Medicaid expansion is bad for Alaska; Medicaid reform is essential

The governor made Medicaid expansion and balancing the budget cornerstones of his election. Expansion is a red herring and discussing expansion deflects attention from the real issue: Medicaid in its current, nonexpansion form, is unsustainable and the state cannot balance its budget without reform. Once Medicaid reform has occurred, expansion can be explored. And when expansion is explored I believe it will be shown to be bad for Alaska.

Medicaid provides health care to people of limited means (adults with children, children, the disabled, etc.). The program is funded jointly by the federal government and state general fund dollars. The state pays for medical services and the federal government reimburses the state a percentage of the cost through the Federal Medical Assistance Percentage, or FMAP. For the current, nonexpansion Medicaid program Alaska's FMAP is 50 percent. For every dollar paid through the state Medicaid program, the federal government reimburses the state 50 cents.

Alaska's share of the existing, nonexpansion Medicaid program cannot be sustained. The Department of Health and Social Services tracks its Medicaid enrollment and spending in its "Long-term Forecast of Medicaid Enrollment and Spending in Alaska." The department's 2010-2030 supplement projected the state's share for the existing, nonexpansion Medicaid program to be $1.07 billion by FY 2020 and $1.96 billion by FY 2030. We're currently funding the state's share of Medicaid at $690 million.

This growth coupled with the historic growth of the state's liability for the Medicaid program has had the Legislature's attention for years now, recognizing that we were headed on an unsustainable trajectory with the Medicaid program. The unprecedented fall in the price of oil -- the state's main revenue source -- has brought the state treasury breaking point much closer than any of us should be comfortable with.

And yet, as we started this legislative session, the governor and proponents of Medicaid expansion ignored the existing Medicaid growth and instead focused solely on the federal match under expansion for the "newly eligible." Under expansion the federal match for newly eligible is substantial and the governor asserted this match and additional savings through "budget offsets" would pay for Medicaid expansion. The implication being that accepting Medicaid expansion would solve the sustainability problem of the overall Medicaid program.

Nothing could be further from the truth. The federal match for expansion does nothing to address the state's liability for the existing Medicaid program. The substantial federal match for "newly eligible" under Medicaid expansion does not address those eligible under the existing Medicaid program. Those costs will continue to rise and be reimbursed to the state under the existing federal matching percentage, NOT the higher expansion matching rate.

Furthermore, the sentiment that "budget offsets" can pay the state's share of Medicaid expansion doesn't hold up to closer scrutiny. This assertion implies that savings associated with expansion will take care of the state's general fund Medicaid liability.


The governor's "Healthy Alaskan Plan" identifies up to $83.3 million in saving over the fiscal years 2014-2020. This sounds impressive until you compare it to the projected Medicaid general fund liability of $3.45 billion for the same period (a 4057.5 percent difference): The paltry amount of budget offsets -- assuming they could all be realized -- fail to make a dent in the state's existing Medicaid liability.

For these reasons, Medicaid expansion is a red herring. The real issue is Medicaid sustainability and the need for reform. Since this legislative session started the legislative majority has been pressing reform on the governor's representative for expansion of Medicaid, the Commissioner of Health and Social Services. Only in response to the majority has the commissioner started talking about Medicaid reform. To date, the commissioner has offered very little by way of ideas for true reform. This is a shame as over the last five years there have been formal groups convened to explore reforming Medicaid: The Medicaid Task Force as well as The Medicaid Reform Advisory Group. Both groups produced road maps for meaningful reform: Payment reform, medical home model, care management, program integrity, among others.

The proposed expansion is bad for Alaska because a downside exists to expanding Medicaid eligibility. In states that have opted for expansion, they are finding that it has not reduced the rate of the uninsured and that people drop private insurance and enroll in Medicaid. Arizona, Maine, Oregon and Delaware all expanded their Medicaid programs to able-bodied childless adults prior to the Affordable Care Act. According to U.S. Census Bureau figures, the rate of the uninsured has remained constant or increased in each state. Census Bureau figures also show that privately insured numbers have fallen while Medicaid enrollment increased (sometimes referred to as the "crowd-out effect"). These are bad enough outcomes. What's worse is the perverted nature of the expansion funding.

The existing Medicaid program was created to be a safety net for the most vulnerable: mothers and children living in poverty, the elderly needing nursing home care, and the disabled. The expansion population is comprised of able-bodied (non-disabled) adults with no children. This population is reimbursed from the federal government through 2016 at 100 percent then falling to 90 percent by 2020. States that have enacted expansion and then experienced budget trouble have cut their existing Medicaid program and kept expansion intact -- reducing benefits to the truly vulnerable and preserving services for the able-bodied. Again, we have seen this in the states mentioned above, but Rhode Island is probably the purest example as it expanded Medicaid after the Affordable Care Act. Rhode Island's Medicaid cost overrun issues have been well-covered and can be explored with a simple Internet search. This is a perverse outcome, but since the expansion population is reimbursed at 100 percent, it is difficult for states to cut these programs. Instead states opt to cut programs to the existing Medicaid populations: women with children, children, the elderly, and the disabled.

I am against Medicaid expansion. Expansion is a red herring. For the state to maintain fiscal health, we need to embrace Medicaid reform and let reform be the plan for a healthy Alaska.

Rep. Wes Keller, R-Wasilla, has served in the state House of Representatives since 2007.

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