Budget Summary: Medicaid

Alice Fitzgerald | April 16, 2024

Medicaid is a means-tested program that funds the delivery of primary and acute medical services, as well as long-term services and supports, to an estimated 85 million people across the nation. The program is voluntary, but all 50 states and U.S. territories currently participate in the program.

Medicaid was established in 1965 during the Johnson Administration and is authorized under Title XIX of the Social Security Act. The federal government requires states to cover certain mandatory populations and services, but allows states to cover others that are optional. While it began as a basic insurance for uninsured Americans, it has since expanded to increase the level of access, quality, and affordability of care to families. The related Children’s Health Insurance Program (CHIP) provides similar coverage to uninsured low-income children who are not eligible for Medicaid.

Funding

States share the cost of Medicaid with the federal government, which matches states for a portion of each state’s program costs. Federal Medicaid funding is an open-ended “entitlement” to states, which means there is no upper limit or cap on the amount of federal Medicaid funds that a state may receive.

Federal Share

A primary goal of the federal Medicaid matching arrangement is to share the cost of providing health care services to low-income residents.

The federal government’s share of most Medicaid expenditures is established by the federal medical assistance percentage (FMAP) rate, which is determined annually according to each state’s per capita income relative to the U.S. per capita income. This formula provides higher FMAP rates (or federal reimbursement rates) to states with lower per capita incomes and lower FMAP rates to states with higher per capita incomes. FMAP rates have a statutory minimum of 50% and a statutory maximum of 83%. The FMAP rate for Kansas in FY 2024 was 60.97%.

In federal fiscal year (FFY) 2022, total Medicaid spending nationally was $792.7 billion (with $565.8.0 billion in federal funding alone), while total CHIP spending nationally in FY 2022 was $22.3 billion (with $16.9 billion in federal funds).

Kansas’ Share

The federal government provides broad guidelines to states regarding allowable funding sources for the state share of Medicaid expenditures. However, states are mostly free to determine how to fund their share of Medicaid expenditures. As a result, there is significant variation from state to state in funding sources.

To finance the state’s share of Medicaid, states can use state general funds (i.e., individual income, sales, and corporate income taxes), as well as other state funds like provider taxes, local government funds, or tobacco settlement funds. Federal law allows as much as 60% of the state’s share to come from local government funding. Federal regulations also stipulate that the state share cannot be funded with federal funds (Medicaid or otherwise).

In Kansas FY 2023, Medicaid and CHIP covered an average of 529,000 people in Kansas per month, at a cost of $5.4 billion for the year. Both enrollment and total Medicaid expenditures increased between FY 2008 and FY 2017, followed by an enrollment decrease from FY 2018 through FY 2020, before increasing sharply in FY 2021 due to the COVID-19 pandemic.

The latter increase in enrollment was seen across the country towards the end of FY 2020 and during FY 2021 as the federal government mandated continued health insurance coverage for under-resourced populations during the pandemic.

About 23.0 percent of all Medicaid and CHIP enrollees in Kansas are adults aged 65 and older or people with disabilities, but this combined population incurs two-thirds (68.8 percent) of total state expenditures for Medicaid and CHIP. Children and families, including kids enrolled in CHIP, account for more than three-quarters (77.0 percent) of total enrollees and incur about one-third (31.2 percent) of state expenditures.

In FY 2023, annual Medicaid and CHIP spending averaged $3,644 per pregnant woman, child, or family member, compared to $32,459 per enrollee with a disability and $20,511 per enrollee age 65 and older. These differences reflect the greater use of services, including long-term services and support, by adults age 65 and older and people with disabilities.

Kansas History of Administration & Spending

The Medicaid program in Kansas was administered on a county level until 1974, when the Kansas Department of Social and Rehabilitation Services (SRS) was created. SRS acted as the single state Medicaid agency until 2005, when the Kansas Health Policy Authority (KHPA) was created. KHPA administered Medicaid and CHIP until Executive Reorganization Order No. 38 in 2011 transferred them to the Kansas Department of Health and Environment (KDHE).

Within KDHE, the Division of Health Care Finance (DHCF) administers Medicaid under federal guidelines and rules that ensure a minimum level of coverage for certain population groups. DHCF is responsible for establishing eligibility criteria, benefit packages, payment rates, and program administration. The Kansas Department for Aging and Disability Services (KDADS) is responsible for management of Medicaid program services for behavioral health, people with disabilities and adults age 65 and older.

In November 2011, Kansas announced significant structural and operational changes in the state’s Medicaid program. These changes created KanCare and were designed to slow the growth of Medicaid costs and improve health outcomes by requiring nearly all Kansans enrolled in Medicaid and CHIP to enroll in private managed care plans handled by managed care organizations (MCOs), which are responsible for reimbursing providers for services used by members. Managed care is about 90% of total Medicaid and CHIP spending, with most of that going to medical care services.

Program Eligibility

Medical assistance in Kansas covers people who meet certain eligibility requirements. Some criteria apply to all medical assistance programs while others apply just to particular programs. Eligible populations are limited to:

• Kids up to age 19, including those in foster care or who receive adoption support payments;
• Persons under age 26 who were in foster care at the time of their 18th birthday;
• Pregnant women;
• Persons who are blind or disabled by Social Security rules;
• Persons aged 65 or older;
• Persons receiving inpatient treatment for tuberculosis;
• Low-income families with kids under age 19; and
• Persons screened and diagnosed with breast or cervical cancer through the Early Detection Works program who are currently receiving Social Security payments.

Most medical programs also have income or asset limits. These general rules apply to all programs:

• Residency: Recipients must live in Kansas.
• Citizenship and Immigrant Status: Recipients must be a citizen or an immigrant with a certain status. Some immigrants must wait five years before they are eligible for coverage.
• Household: The people included in the medical assistance plan may be different for various medical assistance programs.
• Other Health Insurance: If recipients have other health insurance, they must use it first.
• Coverage Date: Medical assistance usually starts with the month of application.
• Reviews: Yearly medical assistance reviews.

Conclusion

As overall health care costs climb, families across the nation continue to struggle to afford health care. Particularly for those falling just outside of eligibility, lack of health care is a worrying reality. Access to quality, affordable health care is essential for all Kansans to thrive in their homes, workplaces, schools, and communities.

Ensuring Kansans have access is a complicated task for lawmakers, with financial limitations and tradeoffs. So far in Kansas, there has not been enough political will to undertake the federally incentivized expansion of Medicaid that 40 states (including D.C.) have already adopted, which would provide health care coverage to many more Kansans and improve the program through broader scopes of services and better reimbursement for service providers.

With the state coffers overflowing for the first time in many years, expansion is more feasible than ever before, and the ability to use federal funds for services the state is already paying for will be a worthy return on investment.

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