Opportunities for Medicaid Modernization

Rep. Marianne Proctor (District 60)
Kentucky’s Medicaid system serves nearly 1.6 million residents, essentially 33% of the state’s total population. Medicaid provides comprehensive health care coverage and long-term health services to eligible Kentuckians. Costs for providing benefits and administering the program account for 18% of the state’s General Fund budget and represent the second largest category at $2.75 billion. The total Medicaid cost for the last fiscal year was $19.6 billion. While $15.1 billion is federally funded, every dime and every dollar came from taxpayers.

Medicaid’s goal of improving health outcomes for vulnerable populations is critically important. Common sense tells us that healthy people have a better quality of life, are able to work, and contribute to their communities. However, recent data suggests that the billions we spend on Medicaid are not delivering the results they should for either the individuals receiving benefits or the taxpayers who fund them. The program is due for serious modernization and accountability reforms. This session, we took steps to make the program more effective and efficient.

Medicaid Spending Skyrockets: Over the last decade, Kentucky’s Medicaid spending has doubled. Despite the dramatic increase, health outcomes remain stagnant. Chronic illness rates are still among the highest in the nation, and preventable hospitalizations continue to strain providers. Much of this spending has been absorbed by administrative costs, pharmacy benefits, and managed care inefficiencies.

HB 695 targets several of these concerns. The bill establishes a work requirement for recipients who are physically able and not directly providing care to a child or disabled adult and moves the pharmacy rebate fund to the Medicaid program. It also calls for improved data collection, particularly in behavioral health and managed care, so lawmakers and administrators can make evidence-based decisions.

Little to No Improvement in Health: Despite record investment, health outcomes have not kept pace. The prevalence of preventable conditions like obesity, diabetes, and substance use disorder remains high, especially in rural communities. Therefore, HB 695’s work requirement provision is significant. It applies only to recipients who are physically able and not caregivers, aiming to encourage self-sufficiency while preserving support for those truly in need. By promoting both personal responsibility and targeted aid, the bill seeks to align Medicaid more closely with its intended mission.

Lack of Access to Key Services: In many parts of Kentucky, especially in rural and underserved communities, access to basic health services remains inadequate. A major challenge has been reimbursement disparities for pharmacists, ambulance providers, and other frontline caregivers.

SJR 26 begins to address this by directing the Department for Medicaid Services to study and report on pharmacist payment parity, an essential step toward ensuring pharmacies, especially independents, can remain open and accessible.

HB 152 takes another critical step by establishing a voluntary supplemental payment program for public ambulance providers. This unlocks additional federal funding, helping sustain emergency services in areas where Medicaid patients are the majority of users.

Improving Accountability and Oversight: With rising costs and persistent inefficiencies, lawmakers recognize the need for stronger oversight. SB 25 establishes the Medicaid Oversight Advisory Board, a bipartisan legislative panel tasked with evaluating the program’s performance. It also strengthens the role of the Office of the Ombudsman, offering clearer guidance on its responsibilities in monitoring the Cabinet for Health and Family Services.

Importantly, SB 25 also addresses Kentucky’s housing shortage by enabling local governments to issue industrial revenue bonds for multi-family housing projects of 48 units or more, an indirect but essential strategy for supporting healthier communities. As Kentucky lawmakers move to modernize Medicaid, the focus is shifting from simply increasing funding to improving efficiency, accountability, and health outcomes.

Through data-driven reforms, targeted investments, and new oversight structures, these legislative efforts represent a hopeful shift toward a Medicaid system that works better for patients and taxpayers alike.