Kentucky implements 70% of Medicaid waiver rate study; providers and legislators raise concerns

Kentucky Department for Medicaid Services officials told the Budget Review Subcommittee on Health and Family Services that the state implemented 70% of a Guidehouse rate study for 1915(c) home-and-community-based waivers, effective Jan. 1, 2025, and outlined enrollment, funding and federal-match risks tied to the program.

The Department for Medicaid Services’ commissioner, Lisa Lee, described the six 1915(c) waivers administered through the department and said waiver eligibility generally requires meeting a nursing-facility or intermediate-care-facility level of care. ‘‘The purpose of the 1915(c) home and community based waivers is to allow individuals to remain in their home or community and receive services,’’ Lee said. She said some waiver services — for example, personal care, homemaking, adult day services and minor home modifications — are not covered by Medicare or commercial insurance.

The rate study, conducted by Guidehouse, produced benchmark reimbursement rates across waiver services; the Beshear administration and the General Assembly funded implementation of part of that study. Steve Bechtel, chief financial officer for the Department for Medicaid Services, said the budget funded 70% of the benchmark rates and that the rates adopted varied by code so some selected rates are above the 70th percentile while others are at or near 70%. Bechtel warned that changes to the federal medical assistance percentage (FMAP) could increase state general-fund obligations. ‘‘If the expansion decreases from 90%, it’s about $75,000,000 for every 1%,’’ Bechtel said.

Providers and provider representatives told the committee the partial implementation and the delay in releasing the study to stakeholders have harmed planning and recruitment. Amy Stade, chief executive officer of the Kentucky Association of Private Providers, said the rate study recommended reimbursement sufficient to support about a $15-per-hour wage but that the 70% implementation ‘‘supports about a $10 an hour wage.’’ Stade said the association and some residential providers are concerned 70% is insufficient to sustain operations and workforce recruitment and that some providers may close if funding does not better match the study recommendations.

Committee members asked for additional detail on how funded waiver slots translate into actual service enrollment and expenditures. Commissioner Lee provided several program-level figures: the state has roughly 485,000 expansion members (individuals ages 18–64 at or below 138% of the federal poverty level); more than 600,000 of Kentucky’s approximately 1,100,000 children are eligible for Medicaid or the Kentucky Children’s Health Insurance Program; the department reported about 69,000 enrolled providers and roughly $18,500,000,000 in Medicaid expenditures in 2024. Lee told the committee the unduplicated total number of individuals on waiver wait lists is 13,933.

Legislators pressed the department for clarifications the committee requested be provided in writing. Committee members asked the department to explain the difference between funded slots, filled slots and reserved slots, and whether allocated funds sit unused while slots are unfilled. Lee said the department would ask expert staff to provide a flowchart and definitions and would send clarifying information to committee staff.

Committee discussion also addressed federal policy risk. Lee and Bechtel explained that FMAP calculations are set in federal statute and that proposals to change the FMAP floor or the share for particular activities (for example, enhanced match for certain IT costs or for expansion population services) could materially affect state budgets. Lee said the department is monitoring federal developments and cannot finalize state planning until federal decisions are clear.

The department said it plans a separate presentation on its oversight and monitoring activities, including utilization monitoring and algorithmic controls, at the committee’s next meeting. Lee and Bechtel reiterated that waiver administration involves multiple cabinet agencies — for example, behavioral health and the Department for Aging and Independent Living administer or assist with some waiver functions — and that the department will continue to coordinate with those partners.

The subcommittee took two procedural votes after the DMS briefing: the committee approved amendments from the prior meeting, and later adjourned. Lawmakers said they would reconvene next Wednesday.