Research & Commentary: Kentucky Medicaid Expansion Deserves Repeal or Reform

Published June 30, 2016

In 2013, Kentucky became one of 32 states that chose to expand its Medicaid program under the federal Affordable Care Act. Then-Gov. Steve Beshear (D) unilaterally implemented Medicaid expansion without the approval of the General Assembly. More than 400,000 people signed up under the expanded program, bringing the total number of Kentuckians participating in Medicaid to 1.3 million, or almost 30 percent of the state’s population. The expansion also came with a deluge of new costs to the state and to taxpayers.

Critics of expansion say Kentucky taxpayers will pay $257 million for the new recipients, considerably higher than Medicaid expansion proponents estimated. The Lexington Herald-Leader estimates that left unchanged, expanded Medicaid is expected to cost Kentucky taxpayers an extra $1.2 billion for fiscal years 2017 through 2021. Peter Ferrara, a senior fellow at The Heartland Institute, warns total future costs to state governments are estimated to exceed the funds provided by the federal government, with this shortfall reaching as high as 66 percent of state expenditures. States will inevitably find the situation impossible to maintain without spending cuts, incurring massive debt, or tax hikes.

In late June, newly elected Gov. Matt Bevin (R) introduced an alternative to the state’s current Medicaid plan, which would impose premiums on recipients and give patients ownership over their health care. Bevin’s plan would impose monthly premiums of $1 to $15, saving taxpayers $2.2 billion over the next five years. The plan, known as Kentucky HEALTH, would cover all non-disabled adults receiving Medicaid and would focus on improving overall health outcomes while improving personal responsibility for the program’s participants and lowering costs.

Under the new proposal, premiums would be determined based on income levels and would be applied primarily to able-bodied adults; pregnant women and children would not be required to pay premiums. Bevin’s plan would not include any co-pays for services, and the plan would not cover dental, vision, or non-emergency medical transportation. However, it would offer recipients the opportunity to obtain credits for additional benefits earned by completing volunteer work. Patients not paying their premiums would be temporarily locked out of the program, and they would only be allowed back in once certain conditions are met.

The federal government must approve Bevin’s plan before it can take effect. The waiver process under which these proposals would be implemented is expensive, slow, and arbitrary. There is no guarantee any waiver would be granted or renewed down the road. When he introduced his plan, Bevin warned he would end the Medicaid expansion in the state if the federal government does not accept his proposal.

While full repeal remains the best course for any state that has expanded Medicaid, it’s not an easy task to accomplish.  Once expansion occurs, it is extremely difficult to roll back, because federal law blocks states from backing out of the expansion under a provision called “Maintenance of Effort,” which requires states to fund a program at the initially agreed-upon level regardless of the amount of federal funding received.

Medicaid expansion, at its core, builds on a failing model. It’s a system where the federal government dictates multiple aspects of the insurance plan, losing the beneficial aspects of real market competition. Bevin’s efforts to modify Kentucky’s Medicaid system are all positive steps that Kentucky legislators should seriously consider.

The following documents examine Medicaid expansion in greater detail.

Ten Principles of Health Care Policy
This pamphlet in The Heartland Institute’s Legislative Principles series describes the proper role of government in financing and delivering health care and provides reform suggestions to remedy current health care policy problems. 

Research & Commentary: States Should Innovate, Not Expand Medicaid
Matthew Glans of The Heartland Institute discusses how expanding Medicaid can have repercussions beyond state budgets and the health care industry and notes better options exist: “It is important to remember government spending creates little or no income or economic growth; it is merely the redistribution of tax dollars taken from the pockets of taxpayers.”

Medicaid Expansion: Myth versus Reality
This Buckeye Institute Policy Brief identifies and refutes some of the most common myths about Medicaid expansion in Ohio.

‘Skin-in-the-game’ Medicaid Expansion did not Work in Oregon
Brandon Hershey of the Idaho Freedom Foundation examines Medicaid expansion in Oregon, the problems it has faced, and the lessons Idaho could learn from its experience: “Oregon’s attempt to fund Medicaid expansion via high premiums and copayments proved an unsuccessful endeavor. As Medicaid costs grow—dramatically should Idaho choose to expand—implementing cost sharing will not help the poor in Idaho. As alternatives and solutions are discussed, this is one idea that should be thrown away. Medicaid expansion—no matter what the packaging is—will do nothing but place a burden on Idaho’s most vulnerable.”

Medicaid: Waivers Are Temporary, Expansion Is Forever
Robert Alt and Nathaniel Stewart of the Buckeye Institute discusses the empty promise of Medicaid waivers. “This solution is illusory. Because Medicaid waivers are temporary, subject to the discretion of federal officials and vulnerable to potential judicial reversal, they are unlikely to permit much of the flexibility state policymakers seek.”

Beware of Funding Promises Made by Medicaid Expansion Proponents Brandon Hershey of the Idaho Freedom Foundation questions the ability of the federal government to cover the costs of Medicaid expansion: “Expanding Medicaid in Idaho relies on federal funds and the promise that the federal government will pay 90 percent of the costs. Really? With a debt of more than $17 trillion? The federal government rarely follows through with funding promises to the states. Medicaid expansion will bring the state’s hospitals a pile of reimbursements, but at what cost to state’s taxpayers and future generations?”

Policy Tip Sheet: Medicaid Expansion
Kendall Antekeier of The Heartland Institute explains why states should avoid Medicaid expansion and instead reform this fiscally unsustainable program in ways that offer better care at a lower cost to taxpayers.

A Medicaid Cure: Florida’s Medicaid Reform Pilot
The Foundation for Government Accountability explains the success of its Project Medicaid Cure: “When the patient is the priority, government and HMO bureaucrats are finally held accountable. Costs flatten and patient health and satisfaction improves.”

The Private Option: Medicaid Expansion by Another Name
Nicole Kaeding of Americans for Prosperity forecasts the effects of the decision to expand Medicaid in Arkansas.

Why States Should Not Expand Medicaid
Writing for the Galen Institute, Grace-Marie Turner and Avik Roy outline 12 reasons states should not expand Medicaid and should instead demand from Washington, DC greater control over spending to fit coverage expansion.

The Empty Promises of Arkansas’ Medicaid Private Option
The Foundation for Government Accountability examines the empty promises of Arkansas’ Medicaid private option program. The authors offer direct quotes from media interviews, legislative floor speeches, and social media posts made by private option supporters, and they provide point-by-point free-market rebuttals.

How Medicaid Expansion (and the ‘Private Option’) Will Lock its Clients into Poverty
Dan Greenberg of the Advance Arkansas Institute argues legislators need to consider the potential economic problems that come from expanding Medicaid, including slow economic growth and trapping taxpayers into low-wage jobs. 

Research & Commentary: The Medicaid ‘Cure’
Kendall Antekeier examines the Medicaid Cure, a pilot program established in five large Florida counties by former Gov. Jeb Bush (R). The Medicaid Cure is a premium support model passed in 2006 in which gave 290,000 Medicaid recipients a range of premiums and plans from which to choose.

A Medicaid Cure: Florida’s Medicaid Reform Pilot
The Foundation for Government Accountability analyzes the success of Florida’s Medicaid Cure program, stating, “When the patient is the priority, government and HMO bureaucrats are finally held accountable. Costs flatten and patient health and satisfaction improves.”


Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Health Care News at, The Heartland Institute’s website at, and PolicyBot, Heartland’s free online research database at

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