Medicaid costs in Alaska have leveled off, for now. They’ll creep up again next year, however, when the new federal Affordable Care Act kicks in.
Medicaid is a huge item in the state budget, and its rapid growth in recent years has been a big driver in the increasing size of the state operating budget. The program provides health care for low-income and disabled Alaskans, and many senior citizens.
A little more than half the costs are paid by the federal government and the rest by the state, and the program is administered by the state Department of Health and Social Services.
In state fiscal year 2012, the budget year that ended last June 30, the Medicaid budget was $1.37 billion, up only 0.69 percent from the previous fiscal year 2011 budget of $1.36 billion.
In the current budget year, fiscal year 2013, which ends this June 30, the projected spending is now estimated at $1.46 billion, according to data provided by Margaret Brodie, the state’s Medicaid director in the Department of Health and Social Services.
The state Legislature had budgeted $1.66 billion for the year, so there are savings that are partly resulting from cost-containment measures and partly from lower use of health care services by those covered by Medicaid.
Lawmakers in Juneau are being asked to budget $1.66 billion for Fiscal 2014, which begins July 1. This is the same amount approved for the current year and presumably some of the cost-containment measures the department has undertaken will continue to reduce costs.
There’s a new factor that will offset part of that. It’s the “woodwork” effect, Brodie said in an interview.
These are Alaskans who are now eligible for Medicaid but who have not signed up for various reasons. In 2014 the new federal health care law will require people to have health insurance, and that will be a wake-up call for those now eligible to sign up, Brodie explained.
This has nothing to do with a decision Gov. Sean Parnell is considering on whether or not to expand Medicare to the higher income limits allowed in the federal law. The Alaskans in “the woodwork” are eligible now, but have just not signed up, Brodie said.
“We anticipate that when it becomes mandatory to have insurance these individuals will apply so they will not have to pay for coverage. We anticipate approximately 1,500 people (signing up) for one half of the fiscal year,” or the January to June half of the 2014 fiscal year.
That is estimated now to cost $3.29 million for the half-year, which is being requested now for the department’s budget. Similar additions to the Medicaid rolls, about 1,500 people per year, are expected in the next two years as more people become aware of the new federal requirement for coverage, Brodie said.
That will add to costs.
However, the department has also been able to reduce costs. One step, taken in mid-2012, was a policy to encourage the use of generic instead of name-brand medications.
“The annual cost-avoidance from this initiative is between $5 million and $6 million a year,” Brodie said.
More generic medications will become available as brand-name medication patents expire, she said.
Another initiative by the department being launched in April is a requirement for pre-approvals for certain types of costly radiology procedures.
“This will be required for hospitals, or for physicians doing ordinary x-rays,” Brodie said.
The concern is that there may be an over-use of expensive radiology procedures like MRIs (magnetic resonance imaging) and PET scans (positron emission tomograohy), particularly when the equipment is owned by physician practices.
The department has also had a case-management program in effect where nurses work with Medicaid patients with chronic conditions. State Health and Social Service Commissioner Bill Streur has said that this results not only in better care, but usually in cost-savings as well.
“The right care at the right time,” usually results in efficient care and lower costs, he has said previously.
Utilization, or the amount of medical services people use as well as the number of people enrolled, is typically a major factor in the growth of overall cost of Medicaid but the relation between the two is not always direct.
For example, between fiscal years 2011 and 2012, utilization grew by 3.3 percent but the cost of medical services grew by only 0.5 percent, according to data provided by Brodie in a briefing to legislator in Juneau.
“In 2012 we had the highest percent of the (Alaska) population enrolled in Medicaid, at 21 percent, with 92 percent of those enrolled using medical services or receiving benefits. However, expenditures did not increase exponentially,” Brodie said.
In previous years the relationship was the reverse. Between fiscal years 2009 and 2010, costs grew by 14.2 percent while utilization only grew by 5.6 percent, the data indicated.
Not surprisingly, medical care expenditures consume more than half the Medicaid budget, or 54.3 percent; senior and disability services is next at 32.1 percent, and behavioral health, such as psychiatric care, takes up 12.1 percent of the budget.
The remaining 1.4 percent is split between Adult Preventative Dental and Children’s Medicaid, Brodie said in her presentation to legislators.
Among the successes on containing costs in 2012, pending per recipient for general health care services declined from $5,428 to $5,315, or 2.1 percent; behavioral health spending per beneficiary went from $12,041 to $11,613 in 2012, or 3.6 percent down.
However, spending for senior and disability services increased 2.7 percent, from $43,652 to $44,844 per beneficiary in 2012.
Spending on senior citizens is difficult to control. “As our population ages we can anticipate increased costs,” Brodie said. Much of this is for personal-care attendant services where senior citizens and the disabled can receive care in their homes. While expensive, it is less costly and better for patients than the alternative, nursing homes.
A national initiative in Medicaid is to reduce costs incurred from fraud, an estimated $22.5 billion estimated nation-wide. Brodie said the Department of Health and Social Services has a new manager in the Medicaid Fraud Unit.
“He is very active, so we should be seeing some activity,” in spotting fraud. “We also have a surveillance utilitization team that combs through claims looking for patterns. We also receive reports (of fraud) from individuals,” Brodie said.
Tim Bradner can be reached at email@example.com.