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.

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:

Senate Panel Grills Cabinet Secretary

After 3 hours of cross-examination, Senate budget panel takes no vote

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.

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 2^nd 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.

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.