Alvarado says idea to pay for Medicaid expansion should go through legislature, plans to gauge interest from other states

UPDATED WITH MATT BEVIN REMARKS: After debuting details of an idea to pay for the state’s portion of Medicaid expansion in a committee meeting, state Sen. Ralph Alvarado is talking to people about his concept and plans to gauge interest from other states before possibly pushing a bill in the 2016 session.

Amid debate about how the state will pay for its portion of the Medicaid expansion through the Affordable Care Act, Alvarado has laid out an idea which would allow the state to use its successful system operating Kynect to set-up and run exchanges for other states.

The idea, first reported on by the Kentucky Chamber’s Bottom Line, would charge states a lower fee than what is charged for the federal exchange. The revenue collected through the operation would then be used to pay for Kentucky’s portion of the state’s Medicaid expansion.

Currently, all Kentucky insurance policies have a 1 percent assessment fee, which funds Kynect. If the system were dismantled and the federal exchange took over, this fee would increase to a 3.5 percent federal surcharge on insurance policies.

In an interview with the Kentucky Chamber Wednesday, Alvarado noted that this is just a concept for now and said he is not working to expand the Affordable Care Act but rather make what we have in front of us work. The freshman senator and Winchester doctor said he believes states like Oregon, Nevada, Rhode Island and others could be interested in having a state exchange run through Kynect as they have not been able to get their own exchanges off the ground.

Alvarado said bringing in revenue from these other states by offering the services could avoid a tax hike to pay for the state’s portion of the expansion. As for how much revenue Kentucky could generate from each state to run their exchange, Alvarado said those details are yet to be seen.

“I will be talking to people to gauge an idea of what they would be willing to pay for that, to see if its even feasible. I mean, a lot of these states are resorting to the federal exchange and if they are using the federal exchange for their Medicaid expansion, I’m not even sure how much they are paying them. I know it’s a percentage of their expansion members but that may be just $5 million. And if it is, then it may not be worth our while to try and do this. But if they are paying the federal exchange $30, $40, $50 million and we could do it for the same cost, then it might be something they might consider,” Alvarado said.

When asked if it would require legislative action to put a plan like this in place before the state has to begin paying a portion of the cost in 2017, Alvarado noted that many of the aspects of the exchange have been done through executive order by Gov. Steve Beshear but he would like to see this these types of ideas come through the legislature.

“If you’re going to start spending money to invest in programs which you’re then going to outsource to other states, I would rather see everything go through the legislature,” Alvarado said (at 2:30). “The governor might be able to negotiate the deals with other states but if we are going to put out money to help get this rolling, it should go through the legislature.”

Alvarado said he is gathering more information to see if there is enough to craft a bill for the 2016 session and added that he has spoken with members of both legislative chambers, both Republican and Democrat, as well as the governor and his office and others saying “everybody seems to like the idea.”

Watch the full interview below to hear what Alvarado said about what this type of concept would require from the state, where we are going to get the money from if an idea like this is not put in place and much more:

Democratic candidate Jack Conway’s campaign said Alvarado’s idea is one that Conway would explore as governor.

“Jack Conway has a long record of bringing both sides together to get results for Kentucky families, and Sen. Alvarado’s proposal is an interesting idea that Jack would explore as governor. Unlike his opponent, Jack would also keep the Kynect program — saving the state millions of dollars and ensuring that the hundreds of thousands of Kentuckians who now have health insurance, especially kids, keep their health insurance,” Conway-Overly spokesperson Daniel Kemp said in a statement to the Chamber.

Independent candidate Drew Curtis expressed support for the idea in his statement to the Chamber.

“I absolutely love this idea–it’s so brilliant.  These are the kinds of outside-the-box solutions Kentucky needs. The costs of expanding the reach of a software project are rarely linear. For example, expanding the size of an operation 200% doesn’t increase costs by the same amount.  We’ll have to take a hard look at the details but this is an elegant solution.  Kudos to Senator Alvarado for suggesting it,” Curtis said in the statement.

Request for comment from Republican candidate Matt Bevin was not returned before this article was posted Wednesday afternoon. However, at a Commerce Lexington event Thursday, Bevin brought up the concept and said it was a “great idea but there is no market for it,” stating that most other states who currently do not have an exchange prefer it that way.

At the Kentucky Chamber’s Business Summit, Bevin called for a full repeal of the exchange (kynect) and said the people currently receiving coverage through kynect would be put on the federal exchange. In the panel, Bevin said he would lower the Medicaid eligibility back to the levels before the exchange was put in place, taking qualifications down to 100 percent of the poverty rate opposed to the current 138 percent.

Read other reactions to the idea in a story from the Lexington Herald-Leader here. To read more details from the original meeting, click here.

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