Beshear vetoes Medicaid changes as health advocates urge lawmakers to hold off on restrictions

Update, March 27, 2025: House Bill 695 was delivered to the Secretary of State after the veto of the governor was overridden in both the House and Senate.

By Sarah Ladd
Kentucky Lantern

FRANKFORT — Health advocates are urging the Kentucky General Assembly to reconsider Republican changes to the Medicaid program passed in the final hours before lawmakers broke for the 10-day veto period.

Meanwhile, Democratic Gov. Andy Beshear on Wednesday vetoed the changes — contained in House Bill 695 — saying they would “put up barriers to and delay health care for Kentuckians.”

Lawmakers return to Frankfort Thursday and Friday to wrap up the 2025 legislative session. Republicans can easily override the Democratic governor’s vetoes thanks to holding supermajorities in both chambers.

HB 695 would do several things that health advocates say are concerning. One is a mandated work requirement for able-bodied Kentuckians between the ages of 18 and 60 who don’t have dependents and are both “physically and mentally able to work.” Advocates said the requirement would create red tape and increase administrative costs at the expense of paying for actual health care.

Another: the bill would reinstate prior authorization requirements for Medicaid behavioral health benefits, which include treatment for substance use disorder. It also would keep the executive branch from making changes to Medicaid without the General Assembly’s approval, unless required by federal law.

“Freezing that until the legislature can give approval for anything along those lines — there are a lot of unforeseen outcomes of that,” said Dustin Pugel, the policy director at the Kentucky Center for Economic Policy, in an interview with the Lantern.

Other parts of the bill — setting up an advisory board to oversee Medicaid spending and learn more about it, are generally supported.

Given the growth of Medicaid spending, Andrew McNeill, the president and senior policy fellow at the Kentucky Forum for Rights, Economics & Education (KYFREE), told the Lantern in an interview that he’s “not surprised that the legislature is asserting itself in this way to become far more active and involved with the Medicaid program, and I think that their primary initiative in that vein is this new Medicaid oversight committee.”

Medicaid is a state-federal program that covers almost 1.5 million Kentuckians.

‘Less health care to fewer people’

At a Wednesday press conference, Emily Beauregard, the executive director of Kentucky Voices for Health, said the bill, in its current form, “puts our safety net and workforce at risk by adding costly administrative red tape to the program that would end up providing less health care to fewer people.”

“As a coalition led by consumer voices, we are acutely aware that most Kentuckians are simply a lost job, new baby, accident or illness away from qualifying for Medicaid and other safety net programs that exist to catch us when we fall and sustain us while we get back on our feet,” she said.

The work requirement

Section 4 of the bill says “the cabinet, to the extent permitted under federal law, shall implement a mandatory community engagement waiver program for able bodied adults without dependents who have been enrolled in the state’s medical assistance program for more than twelve (12) months.”

On the night this language was added, Senate budget committee Chair Chris McDaniel said, “The intent is that if you are an able bodied adult, that you have to demonstrate some kind of a work effort, be that school, be that child care, be that community involvement job, whatever the case is, right, the intent is that you have to execute some type of task like that.”

That’s a very small population. According to data from the Kentucky Center for Economic Policy, the work requirement would apply to only 2%-4% of Kentuckians on Medicaid. Most Kentucky adults on Medicaid work.

Former Gov. Matt Bevin made an unsuccessful attempt to add a work requirement to Medicaid, which was reversed when Beshear took office. Before that, though, President Donald Trump — in his first term — had approved a waiver application to add the requirements, but a federal judge in Washington twice blocked it, the Lexington Herald-Leader reported.

“On the face of it, the expectation for Kentuckians to work and contribute to their families and their communities sounds like common sense. It’s certainly a goal we all share,” Beauregard said. “But in reality, a work reporting requirement is the opposite of common sense. The paperwork and administrative red tape will actually make it harder for people to get and stay healthy enough to work. Terminating someone’s health care for not reporting will only make them sicker and less able to work. That’s not common sense.”

During a coffee conversation with reporters Wednesday morning, Senate President Robert Stivers said “I don’t think anybody wants to see a deserving person lose their benefits.”

“We’re trying to get to the point to make sure that there is not that overutilization by people who are work-able, and make sure that those people who are needy and don’t have the ability to work or obtain insurance because of their status or their employment status, they can’t because of physical or mental issues, that they do have health care coverage,” Stivers said.

But, he said, “when your budgets in the Medicaid realm are so fast and growing, you’ve got to control that expenditure.”

“Plus, there are many things offered in the Medicaid list of services that private insurance doesn’t cover,” Stivers said. “And so, for working people, middle class, middle income people, they can’t get the coverage that a person on Medicaid gets, which I think is wrong. You should have equal, comparable, but not better than.”

Beauregard questioned the assertion that Medicaid benefits are better than those provided by private insurance.

“Here’s the thing: people with commercial health insurance — or with any other type of health care, Medicare, Medicaid — we should all expect to have the type of care that we need when we need it,” she said. “We should have access to those services when we need them. And to suggest that Medicaid is a better benefit than commercial insurance, to me, says we need to expect more from commercial insurance.”

She added: “I don’t think that anybody with Medicaid coverage is getting services that aren’t medically necessary, and we hear oftentimes that people do struggle with access to care for other reasons. I would reject any notion that Medicaid benefits are too generous.”

‘Unintended consequences’

Sheilia Schuster, who leads the Kentucky Mental Health Coalition and has long been a mental health advocate in Frankfort, takes issue with the term “able bodied” in the work requirement.

“To look at some of our folks with substance use disorder or mental illness, they look able bodied, but they are not,” she said. “They are not mentally fit to be able to go to work.”

KFF released a poll in early March that showed a majority of Americans — 62% — support the idea of work requirements. That same poll showed the same percentage of people have the misconception that people on Medicaid aren’t already working.  KFF (formerly known as the Kaiser Family Foundation) is a nonpartisan nonprofit that focuses on health care policy.

McNeil said incentivizing more people into the workforce through a Medicaid work requirement would be a positive for the state.

“With the public support for it and for the potential benefits — by that, I mean upside benefits of more people getting into the workforce, still knowing that they can keep this coverage — it is a policy model that is worth pursuing and trying to make as strong and as compassionate as possible,” McNeill said.

Michael Stanley, the CEO of Grace Health, a community health center in Eastern Kentucky, said more than 40% of the patients his center sees are covered by  Medicaid.

Kentucky under former Gov. Steve Beshear expanded Medicaid eligibility to include more low-income adults. The Medicaid expansion was made possible in 2010 when Congress enacted the Affordable Care Act, informally dubbed Obamacare. The Republican Congress now is considering cuts to Medicaid to reduce federal spending, including potentially reducing federal funds to cover the Medicaid expansion population.

“With expanded Medicaid, our quality clinical performance measures showed that the communities we serve are healthier,” Stanley said. “The loss of expanded Medicaid and a work requirement could reduce our Medicaid-covered patients by 10 to 15% with a loss of $2 million to $3 million in Grace Health revenue. A loss of this magnitude would threaten our behavioral health, school-based health, substance use disorder and dental services.”

Tim Cesario, the substance use disorder director for Cumberland River Behavioral Health in Corbin, said he’s worried about “unintended consequences” from the work requirement.

“In the substance use field, we encounter a lot of people that have never had regular work and have not developed the skills to maintain a full time job, or what we would call a ‘regular job,’” he said. “The reporting requirements, I believe, will cause a hardship, especially when you consider that the 5th Congressional District is not a bustling manufacturing area. The ability for people to find steady full time traditional work is not always available.”

Cesario also said reinstating the prior authorization requirement would “be cumbersome for the providers.”

“Often, we have people who are ready to engage in services today,” Cesario said. “If we have to go through the pre-authorization process to allow people to access services in three weeks, that interest and that desire to receive help may be gone.”

The ‘critical’ waiver component

The bill directs the Cabinet for Health and Family Services to submit a waiver application to the Centers for Medicare and Medicaid Services “requesting approval to establish the mandatory community engagement waiver program” for the able-bodied adults previously described.

The bill directs the cabinet to send a copy of that application to the Legislative Research Commission for referral to the Medicaid Oversight and Advisory Board, the Interim Joint Committee on Appropriations and Revenue and the Interim Joint Committee on Health Services. The cabinet would also need to update these boards and committees on the application’s progress.

Under the bill as written, the cabinet “would put out a proposal. There would be a state comment period. They would need to address those comments, and then they would need to submit it to the federal government,” Pugel explained. “There would be a federal comment period. Once that’s over, the federal government would need to negotiate with the state for the details of the plan. Usually, there’s some back and forth.”

After this process, the Centers for Medicare and Medicaid Services would either approve or deny the application.

“The waiver’s critical, in my understanding,” said McNeill, who served as the deputy state budget and policy director in the Bevin administration. “Certainly in the Bevin administration’s waiver, there was a significant amount of detail of what the implementation of the program would look like.”

It’s also worth noting, he said, that the legislature has directed a Democratic gubernatorial administration to lay out these details in an application to a Republican federal government.

“It’s a question of who writes the waiver for the states and who is in charge of CMS in Washington at the time. And those things don’t line up perfectly,” McNeill explained. “But to direct a Democratic administration here in the state to submit this waiver, knowing that it would look much different under a potential future Republican governor? It’s just going to be something interesting to watch play out, because the details of the waiver matter a lot.”

Beauregard, with Kentucky Voices for Health, acknowledged there is some flexibility with how the state would write the waiver, but it could be inconsistent in the future.

“The Cabinet for Health and Family Services does have some discretion in how it would create that process — the paperwork, in particular, how often people would have to report — and I think all of that is potentially a very good thing,” she said. “But that same discretion means that this administration could do it one way, the next administration could do it a very different way.”

She also expressed concern to the Lantern over Kentucky potentially spending more on red tape than the coverage itself.

McNeill agreed “simpler is better” when it comes to the reporting process.

“Oftentimes, the theory of policy design doesn’t match with human behavior,” he said. “I’ve learned through the years that the best approach to achieving a policy goal, like a work requirement, is to practice humility and keep it … simple, both from a policy standpoint and from an implementation standpoint.”