Division of the Budget
Landon State Office Building Phone: (785) 296-2436
900 SW Jackson Street, Room 504 adam.c.proffitt@ks.gov
Topeka, KS 66612 Division of the Budget http://budget.kansas.gov
Adam C. Proffitt, Director Laura Kelly, Governor
March 4, 2024
The Honorable Beverly Gossage, Chairperson
Senate Committee on Public Health and Welfare
300 SW 10th Avenue, Room 142-S
Topeka, Kansas 66612
Dear Senator Gossage:
SUBJECT: Fiscal Note for SB 355 by Senate Committee on Ways and Means
In accordance with KSA 75-3715a, the following fiscal note concerning SB 355 is
respectfully submitted to your committee.
SB 355 would enact the Cutting Healthcare Costs for All Kansans Act, which would
expand eligibility for receipt of medical assistance benefits. The Secretary of Health and
Environment would be required to adopt rules and regulations necessary to implement and
administer the Act prior to January 1, 2025. The Secretary would also be required to submit to the
U.S. Centers for Medicare and Medicaid Services (CMS) any state plan amendment, waiver
request, or other approval request necessary to implement the provisions of the bill. At least 10
calendar days prior to the submission to CMS, the approval request application would be required
to be submitted to the State Finance Council. On and after January 1, 2025, eligibility
determinations under the Kansas Program of Medical Assistance would be granted to any adult
under 65 years of age who is not pregnant and whose modified adjusted gross income does not
exceed 138.0 percent of the federal poverty limit, to the extent permitted under the provisions of
42 USC § 139a, as in effect on July 1, 2024. The bill would specify that the Act would not provide
coverage for abortion services, except in cases where coverage is mandated by federal law.
Applicants for coverage under the Act would be required to provide employment verification as
specified in the bill, and there would be exceptions to this requirement for certain individuals.
The Secretary would be able to establish a health insurance coverage premium assistance
program for individuals that met requirements detailed in the bill. The bill would direct the
Secretary to administer the benefits using a managed care delivery system and would detail
requirements for the contract. The bill would also specify administration would be restricted to
organizations subject to assessment of the privilege fee under KSA 40-3213, unless this was not
The Honorable Beverly Gossage, Chairperson
Page 2—SB 355
allowed by CMS. The bill would require termination of coverage under the Act if the federal
medical assistance percentage for the expansion population was lower than 90.0 percent and the
provision with this requirement would be nonseverable from the rest of the Act. The Secretary
would be required to report to the Legislature each year on the costs of the Act, additional revenues
generated during the preceding fiscal year, and cost savings, specifically those achieved by the
state for the movement of certain covered populations in the KanCare Program to the expansion
population, as well as cost savings achieved through other initiatives.
The Secretary would be directed to coordinate with county sheriffs on coverage for eligible
individuals in custody of county jails or correctional facilities. The Kansas Department of Health
and Environment (KDHE) would be required to remit all drug rebate receipts to the State Treasurer
to be deposited into the State General Fund. The bill would establish a Rural Health Advisory
Committee consisting of 15 members appointed by the Governor. The bill would include
specifications for membership and duties of the Committee. The bill would also allow for an
additional meeting day in calendar years 2025 and 2026 for the Robert G. (Bob) Bethell Joint
Committee on Home and Community Based Services and KanCare Oversight in order for the
Committee to monitor implementation of the Act.
The bill would establish an annual hospital Medicaid expansion surcharge, which would
be the product of the number of unduplicated Medicaid expansion enrollees multiplied by $233.
Beginning January 1, 2027, the surcharge would be imposed on each Kansas hospital provider as
detailed in the Act in an amount equal to its proportionate share as determined by the Healthcare
Access Improvement Panel as specified in the bill but could not exceed $35.0 million in any
calendar year and no surcharge would be imposed for any period after the federal match rate drops
below 90.0 percent. Revenues would be deposited to the newly created Hospital Medicaid
Expansion Support Surcharge Fund, which would be used to offset Medicaid expansion related
costs to the state.
According to KDHE, enactment of SB 355 would increase administrative expenditures
necessary to prepare for implementation of the bill in FY 2024 by $400,000, including $200,000
from the State General Fund. For FY 2025, the bill would generate State General Fund savings
totaling $61.8 million after all additional expenditures were accounted for. Expenditures for FY
2025 would total $715.0 million, with approximately $675.0 million for direct assistance and $40.0
million for administrative costs. For FY 2026, State General Fund savings would total $120.8
million after all additional expenditures were taken into account. Expenditures for FY 2026 are
estimated at $1.5 billion with approximately $1.4 billion for direct assistance and $82.4 million
for administrative costs. KDHE reports its analysis is calculated assuming an effective date of
January 1, 2025, and uses the assumption of 150,000 new individuals eligible for Medicaid
coverage in FY 2025 under provisions of the bill. The bill would have a fiscal impact on both
KDHE and the Kansas Department for Aging and Disability Services (KDADS). The estimate
provided by KDHE accounts for the impact to both agencies together; the allocation of costs
between agencies would be determined at a later date, but prior to implementation. While the bill
allows for the agency to establish a premium assistance program, KDHE would need to revisit the
impact once the program has been fully realized. An estimate related to the premium assistance
could not be determined at this time.
The Honorable Beverly Gossage, Chairperson
Page 3—SB 355
KDHE estimates total capitation costs would be approximately $675.0 million for a half-
year implementation in FY 2025. Because the expansion population would receive an enhanced
federal match rate set at 90.0 percent, the state share would be $67.5 million. The enhanced federal
match is expected to continue in out years. The State would also incur incremental administrative
costs associated with expanding the Medical Assistance Program. The estimated state share of
total administrative costs would be $16.4 million for staffing, overhead, and increased Medicaid
support contracts due to system changes that would need to be implemented to account for the new
rules, as well as handling the increased volume of encounter submissions. Total expenditures
would be offset with estimated savings of $12.0 million for a small portion of current Medicaid
populations that could be included in the new population, such as those enrolled in MediKan and
certain correctional facility inmates.
The agency states that member counts are projected to grow by 2.5 percent each year,
which would result in a FY 2026 estimate for direct assistance totaling $1.4 billion, with a state
share of $139.1 million. Administrative costs are estimated at $82.4 million for FY 2026, with
$34.1 million for the state share. These estimates would be for a full year and would again be
offset by savings for current members that could be moved into the expansion population. These
savings are estimated to be $24.3 million in FY 2026.
Estimated cost offsets and revenue related to the new population would total approximately
$776.8 million, including $735.6 million in federal matching funds, $38.9 million in additional
Privilege Fee revenue, and $2.2 million in additional drug rebate revenue in FY 2025. For FY
2026, total cost offsets and revenue related to the new population is estimated at $1.6 billion,
including $1.5 billion in federal matching funds, $80.3 million in additional Privilege Fee revenue,
and $4.4 million in additional drug rebate revenue. KDHE notes that they would need to partner
with the KanCare Managed Care Organizations (MCOs) to estimate each of their anticipated
increases in capitation so they can accurately pay the full privilege fee in the first year of Medicaid
expansion. Current practice is for the plans to estimate current year revenues based on their
previous year’s actuals, so this would be a change in methodology for the first year. If the MCOs
do not account for the expansion population when calculating their revenues, then the Privilege
Fee would fall short of expectations in year one but would be trued up with catch up payments in
year two.
Total federal matching funds estimates include the Division of the Budget estimate of
$370.0 million over eight quarters for the federal incentive of an additional 5.0 percent in the
federal medical assistance percentage for the current KanCare population, which is provided to
states that have not yet expanded Medicaid eligibility. This equates to $92.5 million in State
General Fund savings in FY 2025 and $185.0 million State General Fund savings in FY 2026.
While the bill would establish a new hospital surcharge assessment, this would not be effective
until FY 2027 and is not included in the revenue estimates in this fiscal note. KDHE notes that
the first surcharge assessment would be due September 15, 2027. Also of note, the bill would
direct all drug rebate revenue to be deposited into the State General Fund. This fiscal note assumes
the revenue would be utilized for related program expenditures.
The Honorable Beverly Gossage, Chairperson
Page 4—SB 355
The Kansas Department of Corrections (KDOC) estimates that approximately 80.0 to 90.0
percent of the resident population would be eligible for Medicaid under SB 355. Services for
eligible residents could only be covered by Medicaid for inpatient hospitalization services when
the stay was longer than 24 hours. For newly eligible residents, it is estimated that the savings
generated by the bill for inpatient hospitalizations would be $3.6 million annually. Because the
bill would take effect on January 1, 2025, the State General Fund savings in FY 2025 would be
approximately $1.8 million. KDOC would have increased administrative costs that would reduce
the net State General Fund savings. The agency currently has 1.00 Coordinator FTE position
which works with KDHE to enroll hospitalized residents in Medicaid and process Medicaid
payments. Increasing the number of eligible residents would require an additional 1.00
Coordinator FTE position at a cost of $39,600 in FY 2025 and $79,200 annually in FY 2026 and
beyond. The agency notes that depending on interpretation of the bill, there could be additional
administrative costs if KDOC is required to take responsibility for enrollment and claiming on
behalf of the county jails. KDHE did take into account savings from the eligible inmate population
totaling $1.4 million in FY 2025 and $2.9 million in FY 2026 in their estimates described above.
The overall fiscal effect of enactment of SB 355 is estimated to total State General Fund
savings of $62.1 million in FY 2025 and State General Fund savings of $121.5 million in FY 2026.
The expansion of Medicaid is reflected within the FY 2025 KDHE budget in The FY 2025
Governor’s Budget Report.
Sincerely,
Adam C. Proffitt
Director of the Budget
cc: Jennifer King, Department of Corrections
Amy Penrod, Department of Health & Environment
Statutes affected: As introduced: 39-7, 40-3213, 65-6207, 39-709, 65-6208, 65-6209, 65-6210, 65-6211, 65-6212, 65-6217, 65-6218