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June 2012
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CALAMITY Chamber numbers suggest Medicaid cost surge looms

Anyone who doesn't think Gov. Beshear's Obamacare Medicaid expansion will blow a hole in the state budget starting in 2017 should take a look at the recent update to the Kentucky Chamber of Commerce's "Leaky Bucket" report.

The "Leaky Bucket" is a study the state chamber originally assembled five years ago. It looks at revenue growth trends in the state budget and compares those with projected growth in expenses, particularly in problem areas such as Medicaid and state benefits. This month the Chamber published a five-year update.

The sad part with regard to Medicaid is that the state had actually been making significant progress in reining in costs prior to Gov. Beshear's decision to, by executive fiat, impose the Obamacare Medicaid expansion on the state.

The chamber study found that from fiscal 2000 through 2012, Medicaid spending was growing three times faster than the state budget (117 percent versus 41.4 percent). In 2013 through 2016, largely due to implementation of Medicaid managed care programs, the chamber projected the Medicaid spending growth rate to slow to 16.5 percent, still significantly faster than the growth of the overall budget, but progress nonetheless.

However, things are set to change significantly on the Medicaid front in 2017. The governor's embrace of Obamacare expanded Medicaid eligibility to people making up to 138 percent of the federal poverty level. The federal government picks up the full tab through 2016, but in 2017 the state picks up 5 percent of the cost, and that percentage grows annually until it reaches 10 percent in 2020.

In 2013, the Kentucky Cabinet for Health and Family Services had estimated that 164,000 additional Kentuckians would be eligible for Medicaid in 2013 under the governor's program and that number would grow to more than 209,000 by 2017. Based on those numbers, the state was expecting its share of the additional cost to be $63 million in 2017 and go to $187 million by 2021.

As if those numbers aren't bad enough, it now looks like they are way too low (which given government's track record on such estimates should surprise no one). The Chamber report says that enrollment data as of April 21 of this year indicates 330,615 additional people have already qualified for Medicaid, double the number the state projected for this year and 50 percent more than had been estimated for 2017.

Another wrinkle here is that an unknown number of the new enrollees are people who qualified for Medicaid prior to Beshear's expansion but did not sign up until faced with the prospect of a fine under Obamacare for not having coverage. Obamacare doesn't pick up the balance for those enrollees; the state is on the hook for 10 percent of the cost of Medicaid for all of those people.

The state originally thought the cost of covering this latter group of enrollees would be only $13 million in the next fiscal year, growing to $31 million by 2016. But it now appears those costs could be much higher.

All told, it adds up to a major problem for Legislators, which as we have noted before, will have its primary bite when Gov. Beshear is safely out of office. Assuming the Chamber's data is correct, the state, right this minute, has 121,000 more people on Medicaid than it projected having by 2020 and it's going to start picking up an increasing amount of the tab in a few short years.

The Obamacare Medicaid expansion in Kentucky was a terrible decision by the governor that is going to put the state in a real financial bind down the road.

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