By Joe Biesk
The Associated Press

FRANKFORT - State officials agreed to a settlement Thursday that would reinstate or reevaluate hundreds of mentally disabled people who lost their Medicaid benefits.

Current Medicaid recipients would remain status quo, while long-term care recipients who previously were denied benefits would be reinstated or reevaluated, under the agreement.

The settlement, which still has to be approved by a federal judge, also includes less stringent qualifications for long-term care recipients.

Anne Marie Regan, an attorney with the office of Kentucky Legal Services Programs, who represented Medicaid recipients in the case, said she was "very happy" with the settlement.

"We got pretty much everything we wanted in the lawsuit," Regan said. "These new standards that they agreed to use are actually more liberal than what were in place prior to April last year."

The lawsuit came about after former Gov. Paul Patton's administration developed more stringent criteria for how a person qualified for Medicaid benefits. That resulted in hundreds of people losing their Medicaid eligibility for in-home or nursing home care.

Gov. Ernie Fletcher relaxed those changes in January. Still, mental health advocates said even the less stringent rules left out people with mental illnesses or mental retardation.

Now, more people are likely to be eligible, Regan said.

For instance, people diagnosed with mental retardation would be eligible for nursing home care under the settlement, Regan said. It should also speed up the reinstatement of people denied nursing home or home and community services, she said.

"This is a vulnerable population and we wanted to move quickly to fix the problem," Secretary James Holsinger Jr. said in a statement. "There were still some remaining problems and we believe this settlement agreement will correct them and provide coverage to the people who need it."

It's uncertain exactly how many people were affected by the settlement, said David Fleenor, general counsel for the state Health and Family Services Cabinet.

From April 2003 to May 2004, about 3,500 people received "adverse determinations" under the more strident regulations, Fleenor said. But that figure likely included duplications, and is probably closer to 2,500, he said.

People who had been denied services, or had applied but did not qualify, will be reevaluated, Fleenor said. Cabinet officials are already starting reevaluate people, Fleenor said.

Medicaid recipients who had appealed their determinations still received benefits during their appeals, he said. Those people would be reinstated or reevaluated, Fleenor said.

The agreement also calls for the cabinet to report back with updates on recipients and their cases. The first report is due Aug. 1.