Friday, March 25, 2011

Special Session - Day 9 Update


Action and Adjournment

A lot can happen in a day. A Senate version of House Bill 1, legislation to address a $166 million shortfall in the Medicaid budget, passed a Senate Committee, passed the full Senate, the House approved the Senate amendments, and the bill was delivered to the Governor...all on Thursday. Not to mention the House adjourned Sine Die possibly ending the Special Session.

As the 9th day of the Special Session began, we were anticipating a Senate version of HB 1 to pass the Senate today, but once the details were revealed, which included cuts to education, it seemed clear that the House would not support the Senate version and we would be heading to a conference committee to resolve differences between the House and Senate versions. After a prolonged recess this evening, the House came back into session and concurred in the Senate version of House Bill 1, with the understanding that Governor Beshear will utilize his power to line-item veto the cuts to education, veterans affairs, and other language provisions opposed by the House.

Once the bill was delivered to the Governor, the Senate adjourned until April 6 when they would return to consider overriding any vetoes issued by Governor Beshear. However, the House adjourned Sine Die, meaning that they do not intend to reconvene during this Special Session.

The net effect of these actions is not clear, but at the time of this writing it appears that the session has ended though we will have more details once the dust settles.

Senate Plan Details

The SCS to HB 1 does the following (a summary of the bill is available HERE):
  • Accounts for half ($69 million) of the savings the administration has said they can make with Medicaid managed care.
  • Reduces the amount the administration can realize through debt restructuring by $67 million.  This language reverts back to what the General Assembly passed in the budget bill last year.
  • Establishes across the board cuts of 0.355% in FY 11 and 1.74% in FY 12 with a few exceptions (which are listed in the attached document)
  • The SEEK formula (K thru12 funding formula) will have no cuts in FY 11 and .812% in FY 12
  • Postsecondary Education will have no cuts in FY 11 and 1.74% cuts in FY 12
  • The SEEK and Postsecondary cuts will not take place until January 30th.
  • If the administration is able to achieve the $69 million in savings PLUS the cost of the education cuts, then the cuts will be restored to SEEK and Postsecondary Education, assuming the General Assembly acts prior to January 30, during the 2012 session.
In addition to the funding aspects of the legislation, there were a few other items included.  The Senate Committee Substitute to HB 1 also does the following:
  • Repeals the Governor's ability to furlough with the effective date of the bill
  • Establishes no pay for legislators during the special session veto period
  • Includes an emergency clause, which means the bill takes effect immediately after being signed by the Governor.
  • Authorizes the Legislative Research Commission to enter into 2 agreements with accounting firms.  One agreement will be to work with the Consensus Forecasting Group to evaluate the estimated Medicaid savings through managed care by January 2, 2012.  The other is to assist with evaluation all expenditure reductions.
  • Requires face to face interviews to determine Medicaid eligibility.
  • Includes language that shifts funds in the Road Fund for debt service, but there is no budget impact in doing so.

We will have more details on the vetoes and how the session adjourned as they become available.

Wednesday, March 23, 2011

Special Session - Day 8 Update


Action Turns to Senate
(Curious to how we got here, see all of our special session updates at blog.govplan.com)

Tomorrow is shaping up to be a big day in the Senate relative to House Bill 1, legislation to address a $166 million Medicaid budget shortfall. We anticipate that a Senate version of the bill will be considered by the Senate Appropriations & Revenue Committee and the full Senate on Thursday. We have heard that the bill may very well be headed to a conference committee with the House to work out a final compromise, though the situation remains fluid. We believe Senate A&R will meet at 10:00 a.m. and the Senate will convene at 1:00 p.m. 

Details of the Senate plan remain scarce, though based on the line of questioning today the Senate Majority seemed skeptical of the Beshear Administration's ability to deliver the projected savings. They may look at more across the board cuts to generate a larger share of the funds needed to balance the shortfall. We hopefully will have more details in the morning and will communicate those.

Senate A&R
The Senate spent today beginning its deliberations on House Bill 1. The Senate Appropriations & Revenue Committee held a series of three meetings today with CHFS Secretary Janie Miller appearing before the committee. These meetings provided an opportunity for committee members to ask questions on a variety of topics related to the Medicaid budget shortfall, and more specifically could the Cabinet could achieve the savings of $139 million included in the House version of HB 1. The main themes of the key members' questions surrounded these issues:

- In the House plan the State Budget Director has to certify the Medicaid managed care savings or budget cuts go into place. How are these Medicaid savings defined? How will we know you have achieved those savings in August when you will only have signed the contracts in July? Is the Budget Director the right person to make the certification?

- Number of Medicaid Eligibles: The Cabinet has projected that the rate of growth in new Medicaid eligibles will slow to under 2000 per month on average in FY 2012. What happens if the number goes up? Won't that impact the savings in the plan?

- There was significant questioning about these managed care contracts and how these contracts could guarantee the savings in Medicaid that the administration thought they could garner. There was also questions about how quickly the administration would have to move in order to get these in place by July 1. There were several in-depth questions regarding how many contracts, what services they would cover, etc.

- From members of both parties there was several questions asked about the level of confidence Secretary Miller had that she could generate the savings in the House plan. To all of them she said that she was confident, though she did say that not all of the savings would come from managed care as other Medicaid efficiencies would also be needed to make up the rest of the savings.

Secretary Miller's answers to these questions was generally forthcoming and she at least attempted to answer 6 hours worth of questions today. The one exception was that Miller refused to answer questions directed towards the RFP's, because she said that the RFP's would be on the street next week and the Cabinet was in the procurement process, which precluded her from communicating any of those details. This was very frustrating to many on the committee.

These articles will give you a flavor for the tenor of the hearing:


House & Senate Daily Actions
Neither Chamber took significant legislative action on the floor today, and the House adjourned until Noon on Thursday and the Senate adjourned until 1:00 p.m. on Thursday.

Tuesday, March 22, 2011

Special Session - Day 7 Update

Special Session Day 7 Recap
(Curious to how we got here, see all of our special session updates at blog.govplan.com)

 The day was light on official legislative activity, which is detailed below. Of most interest is that the Senate Majority Leadership and Senate Republican members of the Appropriations & Revenue Committee met this morning and we believe are meeting again this afternoon to discuss the House version of HB 1 and how the Senate plans to approach the legislation.

The Senate Appropriations & Revenue Committee has scheduled a meeting for tomorrow, Wednesday at 10:00 a.m. to take testimony on House Bill 1. We are not anticipating that the bill will be up for a vote at tomorrow's meeting.

The two items of major speculation at this point are:
1. The Senate Approach: Has the House satisfied the Senate's need to make further cuts and reduce the Governor's ability to restructure debt? How substantive will the Senate's changes to the bill be?
2. Timeline: Will the House and Senate try to resolve their differences before the Senate amends the bill and sends it back to the House? If they did, then the House could simply concur in those Senate amendments without the need for a conference committee. How does the Governor's veto factor into this? Will the legislature extend the session and wait to see if the Governor utilizes the veto before adjourning the special session?

Senate Daily Action
The Senate briefly convened this afternoon and gave House Bill 1 its 2nd Reading and referred the bill to the Senate A&R committee for action. Now that HB 1 has two readings it can be voted from committee and considered on the floor the same day.

The Senate adjourned until 2:00 p.m. on Wednesday.

House Daily Action
With House Bill 1 over in the Senate the House took no action on the floor today and adjourned until Noon on Wednesday.

Drop Out Bill
The Senate Minority caucus took testimony from First Lade Jane Beshear and Rep. Jeff Greer to urge the Senate to take action on House Bill 2, legislation to raise the drop out age to 17 by 2015 and to 18 by 2016. The legislation has passed the House three times in different sessions, but has yet to be considered by the Senate. This media report of the meeting provides more details. Herald-Leader

Special Session - Day 6 Update

House Takes Action on HB 1

House Bill 1 took a big step forward today, as the House passed an amended version of the bill containing a "bi-partisan" plan to resolve the Medicaid budget shortfall. A copy of the House Committee Substitute to HB 1 is available HERE. Here are a few of the highlights:

- Moves $166 million from FY 2012 to FY 2011 to balance Medicaid budget.
- Governor has to certify to the General Assembly by August 15, 2011 that he can achieve the $139 million in savings necessary in FY 2012 through Medicaid managed care.
- If the Governor can not meet those savings projections then the Governor is directed to make across the board cuts beginning October 1, 2011. However certain agencies are exempted from cuts including: all levels of education except the Council on Postsecondary Education, veterans affairs, local government economic development and assistance funds, and teachers retirement.
- The House plan also re-opens the mandated budget reductions that passed as part of the 2010 budget related to $169 million in FY 2012. It further restricts the Governor's options to achieve that savings and forces him to make cuts to government contracts and to reduce non-merit personnel.
- Further the House restricts the Governor's use of furloughs in FY 2012.

The House Appropriations & Revenue Committee met and the committee substitute was adopted without a dissenting vote. Then within a few minutes the full House approved the bill by a vote of 94-4. The four No votes were from House Republicans: Rep. Stan Lee, Rep. DeCesare, Rep. Kerr, and Rep. Fischer.

The legislative process now turns to the Senate for them to review the House version of HB 1, and to begin to formulate their position on the House bill and their approach to solving the Medicaid budget shortfall. During the Regular Session and in a letter they sent to the House last week, the Senate has favored across the board cuts to most state agencies including education to achieve the needed savings.

The House adjourned until 10:00 a.m. on Tuesday. The Senate took no action on the floor today and adjourned until 2:00 p.m. on Tuesday.


House A&R Committee

The House Appropriations & Revenue committee had another informational meeting today and heard testimony from Sec. Miller regarding Medicaid managed care and how they would achieve the needed savings. A copy of that presentation is available HERE. In the committee meeting, Secretary Miller discussed how the administration is limited in how they can handle the Medicaid deficit, and that if they are not allowed to shift funds and implement managed care, then the only way to deal with the shortfall is either to reduce benefits or cut provider reimbursement.  She said that reducing the benefits is not an option that this administration is comfortable with.  From December of 2007 to December of 2010, KY Medicaid enrollment increased by 95,000 members.  Miller discussed that Kentucky is one of 20 states looking at expanding managed care and then touched on various independent studies that show savings can be achieved.

A good amount of time was spent discussing the timelines for implementing managed care.  The timeline is as follows:
  • RFPs Issued - April 1
  • RFP Responses Due - May 15
  • RFP Contract Awards - July 1


We will continue to keep you updated as the attention turns to the Senate.

Monday, March 21, 2011

Medicaid Resources from CSG

The Council on State Governments put out this handy resource regarding Medicaid match rates and how states will fare with the expiration of the enhanced ARRA (Federal Stimulus) match rate.

This is timely for those of us closely watching the Kentucky General Assembly grapple with filling the $166 million Medicaid deficit in special session. This deficit was caused mostly by the gap in ARRA expected funding and the reduced amount that Congress actually sent the states including Kentucky.

Some of the most helpful information in the CSG post was this spreadsheet showing the match rates by quarter, here are Kentucky's:

                           2008                  2009                               2010                                                        2011                             2012
                                                Q1   Q2   Q3    Q4                  Q1    Q2    Q3    Q4                   Q1    Q2    Q3    Q4   
Kentucky  69.78     77.8 77.8 79.41 79.41    80.14 80.14 80.14  80.14    80.61  77.78  75.9 71.49   71.18


The other interesting chart was this one showing Kentucky as one of only 17 states that will have a better match rate in 2012 than in 2008.





More resources to come and thanks to CSG for the info.

Special Session - Week 1 Update


Time Marches On...

As we end the first week of the 2011 Special Session, called by the Governor to address a $166 million shortfall in Medicaid and to consider legislation to raise the drop out age, things look a lot different than they did at the beginning of the week. Monday and Tuesday the Governor traveled around the state waging a campaign against the Senate's plan to cut state government and education to balance the Medicaid budget. Senate President Williams countered by challenging the Governor to a statewide televised debate of the issue, which the Governor declined. Needless to say the political rhetoric was at a high point.

As the week progressed, the House held a series of hearings from Medicaid providers and state agencies that detailed the impact possible cuts to Medicaid provider reimbursements and further state budget cuts would have on these various groups from Hospitals to Corrections. These hearings provided informational testimony, but also had the effect of taking the "air out of the ball" and dampening the political environment.

But as we look back now, the legislature has used 5 legislative days and House Bill 1, the vehicle for making changes to Medicaid, has yet to be considered by the House Budget Committee and though Speaker Stumbo and Minority Leader Hoover have been working on a compromise plan to solve the Medicaid budget shortfall, no concrete details have been released and it doesn't appear the Senate has been briefed on the plan.

The Senate released this letter mid-week, which was a restatement of their position during the Budget Conference Committee at the end of the Regular Session with the exception of allowing revenues above cuts to be given back to the agencies that were cut. Since this is a budget issue, HB 1 must originate in the House, so the Senate has been left to wait on the House to act. Majority Leader Stivers alluded to that on the Senate Floor on Friday wondering: "why we're here in the capitol since it has been 9 days and there is nothing from the house that has consensus."

House Plan
The little that Speaker Stumbo has shared publicly regarding the House plan is summarized best in this article by Ronnie Ellis in the Daily Independent:  "Stumbo's plan sets target dates for Beshear to report on progress toward achieving his savings – dates in advance of next January's budget session so cuts could be made early enough in the fiscal year to reach established spending targets."

The action should pick up next week when the House Appropriations & Revenue Committee meets at Noon on Monday to hear "important testimony" regarding House Bill 1 and what is likely further details of the House plan. The House and Senate both plan to convene at 2:00 p.m. on Monday.

What to Watch For
1. Speaker Stumbo may have to gig the Governor next week when the House plan is unveiled. The Governor has asked specifically for the legislature to give him the ability to manage the Medicaid shortfall by moving funds from FY 2012 to 2011. However, it is likely that the House plan is going to impose budget cuts if the Governor can not produce the Medicaid savings.

2. The Governor to appear before the House Appropriations & Revenue Committee Monday. Pure speculation on our part, but it would seem like a nice gift from House Democrats for the Governor to at least get some face time next week after they unveil a plan that isn't exactly what the Governor was hoping for. That being said, this Special Session has been a lot about the 2011 Governor's race so the Governor may appreciate the face time. 

3. How will the Senate react? Will they stick to their guns on across the board spending cuts and if so will this Special Session run through the end of next week for the legislature to work through another budget conference committee? It seems like the Senate is pretty dug in on making across the board cuts, so it isn't clear the House and Senate are any closer than when the Regular Session ended.

Legislative Activity
Neither Chamber took any significant action on the floor on Friday.

Thursday, March 17, 2011

Special Session - Day 4 Update

Day 4 Highlights

House

Today the House Appropriations & Revenue committee met but took no action on HB 1, the bill addressing the Medicaid budget shortfall. However, on the floor today the House Leadership announced that all House members were encouraged to attend an A&R Committee meeting on Monday at 2:00 p.m. where "important testimony" would be provided on HB 1. The House plans to convene at 4:00 p.m. on Monday and 9:00 a.m. tomorrow.

A&R Committee:
The House Appropriations & Revenue Committee met today and continued their testimony regarding the potential impact further budget cuts would have on state agencies.

Today's testimony was provided by State Budget Director and Secretary of the Cabinet Mary Lassiter. Her presentation was focused on providing a perspective on the history of budget cuts and the economy over past 4 years, impacts of future cuts, and to further discuss debt restructuring. A copy of the slide presentation is available for download, here are the highlights:

- History of cuts and revenues - Still not back to 2008 revenue levels although they may reach that and beyond in 2012. The administration has made eight budget reductions with two more to come in 2012 that will total $250 million.

- 83% of general fund has been held without cuts, because SEEK, Medicaid, and others have been held harmless. However, those that have been cut which is most other state agencies have had
cuts of 25-30%.

- Addressed state employee hiring numbers. They have declined on trend, low point in 2009 when the  retirement window closed, Beshear has added some people, mostly funded with federal funds, in the areas of workforce development and unemployment insurance or at Revenue where additional auditors were allowed for in the budget.

- Probably the most interesting point was in regards to the impact of future cuts. Due to the already mandated $169 million in cuts provided in the 2010 enacted budget, a scenario like the Senate has discussed would be an additional 2% across the board cuts on top of that. However, if the same programs like Medicaid and SEEK were exempted like they were in 2011, the 2% across the board cut turns into 9.5%.

- Because of the use of $565 million in one time monies in the 2010 enacted budget there will be a $565 million structural imbalance going into 2013-14 budget cycle.

The next meeting of the committee will be Monday at 2:00 p.m.

Senate

The Senate convened briefly today and took no action on the floor. They plan to convene tomorrow at 9:00 a.m.

Dustin Miller
Government Strategies, LLC
229 Shelby Street
Frankfort, KY 40601
Work: (502) 226-3975
Cell: (859) 227-5800





Wednesday, March 16, 2011

Special Session - Day 3 Update


Here is an update on legislative activities in each chamber from Day 3 of the Special Session, the Senate letter to the Governor regarding the Medicaid budget shortfall is available HERE:

House
The House Appropriations and Revenue Committee met this morning and continued testimony from provider groups who would be impacted by 35% cuts if the Medicaid deficit isn't resolved.  The groups that spoke to the impact of the cuts were Kentucky Assoc of Homes and Services for the Aging, KY Dental Association, KY Association of Regional Mental Health/Mental Retardation Programs, KY Association of Private Providers, and the KY Association of Adult Day Centers.  All groups urged the General Assembly to resolve the budget problems and detailed how they would be forced to implement a  35% cut in reimbursement.  The A&R committee plans to take additional testimony tomorrow afternoon and Chairman Rand said it could be early next week before the committee takes action on HB 1 - the Governor's proposal.
The House voted on HB 2 on the floor this afternoon while in Session.  HB 2 is the legislation the Governor has touted the past several sessions that would increase the age at which students can drop-out of school.  The measure passed the House and will be sent to the Senate.  The Senate has not acted on this bill in previous sessions, and we have no indication they will do so during this special session.
Following action on HB 2, the House adjourned for both parties to caucus with their members. 
Senate
While the Senate has been fairly quiet in the previous few days, we saw activity today on a couple of fronts.  The Senate A&R committee met briefly during a recess this afternoon and passed SB 1.  SB 1 is legislation that addresses the post-secondary education funds that allow the state to comply with Federal maintenance of effort provisions. This was part of HB 305 from the regular session and while there seems to be no opposition from either side, the Medicaid budget disagreements prevented any action from being taken.

In addition, Senator Leeper (chair of the A&R committee) communicated with the body, when the Senate reconvened.  He announced to members that the Senate Leadership had sent a letter to the Governor outlining 9 principles that they have entitled Roadmap to a Responsible Solution.  The letter is available here.  It seems as though this is their attempt to begin the discussion on reaching a solution.  Speaker Stumbo and all members of the General Assembly were copied on the letter.
Prior to adjourning for the day, Senator Stivers announced that they will reconvene at 2pm tomorrow afternoon and then again at 9am on Friday.  He told members that at this time he doesn't have information as to whether some or all members would need to be in Frankfort over the weekend.  He also said that it was the Senate's hope to have HB 1 in their possession for action on Monday morning.  That doesn't seem to fit with the time guidelines provided by the House this morning.

Special Session - Day 2 Update

Special Session - Day 2 Summary


Probably, the big news out of Day 2 is that Speaker Stumbo and House Minority Leader Hoover have met and are discussing a compromise plan from the House on HB 1 to deal with the Medicaid budget shortfall. Although details are not clear at this point it appears that they are looking at a plan that would give the Governor an opportunity to make savings in Medicaid, but if he is unable then cuts would be made to state government to balance the budget. The one area that would not be cut is education. This is still in its early stages and according to press reports the Senate has not been involved in these discussions thus far.


After beginning with a flurry on Day 1, the second day of the Special Session got down to business with several committees meeting. House Bill 2, Rep. Greer's legislation to raise the drop out age to 18 by 2016, being voted out of committee and headed to the House floor for a vote on Wednesday. Here is a recap of today's legislative activity:


House
As is usually the case in special session's involving the budget the activity begins in the House. That was the case today with three House Committees meeting and taking testimony on how possible budget cuts would impact various areas of state government.


Education Committee: Passed out favorably HB 2, legislation to raise the drop out age to 18 by 2016. The committee also heard from representatives of various education groups about how past, current and proposed budget cuts would impact everything from small independent districts, teacher staffing, and implementation of past legislation regarding testing. The general theme was that they are running on very tight budgets now and further cuts would directly impact services provided.


Appropriations & Revenue Committee: Did not vote on HB 1, the vehicle for amending the budget to deal with the Medicaid budget shortfall. They did take testimony on the impact of the proposed 35% cuts to Medicaid reimbursements to providers if the legislature is unable to solve the Medicaid budget deficit. The committee heard testimony from the KHA, KMA, Local Pharmacies, and KY Health Care Facilities Assoc. Here are the high points:


KHA:  The cut equals a $125 - $130 million dollar reduction to hospitals in Kentucky. The reimbursement cuts will likely lead to employee furloughs, reduction in hours, delay in hiring, and suspension of certain services. In response to a question, Mike Rust said that he does not anticipate any hospitals shutting down over the 3 months that cuts are in place.

American Pharmacy Services Corporation: Represents roughly 200 independent pharmacies in mainly rural counties discussed examples as to what a pharmacy will lose due to the cuts. One such example is that a pharmacy will lose roughly $64 for every 30 day supply of Lipitor.

KMA: The reimbursement cuts will effect 8400 physicians statewide. Many doctors have said they may not stop seeing Medicaid patients altogether, but they will be forced to reduce the number of patients they do see.  It was also pointed out that the cuts will have a devastating effect on doctors who practice in the rural areas of the state and depend largely on Medicaid and Medicare patients.

The Kentucky Association of Healthcare Facilities: Had a similar story to tell. On average statewide, nursing facilities depend on Medicaid for 65% of their budgets.

Judiciary Committee - Heard from several groups including Justice Secretary Brown who discussed how the proposed budget cuts could affect implementation of HB 463, the corrections/penal code reform legislation passed in the 2011 Regular Session. There was also presentations from prosecutors and public defenders that in essence these budget cuts amounted to less people and would increase case loads.


On the floor today, the House gave 2nd readings to HB 1 & HB 2. The schedule for tomorrow is:


10:00 a.m. House A&R Committee will meet and hear further testimony regarding budget cuts effects on agencies.
2:00 p.m. House Convenes for a vote on HB 2, the drop out bill.
Upon House Adjournment: The House Democrats will be caucusing, most likely on the proposed compromise discussed above. That could mean HB 1 could move out of the House on Thursday.


Senate
Things were relatively quiet in the Senate today, which is natural given that the House generally gets first bite of the apple on appropriations bills. That being said the Senate did give second reading to SB 1, 2, and 3, although its not clear if any of these can be acted on in this special session.


We will continue to keep you updated as things develop.

Special Session Update - Day 1

And so it begins...

The Special Session got underway in Frankfort Monday with both the House and Senate convening this afternoon. You will recall this Special Session was called by Governor Beshear when legislative leaders could not come to an agreement on how to solve a $166.5 million deficit in Medicaid before the 2011 Regular Session ended last Wednesday.

The Politics

Not surprisingly, the two sides, House Democrats with Governor Beshear versus Senate Republicans, have not had much change in their positions since last Wednesday. If anything the politics of the situation have intensified and further entrenched each side.

Today those politics were on display as Governor Beshear started a two-day barnstorming tour to sell his plan and Senate President David Williams challenged Beshear to a statewide debate on the issue. Here is an example of some of the media coverage:


Today's Legislative Actions

The House came in today and got the process started by filing HB 1, which appears identical to HB 305 from the Regular Session, which moves $166.5 million from FY 2012 to FY 2011 to balance the Medicaid budget. The House Minority Leader filed HB 3, which is similar to HB 1 except it only moves $100 million. House Bill 2 dealing with raising the drop out age was also filed today.

HB 1 & 2 were both given their first readings and sent to their respective committees, which are scheduled to meet and consider the bills tomorrow morning with the idea that they would be ready for consideration by the full House on Wednesday. House Education will meet @ 8:30 a.m. to take up HB 2, and House A&R will meet at 10:00 to take up HB 1 the budget bill. Beyond considering legislation, these committees along with the Judiciary Committee will be taking testimony regarding the impact of the proposed Senate Budget cuts.

In the Senate, there were also three bills filed: SB 1, dealing with the post-secondary education maintenance of effort issue; SB 2, restricting legislative pay during special sessions; and SB 3, the Senate plan for dealing with the Medicaid budget essentially across the board cuts 0.316 percent in the last quarter of FY 2011 and by 1.58 percent in FY 2012, including .65 percent cut for SEEK in FY 2012.

The fate of all three bills are unclear, because SB 1 and SB 3 are appropriations bills which must start in the House and SB 2 deals with an issue not on the special session agenda. No committee meetings were scheduled as of this writing.