirees live in Kentucky, and 89 percent of retired teachers. When retirees spend their checks at hardware stores, restaurants and other local businesses, it results in an economic ripple effect that creates jobs. As KRS reports, each $1.00 of benefits supports about $1.43 of total economic activity.

When you cut benefits for current or future public employees and retirees, it harms not just them but the local economies where they live.

The Health Care Repeal Bill Would Double What Kentucky Must Pay for Medicaid Expansion

The American Health Care Act (AHCA) ends extra federal funding for states that expanded Medicaid eligibility, meaning Kentucky would have to increase its Medicaid expansion funding 111 percent to make up the difference. This $404.9 million increase in state spending would almost certainly lead to Kentucky ending coverage for the 472,000 Kentuckians insured through the expansion.

How Is Medicaid Paid for In Kentucky?

Medicaid is a shared state-federal program, and federal government pays states differently for their traditional Medicaid population depending on how well-off people are in each state. For expanded Medicaid, however, the federal government paid 100 percent initially, but has begun to decrease that share to 90 percent by 2020 for every state. In Kentucky, the federal government pays for:

  • just over 70 percent of the cost of traditional Medicaid, and
  • 90 percent of the cost of expanded Medicaid starting in 2020.

How Does the AHCA Change That?

The AHCA ends the extra funding for expanded Medicaid, meaning Kentucky would have to pay 30 percent of costs rather than 10 percent of costs for all new Medicaid enrollees starting in 2020. It is this increased responsibility that creates a $404.9 million hole in the state budget the following year.

What Does that Mean for Kentucky’s Budget?

Combined with other dangerous cuts to Medicaid like a per capita cap and those in the proposed Trump budget, a cut of this magnitude would force state lawmakers to cut other parts of the state budget to make up the difference or pull out of Medicaid expansion altogether. States had the option of expanding coverage to people with higher incomes before the Affordable Care Act (ACA), but would not have received the extra federal funding, so Kentucky never did. Given our pre-ACA decision not to expand coverage, our enormous unfunded pension liability and recent attempts to cut back on Medicaid spending through a waiver request, it is unlikely state officials will decide to make up the difference in cost, leaving close to half a million Kentuckians without coverage.

Kentucky Tonight: Public Employee Pensions

What The Drop in Unemployment Means–Or Doesn’t Mean–For Kentucky

Trump Budget Makes It Harder for Low-Income Kentuckians to Climb Economic Ladder

In President Trump’s budget proposal, cuts to critical programs that help low-income Kentuckians are primarily justified as a way to move more people into the workforce. However, the budget proposal would actually makes it more difficult for low-income Kentuckians to be successful in the labor market — and would hurt many who are already working.

As noted in a recent report from the Center on Budget and Policy Priorities (CBPP), a plan that would actually lead to increased employment and earnings for jobless or under-employed workers with low skills would include: “new investments in high quality job training, including job training slots for those facing a cutoff of SNAP [food assistance] benefits because they are jobless; efforts to make college more affordable; subsidized jobs for those who need to build work experience and skills; and investments in child care so parents can work or participate in training or education programs.” Not only does the President’s budget proposal not do any of this, it actually cuts job training and programs that support child care; makes college more expensive for many; creates disincentives to work through cuts to Medicaid, SNAP (formerly known as “food stamps”) and housing assistance; and terminates food assistance to some who are jobless without offering them training or work opportunities.

Here are some of the ways Trump’s budget proposal makes it harder for Kentuckians to move up the economic ladder:

Cuts core job training programs by 40 percent in 2018 alone

Workforce Innovation and Opportunity Act (WIOA) funds provide employment and training services for adults, dislocated workers and youth through formula grants to states. WIOA also funds adult education and literacy programs and vocational rehabilitation state grant programs that assist those with disabilities in obtaining employment. The budget proposal includes a $1.1 billion cut to WIOA funds — taking funding from $2.7 billion in 2017 to $1.6 billion in 2018. These cuts are expected to grow even deeper over time under the President’s budget.

Perkins Career and Technical Education funds provide support to states for activities related to the development and implementation of Career and Technical Education programs at the secondary and postsecondary levels. Funding for this program is cut by 13 percent in the Trump proposal.

The table below shows how much workforce development funding is at risk in Kentucky.

The budget proposal also cuts the Temporary Assistance for Needy Families (TANF) program by $22 billion over 10 years (13 percent). States use TANF funds for limited amounts of basic cash assistance as well as services — including employment services and job training — for poor families with children. In Kentucky, TANF funds make possible the state’s successful Ready to Work program that helps low-income adults attend community college while receiving the supports they need to succeed in school.

In addition, the President’s budget proposal would eliminate funding for the Community Service Employment for Older Americans program that helps older workers with low incomes make ends meet by working in local programs serving their communities. In 2015, Kentucky received more than $8 million in federal funding through this program; its elimination would mean that around 829 low-income Kentucky seniors lose this employment opportunity.

Makes college less affordable for low-income students

President Trump’s budget proposal eliminates the Federal Supplemental Educational Opportunity grant, which helps cover college costs for students with the greatest financial need. In Kentucky, this means an estimated 20,154 students would lose this financial aid opportunity at the same time that college is becoming even less affordable in our state.

The Federal Work-Study program is cut by 51 percent in the proposal; these funds are used to provide mostly on-campus jobs for qualifying students to help them better afford the high costs of college — and research has shown work-study students are more likely to graduate than those in non-work-study jobs and are more likely to be employed after graduating than students who do not work during school.  The proposed cut would mean an estimated 4,504 Kentucky students would lose their work-study slots.

In addition, student loans would be more expensive for many low- and moderate-income students as the President’s budget proposal eliminates subsidized loans, among other changes. It also doesn’t extend a provision (set to expire after the 2017-2018 school year) that adjusts the Pell Grant for inflation. Already Pell Grants cover only an average of less than 30 percent of the cost of attending a public four-year college.

Cuts funding for child care

Child care assistance is critical to helping parents work, attend job training or go to school when their incomes are too low to afford the high cost of care. Due to inadequate funding, just 1 in 6 children nationally who qualify for child care assistance receive it. Kentucky’s child care assistance program is already relatively weak compared to programs in other states in terms of eligibility limits, parent co-payments, reimbursement rates to providers and how much leeway parents have when looking for a job. Meanwhile, President Trump’s budget proposal sets funding for the Child Care and Development Block Grant just below the 2017 funding level and cuts two programs — TANF and the Social Services Block Grant (SSBG) — that many states use to fund child care; in 2015, 18 percent of Kentucky’s TANF funds were used for child care. SSBG is completely eliminated in the budget proposal.

Creates disincentives for work in Medicaid, SNAP food assistance and housing assistance

Medicaid and SNAP currently have provisions so that when a poor adult is able to get a job or increase earnings modestly, the individual or family does not lose health care or food assistance entirely because of a “benefit cliff.” For instance, Kentucky’s Medicaid expansion has enabled low-income working Kentuckians access to health insurance coverage when they would not otherwise have qualified for the program; the recent health reform legislation that passed the U.S. House combined with the additional cuts to Medicaid in the Trump budget would effectively end the state’s Medicaid expansion and make other harmful changes to the program. By eliminating these options for states, the budget proposal would create new work disincentives in both programs. In addition, the budget proposal would increase rent for those receiving house assistance more quickly as earnings rise.

Forces jobless Kentuckians off of SNAP food assistance after three months even in high unemployment areas

As we have described previously, the President’s budget proposal would make changes in SNAP that require time limits to be enforced even in high unemployment areas. In Kentucky, this could mean that only 15 counties qualify for a waiver of these requirements despite so many more counties continuing to struggle economically; as of April 2016, 112 Kentucky counties were able to waive the time limits. As noted in the CBPP report, “Claims that the administration will ‘do everything we can to help you find a job’ ring hollow as the budget would do nothing to provide job training or work opportunities to individuals facing this time limit; rather those who are out of work and unable to access job training would simply lose food assistance.”

What Combined Federal Cuts to Medicaid Would Mean for Kentucky

Kentucky’s Medicaid program is potentially facing enormous cuts to federal funding through the American Health Care Act (AHCA) and President Trump’s proposed budget. Nationwide, Medicaid as a whole would undergo a $1.4 trillion combined cut over the next ten years, a 45 percent reduction in funding by 2026 compared to current law. This cut would have the devastating effect of making coverage for low-income Kentuckians much harder to get and use — including children, pregnant women, people with disabilities and seniors.

The Cuts Would Be Made in Different Ways, All Ending Medicaid as We Know It

The proposed cuts in President Trump’s budget would be implemented through giving states the option to receive federal Medicaid funds through either a per capita cap or a block grant. Under a per capita cap, the amount states receive in federal Medicaid funding would be based on the average amount the state spends per enrollee. A block grant is similar, but would pay states an allotment fixed to a base-year’s total spending. In each of these cases, the amount would be incrementally increased each year, but more slowly than inflation in the cost of medical care, squeezing states’ ability to cover medical bills over time.

The AHCA cuts Medicaid in two ways. The first is by effectively ending Medicaid expansion by freezing enrollment and significantly increasing the share of cost that states would be responsible for paying. The second way is through a per capita cap, as explained above. Combined, the cuts laid out in the AHCA would shift $16 billion in Medicaid spending over ten years to Kentucky, an amount the state would be unable to make up through its own budget.

Cuts Would Hit Kentucky Particularly Hard

These two funding reductions would be an especially difficult setback for Kentucky because it is one of the 31 states that have expanded Medicaid (and more successfully than most any other state) and because the federal government pays a larger share of Kentucky’s Medicaid program than all but five states. The federal government pays for over 77 percent of Kentucky’s traditional and expanded Medicaid bills combined.

Kentucky has 1.4 million people enrolled in Medicaid, including 472,800 through the Medicaid expansion. If these cuts were signed into law, within just a few years, most if not all of the Medicaid expansion enrollees would lose coverage. Those losing coverage did not qualify under traditional Medicaid’s very narrow criteria in Kentucky and include low-wage workers and the 36,000 veterans who struggle to make ends meet.

For the remaining 939,200 children, pregnant women, people with disabilities and seniors receiving traditional Medicaid, the state would have to roll back the program in one or more of the following ways in order to adjust to such a drastic cut:

  1. Reduce the number of people covered by Medicaid by restricting eligibility or discouraging enrollment through program designs like what is already included in Kentucky’s proposed Medicaid waiver.
  2. Reduce the kinds of benefits offered to Medicaid enrollees.
  3. Reduce provider payments, which are already at least 30 percent lower than what a private insurance company pays for the same services.

Kentucky could be forced to scale back coverage for in-home services for seniors and people with disabilities or services to help fight drug addiction. At real risk are Kentuckians living in rural parts of the commonwealth, women (especially mothers), and the hundreds of thousands of Kentuckians who have been able to get needed care and are on the path toward better health.

The dramatic cuts that result would reverberate throughout Kentucky’s economy. According to one estimate, Kentucky would lose nearly 86,000 jobs, or 2.2 percent of the state’s workforce, from the cuts in the American Health Care Act alone. Over 20,000 of those would occur in eastern Kentucky, a part of the state that continues to lag behind an otherwise recovering economy. The 5th district would see a larger loss of jobs than any other congressional district in the country from the AHCA.

These proposed cuts combine to paint an alarming picture for 3 in 10 Kentuckians who are covered by Medicaid, as well as our economy and state budget. As the Senate now considers how to proceed with the budget proposal and the AHCA, this life-saving program must be protected. Kentucky’s senators should use their considerable influence to do just that.