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Medicaid fund could be tapped again to cover budget shortfall

Stephen Koranda
Kansas Public Radio

From the Kansas Health Institute:

Kansas officials have borrowed a record $900 million from the state’s investment fund but still may need to implement a series of emergency measures to end the 2016 budget year in the black.

Shawn Sullivan, director of Republican Gov. Sam Brownback’s Budget Office, said that the $900 million certificate of indebtedness approved Wednesday by the State Finance Council will be used to manage anticipated cash flow problems in the 2017 budget year, which starts July 1.

But with only a week remaining before the end of the 2016 budget year, the state is facing a $45 million shortfall. And that could grow if June tax revenues come in short of projections.

Sullivan is considering several contingency plans, including sweeping some or all of the cash from the Medicaid drug rebate fund.

A change in federal law triggered by the Affordable Care Act allows states with Medicaid managed care programs to collect refunds on prescription drug claims. Prior to the ACA, states that contracted with private insurance companies to operate their Medicaid programs were ineligible for the rebates.

Kansas privatized its Medicaid program in 2013 and renamed it KanCare.

When the budget year ends June 30, Sullivan said he expects the balance in the drug rebate fund to be in the neighborhood of $40 million to $45 million.

“As a last resort, I may transfer a portion of the ending balance to the State General Fund for 2016,” he said in an email to the KHI News Service.

Sullivan said he will make a decision next week once he knows how close June revenues will come to meeting projections.

Revenues fell more than $74 million short of projections in May.

The drug rebate money is currently earmarked to pay for anticipated increases in KanCare claims in the 2017 budget year, Sullivan said. If the demand for services grows as anticipated, any money transferred from the fund would have to be repaid. If the anticipated growth doesn’t occur, the state may not have to replenish the fund.

The Brownback administration transferred $55 million from the drug rebate fund in 2014 to help bridge a $280 million shortfall. That money wasn’t repaid because rebate payments exceeded projections the following year, Sullivan said.

The nonprofit KHI News Service is an editorially independent initiative of the Kansas Health Institute and a partner in the Heartland Health Monitor reporting collaboration. All stories and photos may be republished at no cost with proper attribution and a link back to KHI.org when a story is reposted online.

Jim McLean is an editor and reporter for KCUR 89.3. He is the managing director of KCUR's Kansas News Service, a collaboration between KCUR and other public media stations across Kansas.