Hospitals, physicians, psychologists and more will soon see less money for the services they provide to Kentucky Medicaid patients.
In a June letter to healthcare providers, Democratic Gov. Andy Beshear’s administration blamed the Kentucky General Assembly for not providing “sufficient funding” for services in the new two-year budget, requiring the state to slash rates for many healthcare providers by 4% across the board.
“The Governor and his administration repeatedly warned the General Assembly about the painful impacts that would be felt by the unnecessary and harmful budget cuts, yet no action was taken by the legislature,” wrote Lisa Lee, the commissioner of Kentucky’s Department for Medicaid Services. “As a result, (DMS) must take the necessary action to align Medicaid program expenditures with the funding appropriated by the Kentucky General Assembly.”
Lee’s letter listed 46 different provider types that would see the 4% rate reduction. It specifically impacts fee-for-service providers — those that don’t operate through Kentucky's five managed care organizations (MCOs), the health insurance companies that administer Medicaid payments for the state.
The 4% cut extends to Medicaid waiver programs specifically designed for individuals who are ventilator-dependent, those with intellectual or developmental disabilities and older adults with physical disabilities. The waivers are designed to allow Kentuckians who require long-term intensive care to remain at home or in their communities.
Amy Staed, the executive director of the Kentucky Association of Private Providers, said Kentuckians with severe disabilities who access Medicaid through waiver programs will be the most impacted.
The waitlist for waiver slots already stretches into the tens of thousands, and Staed said many wait even longer once they get a slot due to provider shortages. A cut into already razor-thin margins could mean providers will have to cut services, wages or capacity.
“This is about choices, and the simple fact of the matter is nowhere in the budget does it order the governor to make a 4% cut to waiver services,” Staed said. “We hope that the governor makes a different choice, because right now he is the sole person that has the ability to act. The General Assembly is not in session.”
The Cabinet for Health and Family Services, which houses the state’s Medicaid program, did not respond to any questions before publication. Spokespeople for Republican leadership also did not respond to requests for comment.
More than 75% of Kentucky’s Medicaid spending is funnelled through MCOs, with the other $5 billion funding the various fee-for-service providers, as of the last fiscal year. Staed questioned why fee-for-service providers, and not the large MCOs, are bearing the weight of the cuts.
In the final budget passed this year, the Republican-controlled General Assembly required the governor to cut costs differently in 2028. It calls for his administration to reduce MCO payments by 2.5% that year, which likely amounts to hundreds of millions of dollars that the budget specifically says should be used to increase fee-for-service reimbursement rates.
Based on fee-for-service and MCO spending in the last fiscal year, a 4% cut to provider rates would amount to $200 million less spending per year. A 2.5% cut to MCO payments would amount to $375 million per year, which the budget would then direct to rate increases for fee-for-service providers. The two-year budget also included $39.6 million annually to increase reimbursement rates for dentists, whom the cabinet said would receive a 4% cut in the June letter.
The Beshear administration’s letter to providers is another chapter of the battle between the governor and Republican lawmakers over Medicaid spending.
Rep. Jason Petrie, the GOP chairman of the House budget committee from Elkton, bristled at Democratic lawmakers referring to the budget bill as “drastically cutting Medicaid” as it passed on the chamber floor, yelling that “restraining the growth in spending is not a cut!”
The two-year budget bill appropriated more for Medicaid benefits than what is currently allotted, but nearly $700 million less than what Beshear requested. It also set aside $290 million in the budget reserve trust fund that could be used to cover benefits next year if the state runs low on budgeted funds. Explaining why the bill spent far less on Medicaid than what Beshear requested, Petrie said he does not believe the administration’s estimates.
In a social media video last week, Beshear laid that blame for looming Medicaid and behavioral healthcare cuts directly at the feet of GOP legislators, saying he warned them that their budget underfunded Medicaid and would lead to painful cuts in services. He also called on Kentuckians to call their state legislator and urge them to appropriate more funds next year.
“They shorted this budget significantly, but they're back in January, and they can provide the funding that can save some of these services, and ultimately provide an amount of money to our Kentucky providers that are providing these services that is fair,” Beshear said. “But we can only spend what we have. We need your help, please.”
Earlier this month, the Beshear administration informed the state-owned Lee Speciality Clinic that the majority of its funding would be cut. The clinic is one of very few resources that provide comprehensive medical, dental and psychological care to Kentuckians with intellectual and developmental disorders. The cuts are not tied to Medicaid, but to a different department in the Cabinet for Health and Family Services. While Beshear blamed Republicans’ state budget, GOP legislative leaders said their bill did not necessitate such drastic measures.
