On this episode of Kentucky Health, Dr. Wayne Tuckson welcomes Dr. Kevin Martin, a retired vascular surgeon and a current adjunct professor at the University of Kentucky College of Medicine, to discuss the Medicaid health insurance program. Here are key takeaways from the discussion.
- 1. Medicaid was created by federal law in 1965 to serve low-income individuals and their children. (It is different from Medicare, which provides health insurance to elderly Americans.) Since then, Medicaid has evolved in several ways, including expanding coverage in many states during the 2010s to help those burdened by rising health care costs.
While Medicare is a fully funded federal program, Medicaid is a partnership between the federal government and states, Dr. Martin says. Funding of Medicaid, called Federal Financial Participation (FFP), varies from state to state based on the per capita income of a state compared to the U.S. per capita income. That means that states with larger low-income populations receive more federal assistance.
With approval from the federal government, states can make changes to how they administer Medicaid. A provision in the Patient Protection and Affordable Care Act (ACA) granted states the authority to expand Medicaid coverage to their residents – and all but 10 have done so. In Kentucky, former Gov. Steve Beshear and his administration oversaw the implementation of Medicaid expansion under a program called kynect.
“The eligibility is, by and large, that you can sign up for Medicaid if you (earn) less than 138 percent of the federal poverty level for that area,” Martin says. After the Affordable Care Act expanded Medicaid coverage, he explains, states that accepted the federal support and raised the eligibility limit saw their percentage of uninsured citizens substantially decrease.
The funding mechanism also changed, Martin says. For 2025, Kentucky will receive a base 71 percent FFP, but children in Medicaid through the Children’s Health Insurance Program (CHIP) and people who gained coverage during the ACA expansion will receive 80 percent of their funding via the FFP. During the COVID pandemic, Medicaid enrollment in the commonwealth increased by 30 percent.
“Now that the pandemic is over, (the federal government) is stepping down the amount they are paying, and as a result, Kentucky is having to pay a little bit more,” Martin says. Since this is the case, the Republican-controlled legislature is exploring options to revise Medicaid eligibility in an effort to lower the state’s financial burden. (After this program aired, the General Assembly passed legislation mandating work requirements for “able-bodied” adults on Medicaid).
“In this state, Kentucky, you have to understand there’s over 1.5 million people on Medicaid. We’re talking a third of the population,” Martin says. “That’s a huge number. And so, if you take a look at the program, it’s the largest part of the state budget, it’s 29 percent of the budget. It’s $20 billion per year.”
Martin notes, however, that that Kentucky only pays $2.8 billion of that amount due to the FFP. Overall, he says Medicaid expansion in Kentucky has been positive because it gave thousands of formerly uninsured people access to routine medical services. This will lead to better health outcomes for Kentuckians and also lower health care costs in the long run, he believes.
“This makes them a healthier workforce, a healthier population, and getting them on the Medicaid rolls that they couldn’t get on otherwise is dragging a lot of money into the state that would not otherwise be coming in. It becomes an economic engine” he says.
- 2. One of the main criticisms of the Medicaid program in Kentucky comes from the medical community over physicians’ reimbursement fees, which are set by the state and paid by managed care companies with Medicaid contracts. The reimbursements for Medicaid patients are substantially lower than what physicians receive for treating Medicare patients.
“The physician fee schedule for Medicaid in Kentucky is woefully inadequate,” Martin says. He explains that at most, physicians treating Medicaid patients are reimbursed at 80 percent of Medicare rates. “And for the most common office visits, the things that really support primary care physicians especially in the rural areas, they’re paying only 50 to 55 percent of Medicare rates... Now, you’re really trying to get people to operate at a loss.”
According to Martin, low physician fees in Medicaid are the result of a large portion of the state’s overall Medicaid budget going to paying hospitals, drug manufacturers, and even transportation services, which is provided to Medicaid patients unable to travel to their appointments. His argument for reform is clear: In a state where one-third of the population is on Medicaid – and many of these folks are located in rural areas – offering low reimbursement for Medicaid physicians in those areas is unsustainable and will drive existing practices to move out and serve as a disincentive for any new ones to relocate.
“Primary care is incredibly important because they’re directing the health care,” Martin says. “These doctors have the primary relationship with the patient, but they’re also the ones that identify and send the people off to specialty care – and you have to try to get the specialty care. I’m talking about obstetricians, surgeons. You’ve got to have the care there (in rural areas). Nobody wants to drive 100 miles to go deliver a baby or have an operation.”
Martin says that it would take only a fraction of 1 percent of Kentucky’s budget to increase Medicaid physician reimbursement fees more on par to those provided for treating Medicare patients. He believes that this increase should come out of state budget surpluses, which have been in excess of $1 billion in recent years. He also warns that physician shortages in many of Kentucky’s rural areas will only worsen if the current fee structure persists.
- 3. Medicaid coverage will likely change in the future, just as it has in the past, determined by political goals of elected officials at the federal and state levels.
Under the Trump administration and Republican majorities in both houses of Congress, some of the provisions implemented a decade ago under President Barack Obama could be reviewed, adjusted, or eliminated.
“The interesting things are that, one, there’s always financial pressure because we have these huge programs – we’re talking about 80-90 million people on Medicaid and 65 million people on Medicare,” Martin says. “These costs are going up, never mind the fact that the feds have put in a lot of rules and regulations and what they’ve done is driving those costs up, but there’s going to be pressure to change them.”
Martin says that new appointees to oversee the U.S. Department of Health and Human Services might attempt to revise Medicaid rules and place more emphasis on preventive health services, but he adds that making changes will require Congress to adjust the original 1965 Medicare and Medicaid Act.
“So it’s hard to say what’s going to really happen,” he concludes. “Will there be changes? There always are changes – they’re trying to limit the costs yet deliver the goods.”
