KY Policy Blog

Senate Budget Accepts Affordable Care Act Funds and Draws on Law’s Benefits

By Ashley Spalding
March 26, 2014

Implementation of the Affordable Care Act (ACA) in Kentucky passed a hurdle this week when the Senate chose to accept billions of federal dollars in its budget to fund the law’s expansion of health insurance and built the budget based on the General Fund cost savings associated with the ACA. With 321,000 Kentuckians signed up for coverage so far and given the monies that will flow to health care providers, it’s becoming more unlikely Kentucky will ever move backward on this opportunity to make the state healthier.

The ACA’s implementation in Kentucky involves the expansion of Medicaid to those with family incomes up to 138 percent of the federal poverty level and the establishment of a state-run health care exchange. Kentucky is recognized as a national leader in implementation of the law, and is one of 25 states that are expanding Medicaid and one of very few southern states. This year’s deadline to sign up for insurance through the exchange is March 31.

The budget that passed the Senate on Monday includes language that General Fund dollars not be used for the implementation of the ACA. However, the expansion of Medicaid is fully funded by the federal government for those newly eligible for the first three years. The creation of the exchange is also federally funded initially, and the governor has proposed an insurer surcharge that he would implement (rather than using General Fund monies) to fund the exchange moving forward.

Other aspects of the Senate budget speak to an understanding that the ACA will save the state money, and the budget accepts and appropriates $2.5 billion in federal money to implement the law. Rather than a rejection of the ACA, the Senate budget recognizes the law and fully draws on the benefits associated with its implementation.

The Senate acknowledges and appropriates savings from the ACA of approximately $166 million over the biennium, just as in the House. The ACA is expected to save the state money in part by shifting expenses associated with health services for low-income and uninsured Kentuckians to federal funds. Affected areas include mental health services for low-income adults, preventive health services provided through local health departments, inpatient hospital costs for prisoners and state payments to hospitals for serving the uninsured (known as Disproportionate Share Hospital (DSH) payments).

In part because of cost savings associated with the ACA, the Senate budget is able to put more money into the state police, universities and the rainy day fund and avoid deeper cuts to a variety of public services.

In fact, the Senate budget claims savings beyond that $166 million—more savings than those in the health care arena believe can be achieved, especially in the short-term. In particular, the Senate completely defunds the Quality Care Charity Trust Fund (QCCT) for indigent care at the University of Louisville Hospital. The House and governor’s budget had decreased funding for indigent care in recognition that more people will be covered by Medicaid under the ACA, but didn’t completely eliminate funding in acknowledgement that the law cannot cover everyone in this time frame and fully address costs associated with the uninsured. The Senate budget also cuts cancer screening program funding included in the House budget, which it will likely defend for the same reason.

The Senate budget includes language indicating that accepting the federal funds in no way commits the state to continuing the ACA after this two year period, and we are likely to hear more about the specifics of that language in budget negotiations. But the reality is that despite opposition to the law the Senate is choosing not to pick a big fight over it in the state budget and try to take away newly-gained health insurance from several hundred thousand Kentuckians.

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