Committee on Social Services reviews KDHE health budget; members probe Gainwell contract, PASRR tool, survey backlog and credentialing

The Committee on Social Services conducted a budget hearing Jan. 30 on the health side of the Kansas Department of Health and Environment, reviewing KDHE’s fiscal 2025 and 2026 requests, proposed reappropriation lapses in House Bill 2007, and multiple supplemental and enhancement items that the legislative budget committee (LBC) and the governor treated differently.

KDHE’s health budget request for fiscal 2025 totals about $4.1 billion, including roughly $970 million from the State General Fund (SGF); KDHE told the committee its revised FY25 request was about $12.9 million below the previously approved FY25 spending level and represents an overall $342 million increase from the prior-year actuals. The agency said a mix of reappropriations, federal grant flows and one‑time items account for much of the year‑to‑year movement.

Why it matters: the items under discussion affect Medicaid administration and payments, public‑health capacity statewide, and federal funding flows. Several items are matched by federal dollars (KDHE noted a 75% federal match on some Gainwell costs and a 90% match for certain PASRR functions), and the agency warned that lapsing some reappropriated funds tied to an enhanced FMAP could trigger federal recoupment.

Major requests and committee discussion

Gainwell contract increase: KDHE asked for a $16.2 million supplemental in FY25 (about $4.8 million SGF) to cover increased contractor staffing, technical licensing and additional testing/production environments needed to operate the Kansas Modular Medicaid System (CHIMS). Amy Penrod, KDHE director of finance, said Gainwell staffing supporting Kansas increased by at least 84 full‑time equivalents compared with the original 2015 contract and that technical licensing costs and added environments drove a roughly $7.9 million licensing increase. KDHE said much of the increase is eligible for a 75% federal match. Christine Osterlin, KDHE deputy secretary and state Medicaid director, told lawmakers Kansas was the first state to procure a modular Medicaid system and that the prolonged implementation (2015–2022) and increasing federal requirements contributed to the need for a contract adjustment; she said the state obtained a contract extension to 2029 to avoid reprocurement immediately after the 2022 go‑live.

ePASRR (electronic PASRR) assessment tool: KDHE requested a combined move of the PASRR function to KDHE (previously housed at KDADS) and one‑time funds to procure and implement an electronic PASRR (ePASRR/CARE) system. Amy Penrod said KDHE and KDADS request $6 million in FY25 (about $750,000 SGF) to automate preadmission screening and resident review processes used to determine placements and specialized services for individuals suspected of intellectual, developmental or mental‑health conditions. KDHE described backlog and manual‑entry problems that slow Medicaid billing and increase error risk; the agency said the ePASRR project is eligible for 90% federal financial participation from CMS and the RFP was expected to conclude in April. The governor recommended funding this request.

Health facility inspections backlog: KDHE officials described a persistent backlog in federally required health‑facility surveys after COVID‑era staffing losses. The Bureau of Facilities Licensing requested $2 million SGF in FY25 and again in FY26 to hire contract surveyors and recover survey productivity; KDHE estimated it completed roughly 15% of required workload in 2022 and has improved to about 40%, with a target of 70% completion to satisfy a CMS corrective action plan. KDHE told the committee its federal survey allocation has not increased since 2015 and remains insufficient to meet CMS expectations; the governor’s budget recommended the FY26 inspection funding but did not recommend the FY25 request, while the LBC recommended deleting the enhancement.

Medicaid provider centralized credentialing: KDHE requested $12.9 million ($1.5 million SGF) in FY26 to procure and implement a centralized credentialing module for Medicaid providers. KDHE said the module would replace multiple managed‑care organization (MCO) credentialing processes and align to NCQA guidance, reducing administrative burden for providers and MCOs. KDHE estimates out‑year operating costs around $3 million (including $750,000 SGF); the project is eligible for 90% federal matching funds. Committee members asked whether administrative savings to MCOs or other offsets would materialize; KDHE replied savings are expected to come largely from reduced duplicate administrative work across MCOs, but exact figures will be clearer only after implementation.

FTE increases and staffing: KDHE requested 46.9 new full‑time equivalent positions across the agency, 30 of which KDHE said are funded entirely with federal grants. The LBC moved to delete new FTEs as part of a broader motion; lawmakers asked KDHE to separate which positions were federally funded and which relied on SGF so the committee could consider limited discussions about retaining federally supported posts.

Medicaid caseloads, FMAP and expansion: KDHE described large year‑to‑year caseload estimate changes that drive volatility in Medicaid spending. Agency presenters noted FMAP changes (federal matching percentage) and caseload trends as major budget drivers; KDHE staff also pointed to the governor’s budget including a Medicaid expansion fiscal assumption: roughly $797.8 million in additional federal/all funds with an SGF savings estimate in the budget of about $78.3 million for FY26. KDHE cautioned that some federal COVID‑era or ARPA‑related match rates and temporary enhancements have phased out and that those transitions affect federal and state shares.

Reappropriations and proposed lapses (HB 2007): KDHE summarized reappropriated funds carried from FY24 into FY25 and said the LBC recommended lapsing roughly $15.6 million in reappropriations in draft language in House Bill 2007. The agency presented a memo asking the committee to delete the lapse language for eight line items so KDHE could retain reappropriated funding now expected to be spent in the current fiscal year (with one exception—the special enhanced FMAP funds tied to an ARPA initiative, which KDHE said must be spent under CMS rules by 2026 or be repaid). Specific items KDHE asked to retain included: lab equipment replacement, pregnancy maintenance initiative grants, a $2.5 million childcare pilot payment already executed, Medicaid data‑warehouse consolidation project obligations, and HCBS projects tied to the enhanced FMAP. KDHE warned that lapsing the enhanced FMAP reappropriation could require returning roughly $9.3 million in federal funds if the approved uses were not completed.

Committee questions and next steps: Committee members pressed KDHE on the Gainwell procurement history, the timing of reprocurement (KDHE said the contract was extended to 2029), whether credentialing efficiencies would reduce MCO administrative costs, and the geographic reach of primary care grants. KDHE provided high‑level options for a hypothetical 7.5% SGF reduction but emphasized many SGF dollars are matched federal funds or support required maintenance‑of‑effort obligations and that cuts could risk federal dollars or core services. The committee did not take formal action during the hearing and planned further consideration in subsequent meetings.

Ending: KDHE officials and the committee agreed to return for additional budget work the next day; KDHE staff stood for follow‑up questions and said they would provide requested detail on FTE composition, historical Gainwell contract amounts, and MCO medical loss‑ratio data if the committee sought it.