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Kansas Plan to Fund Medicaid With Pot Taxes Faces Headwinds

Feb. 4, 2021, 10:30 AM

The Kansas governor’s plan to expand Medicaid and legalize medical marijuana in a single legislative package will be a long shot in the 2021 legislative session, key lawmakers say.

Gov. Laura Kelly (D) says bringing the two proposals together makes sense because tax revenue from medical marijuana can fund the state’s cost of expanding the health program, which will allow 165,000 more low-income Kansans to have insurance.

Increasing that coverage without straining the state’s budget could be crucial to Kansas’s recovery from the pandemic. But leaders of the GOP-dominated Legislature say yoking the two initiatives together is no way to overcome the objections of lawmakers who have resisted the proposals so far.

“Governor Kelly envisions a Kansas where you can choose not to work and the taxpayers will foot the bill for you to stay home and smoke supposedly medicinal marijuana,” state Rep. Dan Hawkins (R), House majority leader, said in a statement.

Opponents of Kansas Medicaid expansion argue it would cost too much and force the state to cut funding in other areas. Critics of legalizing medical marijuana say the drug is addictive and dangerous, and that allowing its use for medicinal purposes could fuel the push for full legalization.

Kansas is one of just three states that haven’t legalized medical marijuana, Kelly said.

There’s no clear path for the bill given the current composition of the Legislature, state Rep. Steven Johnson (R), chairman of the Insurance and Pensions Committee and formerly chairman of the Taxation Committee, told Bloomberg Law.

And health-care advocates who support Medicaid expansion say the inclusion of medical-marijuana legalization has left them uncertain about whether they will be able to fully support the combined proposal.

“I don’t think that Medicaid expansion has even as many legs this year as it has had in the past, when it couldn’t get through,” Johnson said. “And what support there is in the body for medical marijuana isn’t going to be enough to make any change in the outcome on Medicaid expansion.”

The Kelly Plan

Under the proposal announced Feb. 1, Kansas’s Medicaid program would expand eligibility to include able-bodied working-age adults earning up to 138% of the poverty level.

The proposal also would legalize medical marijuana in the state. It would give the Kansas Department of Revenue authority to regulate and license producers and collect taxes and fees.

Medicaid is a joint federal-state health program for low-income people that traditionally has focused on children, pregnant women, the elderly, and the disabled. States were allowed under the 2010 Affordable Care Act to expand their programs to include working-age adults, with the federal government picking up 90% of the tab for the expansion population. Thirty-eight states have expanded Medicaid so far.

The governor’s plan would expand eligibility as provided for in the ACA, but it also would require enrollees to pay premiums of up to $25 per person or $100 per family. Kelly said Feb. 1 that her proposal would generate around $50 million in revenues, more than enough to cover the cost of expanding Medicaid.

But some Republicans questioned her cost estimates, pointing to higher estimates that have been part of the Medicaid expansion debate in the past.

“There are estimates that expansion will cost the state of Kansas $70-$80 million annually,” state Rep. Troy Waymaster (R) said in an interview. “And we’re tying it in this proposal to a funding source which, let’s face it, we have no idea how much money it will generate. I don’t see how this adds up.”

Uneasy Fit

Supporters of Medicaid expansion outside the Kelly administration say they’re happy Kelly has demonstrated her support for expansion once again, but are still trying to come to grips with the inclusion of medical-marijuana legalization in the package.

Including medical marijuana could threaten the coalition’s support for the proposal, said April Holman, executive director of the Alliance for a Healthy Kansas, an advocacy group that has been pushing for Medicaid expansion since 2016. “We’ll have to have that conversation before we know,” she said.

For broad coalitions that have come together around Medicaid expansion, the challenge of getting consensus around a separate policy goal is particularly difficult, Holman said.

“Medical marijuana is not something that we as advocates for Medicaid expansion know very much about,” she said. “And we’re a wide-ranging coalition with 120 members that have come together around expansion and are all on the same page on that issue. And I have no idea if we have a consensus in our coalition about anything else in the proposal but Medicaid expansion.”

The Kansas Hospital Association, another longtime supporter of Medicaid expansion, faces a similar predicament.

The association welcomes Kelly’s renewed willingness to throw her weight behind Medicaid expansion, but the impact of tying it to medical marijuana is unclear, according to Cindy Samuelson, KHA’s vice president for public relations.

“We’ve got members of our organization on both sides of that issue,” Samuelson said. “And it’s too soon to say where their boards of directors will land, or what the impact will be.”

To contact the reporter on this story: Christopher Brown in St. Louis at ChrisBrown@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Alexis Kramer at akramer@bloomberglaw.com