CHIP and Medicaid Enrollment Increases, Combined with Medical Inflation Create Medicaid Budget Shortfall in Kentucky

Kentucky will experience a $12 million to $24 million Medicaid budget shortfall in the fiscal year ending June 30, state Budget Director Jim Ramsey announced Monday, the Louisville Courier-Journal reports. Calling the problem "potentially serious," Ramsey said that the shortfall could increase to $70 million in the second year of the current state budget. There were two main factors contributing to the shortfall. First, the budget "did not anticipate the large [enrollment] increase" in Kentucky's Medicaid plan Children's Health Insurance Program. In 1999, Kentucky launched an outreach program to enroll children in its CHIP program, a Medicaid expansion, netting the state enrollment increases in both the CHIP and Medicaid programs. Second, the costs of Medicaid services -- particularly prescription drugs -- were higher than originally estimated. Ramsey said the budget was based on a 3.1% medical inflation rate, but the actually rate reached 4.3% this year. Luallen said the administration would look at "various options" to eliminate the shortfall. She said, "That has to come on the side of payments to providers or benefits to consumers who are part of the program. All of those issues have to be on the table as we try to look at what is the least amount of pain as we're trying to manage our way through this budget situation." Sarah Nicholson, vice president of the Kentucky Hospital Association, said that "no plan" had been proposed to address the shortfall yet, but she cautioned that hospitals cannot afford any further reductions in reimbursement rates after recent cuts from the state and federal governments. In addition, the shortfall comes at a time when Kentucky's Medicaid managed care program, Passport Health Plan, is seeking a 10% budget increase for next year, more than twice what the state has budgeted. Passport spokesperson Jill Bell said, "We're concerned. We're doing a good job. We're saving the state money, and we need the larger increase to continue to do what we're doing" (Loftus, Louisville Courier-Journal, 12/19).