In a closely watched and controversial decision, Gov. Sean Parnell announced Friday that Alaska will not participate in Medicaid expansion under the Affordable Care Act, describing it at a news conference as a "failed experiment."
Expansion would have benefited 40,000 or more Alaskans, many of them low-income adults without children who currently have no health insurance. It also would have helped hospitals and doctors by reducing the amount of uncompensated care they have to write off and would have brought billions of federal dollars into the Alaska economy.
But Parnell, a Republican running for reelection next year, described it as one of many troubled parts of health-care reform.
"I believe a costly Medicaid expansion especially on top of the broken Obamacare system is a hot mess," Parnell told reporters at a news conference in Anchorage called to announce his decision.
A range of groups and individuals -- including chambers of commerce, Alaska Native organizations, churches and leading Democrats -- had pushed for the change and reacted on Friday with disappointment, frustration and sharp criticism for the governor. But others including right-wing think tanks, had argued against it. Some Republican legislators praised the governor, saying extending the health coverage would have been far too expensive for Alaska and the country.
The Affordable Care Act initially provides 100 percent of the cost of increasing Medicaid coverage to all people whose income is 138 percent of the federal poverty level. The federal share would drop to as low as 90 percent by 2020. In reality it would have been greater than that on average in Alaska because the federal government covers 100 percent of the costs for Alaska Natives.
Individuals with annual incomes up to $19,803 would have qualified had Parnell made the opposite call. For couples, the cutoff would have been $26,744 and for a family of four, $40,627.
"For most of these people, there is no other source of assistance to get coverage. When someone is sick, they have to choose between getting health care and feeding their family," said Andy Teuber, chairman of the Alaska Native Tribal Health Consortium, one of the groups that pushed for the expansion.
About 17,000 Alaska Natives would have been among the newly eligible for Medicaid. But Parnell noted they already qualify for health care through federally supported Native hospitals and clinics. He subtracted their numbers from the uninsured group at issue, saying about 26,000 Alaskans are truly without health benefits.
Parnell said he would look for other ways to improve access to health care for Alaskans.
He announced his decision in the conference room of his Anchorage office with Health and Social Services Commissioner Bill Streur at his side.
Just outside the state Atwood Building, as Parnell began speaking to reporters, a group representing 15 Anchorage churches lit candles and prayed.
They wanted the governor to "remember the poor and the struggling families of Alaska when he makes his announcement today regarding Medicaid expansion," said the Rev. Julia Seymour of the Lutheran Church of Hope.
THE LEWIN STUDY
Parnell told reporters Friday morning that he made the call after reviewing an $80,000 state-commissioned study by a Falls Church, Va., health-care consultant, The Lewin Group. He said he received the 60-page report a couple of weeks ago, though it was delivered to the state April 12. It was made public on Friday minutes before Parnell began talking to reporters.
For months, the state Health and Social Services Department refused requests from the Daily News and others to release the study, saying it fell under the "deliberative process privilege."
Asked whether withholding a study while he and others were thinking it over was a novel interpretation of the state law that requires state records to be made public with few exemptions, Parnell said no one asked him personally for the report. He said he would need to consult with attorneys for more explanation.
"I saw it as a deliberative piece," Parnell said. At any rate "it's available. It's a part of the decision I've made. I've announced the decision."
The report was illegally withheld, said state Sen. Bill Wielechowski, an Anchorage Democrat who has been asking for the report since March and who attended the press conference. There's no chance for an open public debate and process by releasing it after the decision was made, said Wielechowski, who is proposing legislation to do what the governor has rejected.
The Lewin study estimated it would cost the state just over $200 million over a seven-year period to expand Medicaid, while the state would receive an additional $2.9 billion in funds from Washington during that time for the federal share
Because of the generous federal reimbursement specified by Congress, the state's "new cost would comprise only 1.4 percent of total Medicaid costs from 2014 to 2020," The Lewin Group said.
The state cost still is significantly higher than the $23 million estimated by the Alaska Native Tribal Health Consortium. The consortium relied on the Urban Institute and Northern Economics Inc., an Anchorage-based consulting firm, for its analysis.
Streur, the health commissioner, said that discrepancy was one reason for the months-long delay in the report's release. He said he ultimately decided the Lewin Group figures were more accurate because of the documentation the consultant provided.
"I came in with a very neutral question," Streur said earlier this week. "Tell us the costs to the state of a Medicaid expansion."
People with incomes below 100 percent of the poverty line -- just $14,350 for an individual -- are ineligible for a subsidy through the new health care marketplaces and of most concern, he said. One challenge has been the difficulty of determining more about who lacks health insurance and why, he said.
"Are these people with significant mental health issues who are on the streets?" Streur said. "Are these people with significant substance abuse issues? Why are they below 100 percent of poverty level?"
Maybe he said, "they are healthy people who are just down on their luck."
Medicaid is already one of the state's most costly programs, the governor said. About 140,000 Alaskans currently are covered through the joint federal-state program at an annual cost of $1.5 billion. Parnell told reporters the figure was supposed to grow to $2.5 billion by 2020 even without the expansion.
Parnell acknowledged that there are gaps in health-care access. Uninsured Alaskans already can get free or subsidized health care at more than two dozen community health centers as well as state-funded mental health and substance abuse treatment, he said. That's not enough, he said.
Experts who have examined Medicaid said it improves the health of people who otherwise can't afford to see physicians.
But Parnell said the Medicaid system is broken and unsustainable, and that he couldn't justify the risk of expanding it through the Affordable Care Act.
The country's new health care law involves a combination of parts, he said.
"Many of those pieces are failing," Parnell said. "Can states trust the federal government to not cut and run on its share of the costs?"
He pointed to delays in key elements, such as a mandate that employers provide insurance, as well as troubles in the health insurance marketplace, which he called a "boondoggle."
"And now it gets worse, because Obamacare's Medicaid expansion enrollment has far exceeded paying customers for insurance coverage. That fragile fiscal framework that Obamacare relies on is cracking," he said.
Parnell said he asked U.S. Health and Human Services Secretary Kathleen Sebelius in February whether the state could expand Medicaid to 100 percent of the poverty level rather than 138 percent. No, she told him.
As of Oct. 22, Alaska was one of 25 states that had not moved forward with a Medicaid expansion. All but three have Republican governors. Among the 25 states that are heading toward expansion, eight have Republican governors. Among them is New Jersey, where Chris Christie was just reelected by a wide margin and is being touted as a moderate presidential candidate.
Around Alaska, pressure on Parnell to expand Medicaid has been building in recent weeks and months.
The Anchorage and Alaska chambers of commerce, the Anchorage NAACP, the Alaska Federation of Natives, the Alaska Native Tribal Health Consortium, AARP Alaska, Anchorage Faith and Action-Congregations Together, and numerous Democratic legislators and candidates all have pushed for the new coverage.
Asked why he was going against such a diverse list of Alaska groups, Parnell said "each one of those groups you've named are responsible for their membership. I'm responsible for all Alaskans."
On Friday, those criticizing Parnell's announcement included Byron Mallot, Democratic candidate for governor, who described it as a "calculated political decision." Anchorage Rep. Geran Tarr, one of a number of Democratic legislators who railed against the governor, called the decision "unconscionable." U.S. Sen. Mark Begich said it didn't make business sense, citing the chambers' support.
The Alaska Chamber said Friday the expansion had fit with its goal of reducing "the cost of doing business in Alaska." Insured Alaskans will have to pay higher premium and health care costs to cover those with no insurance. The expansion could have been contingent on the federal government keeping up its end of the deal, the chamber said.
But Republican leaders said Parnell made the right call. Sen. John Coghill, R-Fairbanks and the majority leader, said the country can't afford the expansion. Rep. Mark Neuman, a Republican from Big Lake who chairs the House budget panel on health and social services, said "passing the burden of health care on to our children is not an option." Rep. Pete Higgins, R-Fairbanks and chairman of the House Health and Social Services Committee, said he looked forward to working with the administration on solutions.
Parnell said he was creating a Medicaid reform group to study the system and report back in a year. He also directed Streur to report back on the health-care needs of uninsured people who fall below the federal poverty line. He said he expects that information in hand in time to make amended budget requests to the Legislature in 2014. Critics were skeptical any improvements would materialize soon.
The commissioner said the state simply didn't have that data yet.
"I say 'shame on me' for that," Streur said.
Reach Lisa Demer at email@example.com or 257-4390. Reporter Richard Mauer contributed to this story.