Kansas Reinvents Medicaid or Medicaid Reinvents Kansas?

It was down to the wire, but Kansas has received CMS approval (for the most part) of its Section 1115 Medicaid waiver application, allowing it to proceed with its experiment with state-specific Medicaid reform beginning tomorrow, January 1, 2013.  The waiver is time limited, but waiver renewals and extensions are pretty common, so think of this as the first cycle of Kansas Medicaid reform efforts.

Since Kansas has announced its intention to not expand Medicaid under the ACA, its attempts to reign in Medicaid spending on its existing Medicaid eligible population should be interesting.  As KanCare's August, 2012 waiver application pointed out, Kansas has experienced Medicaid cost increases exceeding seven percent each year of the past decade.

The hard questions are: why has this occurred?  And what is found in the KanCare proposal that will help to turn the tide on Medicaid health care inflation?

The plan is to push as many Medicaid enrollees in Kansas to managed care as quickly as possible, in the hopes of improving utilization review and care integration.  Though CMS, in its recent section 1115 demonstration project waiver letter, put the brakes on this slightly by delaying the movement of certain Mediciad sub-populations into managed care and by refusing to waive the 45 day appeal process for Medicaid managed care vendor patient assignment decisions, we will see a big move into the Medicaid managed care products of the three selected vendors: Amerigroup of Kansas; Sunflower State Health Plan, and United Healthcare Community Plan.

All of this will happen while the general pool of Medicaid eligibles in Kansas likely expands considerably under the seamless enrollment mechanisms between the Federal Health Exchange for Kansans and the Medicaid eligibility portal for Kansans. Even without a state specific exchange, the plan is for Kansans to experience simplified enrollment under the ACA, a part of the ACA unchanged by NFIB v. Sebelius.

These are interesting times to be a Medicaid administrator in a non-Medicaid expansion state.  As Medicaid take up rates change, in line with the streamlining of eligibility, Medicaid will likely expand considerably even in non-expansion states.  And those new enrollees, in Kansas, will be in managed care.

This may be reinventing Medicaid as we know it for Kansas, but it is a fairly well trod path to Medicaid reform in other states. Medicaid Managed Care has been around for some time.  What is unusual about KanCare is the extension of Medicaid Managed Care, eventually, to the disabled, to low income seniors, and to those in skilled nursing facilities. These folks are the expensive folks in the Medicaid budget. 

So the real challenge for Kansas, as it is for every state, is to stop health care cost inflation for this group. Not surprisingly, this will be the challenging part of the assignment for a number of reasons — the most significant of which are that Kansas is, outside of a very few metropolitan areas, a sparsely populated state. Sparsely populated places are notoriously difficult to serve in health and senior services for two reasons: geographic distance can challenge economies of scale pretty quickly and managed care entities have, historically, found it difficult to serve rural areas in a cost effective manner.

How will Kansas do this? It is an experiment, so let's watch it unfold. In the meantime, Kansas has already indicated its ultimate goal: a global waiver that will administer an outcomes based Medicaid and CHIP program under a per-capita block grant.

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