State grant muddled by Brownback letter

"Or-else" letter to HHS Secretary Kathleen Sebelius created complications

By Mike Shields, KHI News Service, February 12, 2011

TOPEKA — Kansas is in line for a $31 million federal grant to help plan for an insurance exchange that starting in 2014 will be the place where thousands of Kansans shop for and buy their health coverage.

But a letter sent this week by Gov. Sam Brownback and 19 other GOP governors to U.S. Health and Human Services Secretary Kathleen Sebelius has complicated things.

HHS is expected to announce Tuesday which states will receive millions of dollars in "innovation" grants to help cover the costs of planning the health insurance exchanges each state is expected to have in place three years from now to comply with the federal health reform law.

Governor Sam Brownback

Gov. Sam Brownback (Photo by Phil Cauthon)

Kansas is or was considered a shoo-in to receive the millions of dollars in planning aid until Brownback signed off on a polite but stern letter delivered Monday to Kathleen Sebelius, a former Kansas governor and now the chief federal official in charge of health reform.

An or-else letter

The letter, co-signed by 19 fellow GOP governors, informed Sebelius that many of the state executives, like Brownback, supported repeal of the reform law and that each faced the decision whether "to participate" in it by operating the insurance exchanges at the state level or to surrender that responsibility to the federal government.

(The law and its regulations stipulate that if states don't have their exchange plans approved by the U.S. Department of Health and Human Services by January 2013, then the federal agency will step in to develop and then run the exchanges when they are launched the following year.)

The governors then listed six "suggestions" for improving the law as it pertains to the exchanges and concluded by saying that if HHS did not accommodate their concerns, then the federal government "should begin making plans to run exchanges under its own auspices."

It was an "or-else" letter, putting Sebelius on notice that governors in 20 states - from Maine to Kansas to Utah - were willing to let HHS take on the chores of managing the exchanges, if the "accommodation" they want isn't made.

As it turns out, the governors' communique was sent without the knowledge of Kansas legislative leaders - Republicans or Democrats- or Insurance Commissioner Sandy Praeger, whose department had applied for the innovation grant last year with the idea it would help Kansas plan and launch its own exchange, exercising the considerable leeway Praeger said the law allows for state's to create them as best meets their specific needs.

The grant application had been submitted with the endorsement of the Legislature's Health Policy Oversight Committee (dominated by Republicans), the approval of then Gov. Mark Parkinson, a Democrat, and also was given the unofficial nod by Brownback, who then was preparing to take office as the state's first conservative Republican governor.

Not in the loop

Praeger said she learned of the governors' letter Tuesday, the day after HHS got it, through the National Association of Insurance Commissioners, which forwarded to her a copy.

Legislative leaders today said that they were either still unaware of the letter or had learned about it in a news account after the governors had shipped it.

Senate President Steve Morris, R-Hugoton, when told about the missive, said the Governor's Office hadn't talked with him about it, but that he wasn't wild about the possibility of the federal government running a Kansas exchange.

"I think the states always do things better than the federal government," he said.

Senate Minority Leader Anthony Hensley, D-Topeka, said important policy pronouncements -such as one dealing with the question of state-versus-federal primacy in implementing a major law - generally involve at least some discussion between the Legislature and the executive branch.

"As to the letter," he said. "This is not typical."

Hensley and House Minority Leader Paul Davis, D-Lawrence, also said they were concerned about a provision in the governor's recent executive reorganization order, ERO 38, folding the Kansas Health Policy Authority, which is the state's Medicaid agency, into the Kansas Department of Health and Environment. Tucked into that order was a directive that anything any Kansas agency is doing that involves implementing the federal reform law also be transferred to KDHE.

Both lawmakers said they were impressed with the way Praeger, a moderate Republican, has been moving the state forward on reform implementation, specifically development of an exchange, and that they preferred that planning stay with her department rather than be shifted to KDHE. The merger of KDHE and KHPA isn't expected to happen sooner than July.

Planning process already launched

Praeger, two weeks ago, announced she was forming work groups involving various health and insurance industry officials and organizations, including the Kansas Health Institute, to begin developing a proposal for a Kansas exchange to be presented for consideration by the 2012 Legislature. Among other things, she said, she wanted the work groups to have another grant proposal for exchange implementation to be ready to submit to HHS by August. That grant could mean another $1 million.

Kansas Insurance Commissioner Sandy Praeger

Insurance Commissioner Sandy Praeger

Democratic legislators weren't the only people concerned about the ERO. HHS officials pondering which states would receive next week's innovation grants also were aware of the order, Praeger said. And between the ERO and the governors' letter, they were no longer sure if the Kansas Insurance Department would be able to execute a grant or whether Kansas would be willing to comply with its expectations.

Confusion about the letter, the ERO and the Brownback administration's intentions, prompted the insurance department to put its exchange work groups on hold for a few days this week and prompted calls to and from HHS officials and talks with the Governor's Office in efforts to sort out where Kansas was headed with respect to an exchange and the $31 million in grant money.

Finalizing the language

Like the governors' letter, Praeger said she wasn't aware of the health reform provisions in the ERO until it was a public document.

"We've been working with the Governor's Office to clarify what the intention of the ERO is," she said Friday afternoon. "We've been working with the grants, we're still working with them. If we had seen the ERO before it was put on the Website we might ahave been able to catch this, but if they clarify with a letter that we are still in charge (of administering the potential grant) then everything should work out."

She said her office and the Governor's Office were still crafting the letter spelling out that she would oversee the grant regardless of the ERO on Friday afternoon.

"We've been finalizing the language today," she said. "They've been very good working with us. HHS needs to have it before the end of the day. The time frame they're operating under is for awarding the grants on Tuesday."

(Linda Sheppard of the insurance department confirmed late Friday that the letter was completed and sent to HHS on time.)

Praeger said of the six "suggestions" raised by the governors in their letter, most were "moot," because the reform law allows states the flexibility the governors say they want before implementing state exchanges.

The one thing they requested that could be problematic, she said, was the governors' call for the federal government to give states, "blanket discretion" to move non-disabled Medicaid beneficiaries into the exchanges without HHS approval.

Praeger said changes of that sort to a state Medicaid program have always required federal sign-off and that isn't likely to change.

"Kansans not Washington"

A spokesman for Brownback was asked various questions by KHI News Service regarding the governors' letter, the ERO and the administration's intentions regarding the exchange planning, the grant, and which agency will oversee it, should the state receive the money.

This was the full response:

"The letter is reflective of what Gov. Brownback has said publicly on many occasions, Kansans should be the ones making their health care decisions, not Washington," said spokesperson Sherriene Jones-Sontag in an email.

A spokesperson for Sebelius and HHS made this comment:

“The Affordable Care Act helps control costs, while giving states the flexibility to make the law work for them and the opportunity to take the lead role in delivering the benefits of reform to their residents," said Melissa Nitti in an email. "Since it was enacted, HHS has made resources available to the states to both plan and establish exchanges and made clear we will consider different models that fit states’ needs. We look forward to continuing to build a constructive partnership with governors and state leaders.”

Praeger said she thought the confusion created by the governors' letter and the ERO was the sort of thing one might expect from a new administration. Brownback has been in office barely a month.

Exchange Planning Work Documents

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