Increased Medicaid usage spikes cost

It's Medicaid -- the state-federal insurance program for poor and low-income people. The cost is sure to top $1.2 billion this budget year and is expected to scale $1.3 billion the next. About 11,000 more children enrolled in the last 18 months. Doctors' rates went up. And more people eligible for the program began to use it, perhaps out of anxiety over all the talk in Congress about national health care reform.

A weakened state economy is at least partly to blame, a legislative consultant told lawmakers recently.

The state unemployment rate is rising, and along with it, the numbers of Alaskans turning to food stamps and Medicaid, consultant Janet Clarke, a former top official in the state Department of Health and Social Services, told the House Finance Committee recently.

"I know we normally don't talk about billions," Clarke said. "We might as well face it. This is a billion-dollar program and growing."

Clarke analyzed a number of factors to assess whether Gov. Sean Parnell's requests were justified for more money to cover Medicaid's projected costs through June 30, as well as an increase for next budget year. Her estimates came in slightly under the administration's -- close enough to convince some lawmakers that the requests weren't bloated.

Medicaid is an entitlement program, like food stamps or public assistance payments. People who qualify for benefits get them. It's not first come, first served until the money runs out.

"Unless we are willing to eliminate services, with a growing population, the Medicaid number will inevitably grow over time," said state Rep. Mike Hawker, a Republican from Anchorage.

STATE DRAWS THOSE DOWN ON THEIR LUCK

In her analysis, Clarke looked at unemployment figures and found Alaska's rate approaching 9 percent as of December. That's the highest level since 1992, according to the state Department of Labor.

When the economy was stronger, more workers had jobs that provided health insurance, people generally were making more money, and they didn't qualify for Medicaid, she said.

"Now we are seeing that they do," Clarke told legislators.

Economists say Alaska's picture isn't as bleak as in other states. While Alaska's unemployment rate is up, Alaska still looks stronger by a different measure, the percentage of jobs lost, said Scott Goldsmith, an economics professor at the University of Alaska Anchorage. From December 2008 to December of last year, the state lost less than 1 percent of its jobs.

"If you look at the overall economy, it's down. But it's not down nearly as much as in other states," Goldsmith said Friday.

Goldsmith said he doesn't see enough downturn in Alaska's economy to explain all of the Medicaid crunch

"We're in a much better position than the rest of the country and we're not looking at a situation like we had in the mid-80s (recession), when we lost 10 percent of our population," he said.

One factor, economists say, may be increasing numbers of people without jobs moving to Alaska from states plagued by high unemployment and job losses. Legislators say they are draining public benefits such as Medicaid.

Hawker oversaw the health and social services budget for six years and is now co-chairman of the Finance Committee.

"As long as our state remains quite attractive to people who are down on their luck in other states, we're always going to be bringing in an economically marginal group and adding it to our state's demographic," Hawker said in an interview.

Legislators are seeing the situation from a broader lens, he said, not just jobs and unemployment. Public defenders and prosecutors are seeking budget increases, too, based on increased crime stemming from a troubled economy, he said.

"The state's economy has gone into the toilet by all other indicators," Hawker said. "You look at the employment indicators. You look at the crime indicators. You look at the jobless indicators."

BIRTHS AND MEDICAID

More than 100,000 Alaskans, including 71,000 children, were signed up for Medicaid as of January. They rely on the coverage for a wide range of health services: prenatal care and baby checkups, prescriptions and dentures, hospital treatment and nursing home stays. Costs are shared by the federal and state governments.

For a family of four in Alaska, the income cutoff is $3,009 a month for regular Medicaid and $4,021 for Denali KidCare, provided the family doesn't have other health insurance. Single adults usually only are covered if they are disabled, elderly or pregnant.

One startling figure is that Medicaid pays for 40 to 50 percent of Alaska births, according to Clarke.

"That tells me that 50 percent of the kids are being born to parents who can't afford to have kids," Hawker said.

Spending for Medicaid in Alaska began to take off about a decade ago. More children qualified through Denali KidCare, which started in 1999 to cover children and pregnant women in families with higher income levels than regular Medicaid. Emotionally disturbed children were being sent, at Medicaid expensive, to expensive private psychiatric treatment centers out of state. Prescription costs were growing. And billings to a relatively small program providing in-home personal care began to escalate -- people were abusing it, Hawker said.

State officials and legislators began to put controls on costs, limiting, for instance, how many hours of care would be allowed for the in-home help. In the 2005 budget year, the Medicaid budget leveled off at about $1 billion. That's more than double what it had been five years earlier but for a few years, it stayed stable, even dropping.

Until last budget year.

"Any implication that agency is not ... doing its best to manage the program is wrong," Hawker said.

For instance, the state encourages Alaska Natives who qualify for Medicaid to get care through tribal health organizations because the federal government picks up 100 percent of that Medicaid bill. The Legislature in the past has approved planning money to develop tribally run nursing homes in Anchorage, Bethel and Kotzebue.

THE NEW WAVE

According to Clarke, a number of factors are in play with the recent spike:

• Overall medical costs in Anchorage rose about 3 percent in 2009. Also, in March 2009, doctors received a 15 percent increase in their Medicaid reimbursement rates, but no extra money was put into this year's budget to cover it.

• More people on Medicaid are going to the doctor. In the 2000 budget year, about 87 percent of those signed up for Medicaid used their coverage. Last year, the rate reached 97 percent. All the talk about federal health reform and even about the H1N1 flu epidemic could have prompted more people to seek care, said Alison Elgee, assistant commissioner of health and social services.

• The biggest factor, though, is the increasing number of Alaska children covered by Medicaid. The total rose from 60,142 in July 2008 to 71,460 as of January, according to the Department of Health and Social Services. That's about 11,000 more children in the space of 18 months.

Most of those children, about 9,000, are poor, in regular Medicaid, not Denali KidCare, Clarke noted.

"So we know it's the kids in Medicaid" driving the increase, she told legislators.

As Clarke summed it up for legislators, the administration is seeking an extra $88 million to make it through this year, including $44 million in state general funds, for a total of $1.26 billion. For next budget year, the administration wants a total of $1.34 billion for Medicaid, including an additional $77 million in state general funds.

"This is serious stuff. We take the growth in the Medicaid budget very seriously," Bill Hogan, health and social services commissioner, told the House Finance Committee.

He said legislators will need to make painful decisions and warned them to expect a bigger hit in the 2012 budget year. That's because the federal share, now 61 percent under a special economic stimulus appropriation, is expected to drop, and the state share will need to go up.

Clarke recommended slightly smaller increases this year and next but said the department's requests weren't out of line. A difference of a few million dollars in a budget topping $1 billion is "decimal dust," Hawker said.

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Find Lisa Demer online at adn.com/contact/ldemer or call 257-4390.