Gov. Sean Parnell should seek expansion of the Medicaid program in Alaska for two reasons — to prevent a huge drain of health care dollars out of the state and to plug a bizarre gap in coverage for the poorest Alaskans created by the federal Affordable Care Act.
To understand why requires some detailed background.
Medicaid provides health care to low-income Alaskans, primarily adults with dependent children who make less than about 80 percent of the federal poverty level. Medicaid also pays to care for low-income disabled people, regardless of whether they have children. The program, which is run by the state but funded by both the state and federal governments, will cost $1.66 billion in Alaska this state fiscal year. The state will cover 41 percent — $686 million. The federal government will pick up the remainder, just shy of $1 billion.
This is big money. It represents almost 14 percent of the state’s total spending, including not only state money but also all federal pass-through dollars. Medicaid funding comes from general state and federal tax revenue — unlike for Medicare, the 100 percent federally funded program for people over 65, there is no separate “Medicaid” line on our pay stubs.
Under terms of the federal Affordable Care Act, aka Obamacare, states are expected to expand their Medicaid eligibility rules to include all adults, not just those with children, whose income is below 138 percent of the federal poverty level. The federal law offers to fund 100 percent of the expansion costs for the first three years; the percentage falls to 90 by 2020.
The U.S. Supreme Court made the Medicaid expansion optional, but many states have expanded eligibility anyway. Alaska has not. Doing so in Alaska would cost up to $215 million annually by 2020, with a cumulative additional cost of $1.1 billion between 2014 and 2020, according to estimates from the Alaska Native Tribal Health Consortium. Of that cumulative amount, the state would be on the hook for about $90 million, although some offsetting income could cut that to $24 million, the consortium estimated.
Gov. Parnell will make a recommendation on whether to expand Medicaid eligibility when he releases his proposed 2015 budget in December. He has hesitated to endorse the idea because he correctly observes that Congress can’t guarantee that it will reimburse the state for the expansion. The law promises that the federal government will cover 90 percent of expansion costs, but Congress, under its own budget pressures, might cut that. If so, the cost to the state could be vast.
Nevertheless, it should be clear from these facts that the best policy for Alaskans, who are both health care consumers and taxpayers, is to expand Medicaid eligibility.
First, consider the issue of lost dollars in the Alaska economy. Individual Alaskans and Alaska businesses pay federal taxes into the big pot from which Medicaid funds are dipped. If other states expand their eligibility but Alaska does not, our tax money will pay for additional coverage for people in other states but not here. We should expand eligibility here, too, to keep our tax dollars coming home. Those dollars will also reduce the unpaid bills that hospitals and other health care providers must write off, a unavoidable practice that inevitably increases costs for everyone else. The Medicaid money also will help offset a planned cut in Medicare payments to Alaska hospitals and physicians that’s supposed to help reduce the overall budgetary impact of Obamacare.
If the federal government doesn’t come through with the promised extra funding for the Medicaid expansion, Alaska can revisit the issue, as many of Alaska’s business groups have suggested.
Second, declining to expand Medicaid in Alaska would have one entirely illogical result: The poorest people without children (those making less than 100 percent of the poverty level), and even some people with children who fall just below poverty level, would actually get no help with medical care. They’d be eligible for neither Medicaid nor subsidies to buy the new mandatory insurance. Meanwhile, people making a lot more money — between 100 and 400 percent of the poverty level — will receive those subsidies.
This makes no sense. How did it come to be official policy? Well, given the original premise that states would have to expand Medicaid to cover all low-income adults, the Affordable Care Act does not offer to subsidize the purchase of the new mandatory health insurance for them. Those who make less than 100 percent of the federal poverty level are expected to get Medicaid coverage, not subsidized health insurance. If they don’t get the Medicaid coverage because the state declines to expand it to cover them, they’ll get no help at all, even while people who make far more money will.
In the interest of Alaska’s economy and in the interest of fairness, there is a clear best policy for Gov. Parnell: Put the Medicaid expansion in the budget.
— Fairbanks Daily News-Miner,