According to a recent report from the Paragon Health Institute, Kansas has experienced the 12th highest growth in Medicaid spending per resident since the so-called “Affordable Care Act” — sometimes called “Obamacare.” Kansas has seen growth of around 110% from 2014 through 2023, when the ACA took effect, according to the report — well over the average of 89%.
Kansas is one of 7 states, along with Alabama, Florida, Mississippi, South Carolina and Texas, that have not expanded Medicaid access. Georgia, Tennessee and Wisconsin have all expanded Medicaid in limited ways.
According to a study from KFF (formerly the Kaiser Family Foundation), expansion states — with the exception of Kansas — spend on average about $1,000 more than non-expansion states. The states with increases greater than Kansas are (in descending order): Nevada, Kentucky, California, Virginia, Oregon, New Mexico, Louisiana, Arizona, New York, Ohio, and Arkansas.
In fact, according to Niklas Kleinworth, who authored the Paragon study, Kansas spends about $11,000 per enrollee — about $2,500 more than California. Nebraska — which is an expansion state — spends about $10,400 per enrollee.
Kleinworth said what Paragon discovered is that costs tend to be much higher in states like Kansas that use a “managed care” approach. Managed care states hire private companies to manage Medicaid, compared to Fee-for-Service, where the state pays providers directly.
“Kansas is a managed care organization state, so it looks like about 80 to 90% of your Medicaid population is covered with the managed care program,” he said. “Now, what we’re also finding is that managed care programs aren’t very good at controlling costs like they were promised.
“The idea behind managed care organizations was that because it was a private company and we’re paying them a flat fee per month per Medicaid enrollee to take care of their Medicaid services, that they would be incentivized to lower costs and they would be incentivized to root out things like waste, fraud, and abuse. The states could be relieved of the administrative burden of making sure that the program is serving people appropriately.”
But that didn’t materialize, according to Kleinworth.
“So, on the aggregate, we found that states that use managed care organizations to run their Medicaid programs are generally not saving any money compared to the states that have fee-for-service programs and run everything in-house,” Kleinworth said. “Also, it’s very common for states to not impose very much accountability on managed care organizations, because you kind of have this, I guess, for lack of a better word, ‘patient capture’ with the managed organizations once they have the contract and they’re taking care of all of those enrollees once they’re in violation of the contract. The states have a hard time enforcing it, because then what are you going to do?
“You’re going to cancel a contract and go through another three-year procurement process …. and what do you do with the people in the meantime? So the states find themselves on their heels, trying to keep the MCOs in check, and what you’ll find when you go through state audits (is that) the MCOs are very bad about checking for waste, fraud, and abuse in their programs.
Indeed, the Kansas Inspector General, earlier this year, found nearly $800,000 in Medicaid pregnancy coverage fraud in the Sunflower State.
The review identified 62 Medicaid beneficiaries aged 45 or older — out of 151 cases audited — who appear to have fraudulently enrolled in pregnancy-related coverage. These cases resulted in improper payments totaling more than $798,000.
According to the OIG report, an additional review was conducted for beneficiaries without pregnancy-related claims who had originally been reviewed by the Investigations Team. From that review, the Audit Team determined that, of 151 beneficiaries, 32 (21%) were placed on the Pregnant Women program due to a KDHE error and potential beneficiary fraud. Of the $798,000 in suspected fraud, approximately $137,615.95 was paid during the audit period, related to potential fraud combined with a KDHE error.
Kleinworth was not surprised.
“Usually, a state auditor finds that a lot of MCOs don’t have adequate what they call special investigation units to go through and root out fraudulent claims, and so this manifests in a couple ways,” Kleinworth said. “First, it means that those MCOs, if you have a lot of fraudulent claims that aren’t getting addressed and cleaned out? All of that gets rolled into the next year’s capitation payments, so the MCOs can inflate how much they’re getting paid by overlooking some of the fraudulent claims, because then the patient population is artificially sicker, so there’s that perverse incentive inherent to the MCOs.
“But then the secondary piece is that there was a study that came out in the Journal of Managed Care that found that when states levy sanctions against MCOs for being in violation of their contracts, very few states actually go and collect on the sanctions.
“They say, ‘Hey, you owe us money because you aren’t in compliance; the MCO just doesn’t pay it back, and the state doesn’t do anything about it. The study estimated that about one quarter of all sanctions in the country go unremediated.”
