Kansas governor says One Big Beautiful Bill Act could cost state $150 million or more

Gov. Laura Kelly says the loss in federal funding from health care changes in the One Big Beautiful Bill Act will cost Kansas at least $150 million. (Photo by Grace Hills for Kansas Reflector)

TOPEKA — The One Big Beautiful Bill Act is expected to cost Kansas at least $150 million as provisions cutting health care programs go into effect, Gov. Laura Kelly said in an interview with Kansas Reflector.

She said state agencies are studying implications of the law, and while guidance from the federal government has been unclear or incomplete, it’s clear the state budget will feel a bite when tens of millions of federal dollars are lost.

“And that’s if we don’t choose to cover some of the folks who will be knocked off of programs or hospitals that need support,” Kelly said.

“The reality is we don’t have that kind of money. No state has the money to backfill these programs that were designed to be federally supported,” she added.

Kelly was referring to cuts included in the federal law to the Supplemental Nutrition Assistance Program and Medicaid, and expiring premium subsidies for people who buy insurance through the Affordable Care Act marketplace. The federal government funds about 60% of Medicaid, she said.

The nonpartisan Congressional Budget Office projects the act’s cuts to Medicaid alone will increase the number of uninsured people in the country by 7.8 million by 2034.

The Kaiser Family Foundation estimates Medicaid changes in the act and expiration of ACA enhanced tax credits will increase Kansas’ uninsured population by about 63,000 people by 2034.

As changes to social programs are instituted over the next three years, Kelly is worried about Kansas hospitals.

More than half of rural hospitals in the state are at risk of closing, and a United Methodist Health Ministry Fund report said Kansas would experience a 15% reduction in total rural Medicaid hospital reimbursement under the law. In addition, 5,000 rural Kansans enrolled in Medicaid are expected to lose coverage.

Freeman Health System, which had considered opening a hospital in southeast Kansas, said in a news release in October that the “unpredictable impact” of the One Big Beautiful Bill Act and other changes in rural health care were factors in its decision to cancel the project.

The upcoming shifts will “throw a number of our hospitals over the edge,” Kelly said.

Retirement homes also will see financial effects, she said. Many are dependent on Medicaid payments and federal changes will negatively affect them, Kelly said. According to LeadingAge, more than 50% of nursing home residents in Kansas receive Medicaid.

 

Ripple effects

It is difficult to assess the One Big Beautiful Bill Act’s full impact because it is unknown how the changes will play out. For instance, Robert Stiles, CEO of the Community Care Network of Kansas, said those on Medicaid will have to reapply twice a year instead of once a year.

Overnight, the state will manage twice as many Medicaid verifications, he said. It’s one item in a long list that will at a minimum cause behind-the-scene challenges.

Kelly said the long-term effects also include higher levels of hunger and lack of insurance access. Hungry children don’t learn as well and their brain development is affected, she said.

The Navigator Program, which helps people work through the challenges of applying for Medicaid, the ACA and other social service programs, was cut 90%.

“I can remember sitting in public health committee as a senator, and we worked very hard to get that funding in there for navigators,” Kelly said, referring to the launch of ACA.

Kelly represented a Topeka district for 14 years in the Kansas Senate before she was elected governor.

“I do understand the Stephen Millers of the world — they think differently,” Kelly said. “But I don’t understand why Congress is sitting back and letting all of this happen. It’s their bailiwick. This is what they’re supposed to be doing, and why they are allowing all of this to happen while they sit on their hands, I don’t know. I just don’t know if they’ve thought about the ripple effects.”

Miller, the U.S. Homeland Security adviser, is credited with shaping the Trump administration’s immigration policies.

 

Medicaid and ACA changes

The governor’s office offered a three-page assessment of Medicaid and other social service effects of the One Big Beautiful Bill Act, including:

• A provision requires Kansas to lower payments it uses to enhance Medicaid payments for specific providers, which could result in revenue loss for those providers. State Directed Payments, or SDPs, are payments from Medicaid managed care plans that the state can direct to support specific providers. Kansas has been using these payments to increase dollars for academic medical centers, Children’s Mercy Hospital and inpatient/outpatient hospitals, according to the Kansas Health Institute. The federal bill directs SDPs to be lowered by 10% each year starting in 2028 until it is at 110% of Medicare. “With SDP rates in Kansas projected to exceed 200% of Medicare by 2028, hospitals are expected to see a decline in SDP-related revenue as phased reductions take effect. By 2038, these payments must be fully phased down which may require Kansas to find alternative funding sources or adjust Medicaid payment strategies,” KHI said.
• Currently, Medicaid is required to pay for expenses incurred for 90 days before a person was found eligible for the program. The federal law drops it to 60 days, which means the patient or the medical institution will have to cover expenses before that time period.
• Participants in the ACA marketplace won’t be automatically reenrolled each year, even if no information has changed.

Cindy Samuelson, spokeswoman for the Kansas Hospital Association, echoed Kelly’s concerns, pointing to a KHA study about commercial payers that found hospitals are losing money on patient services.

The study showed most Kansas hospitals are losing money on patient services. In fiscal year 2022, the median operating margin for Kansas hospitals was -12.7%, with most hospitals losing money on patient services. Kansas had the lowest median operating margin compared to Nebraska and Oklahoma, the study found.

Samuelson said the federal changes to state directed payments, which start in 2028, will mean hospitals get paid less for Medicaid services than they are now. As costs rise every year, that will be a significant cut.

“We’re going to keep working and advocating and trying to tell the story, but I think we have to be prepared,” she said. “We have to know that we’re going to have to look at long-term stability of the program and how we’re going to support people that have Medicaid.”

 

Economic effects

Kelly said it’s unclear how far the economic reverberations of these changes will spread, much like it was difficult to predict how trade policies and shutting down the U.S. Agency for International Development programs would affect Kansas farmers. 

A study by Manatt Health projected that Kansas hospitals will lose $1.6 billion over 10 years from lost Medicaid funding, which would affect the Kansas communities, especially if hospitals were to close.

“It’ll be really impactful,” Kelly said. “And I don’t know how subtle it will be, whether it will come sort of like the tariffs, or whether it’ll be a slow death to parts of our economy.

“When kids don’t get food at home — I mean, we already are trying to feed them at schools and it’s going to be even worse. What is that going to do, then, ultimately, to our workforce, when you have kids who are not eating, therefore not learning, therefore dropping out? The impact is huge.”