Alaska News

New Medicaid reports repudiate Alaska GOP fears, outline ideas for changes

JUNEAU — One new report on Alaska's expanded Medicaid health care system repudiates lawmakers who raised fears about its unintended consequences, while another provides new ideas to control spending on the $600 million program.

Medicaid, which covers 130,000 people, or about one of every six Alaskans, was a lightning rod during last year's legislative session, as top Republican lawmakers thwarted Gov. Bill Walker's plans to expand the program under President Barack Obama's health care law.

Walker, a Republican-turned-independent, ultimately used his executive power to expand the program unilaterally — a move that's now subject to a legal challenge from the Legislature. But as attorneys prepare for oral arguments in that case next week, a new report commissioned by the Legislature itself dismisses some of the challenges that lawmakers themselves made against expansion, which now covers about 8,000 low-income Alaskans.

The report was done under a contract capped at $350,000, with a Virginia-based health policy consulting firm, the Menges Group. The firm was hired this spring by the Legislative Budget and Audit Committee, chaired by Rep. Mike Hawker, R-Anchorage.

Among the findings:

• Concerns about a "woodwork effect" — that expanding Medicaid could trigger more people to enroll — are unfounded, the report says. Pre-expansion Medicaid, or "regular Medicaid," actually grew more than twice as quickly in states that didn't expand the program, according to the report.

• There's no basis for fears that expanding Medicaid could squeeze other patients out of the health care market, a phenomenon dubbed "crowd-out." Some GOP lawmakers said expanded Medicaid risked overwhelming the health care system and preventing seniors, veterans and regular Medicaid patients from getting the care they need. But the report said Medicaid expansion typically brings a large amount of money to the health care system, with providers "made far better off" than if Alaska stuck with the status quo.


• The total state cost of expansion will hit $24 million by 2020, once the federal government scales back its support for the program to 90 percent from 100 percent. But the report says there are "large-scale opportunities" to cut Medicaid spending over the long-term to offset the increased costs. It also says the state gets a $170 million annual net gain by expanding Medicaid, with more federal money coming into the state than leaving in taxes. About $90 million from Alaskan taxes would be spent in other states if Medicaid wasn't expanded, the report noted.

• The impact of the federal money on the state's economy makes Medicaid expansion "a highly attractive policy change, financially," the report said. And when combined with other benefits to the health care sector and to low-income Alaskans — many of whom otherwise have no affordable way to get health insurance — expansion justifies a "considerable" state investment, the report said.

The completed report was released earlier this month and provided to all 60 lawmakers, an aide to Hawker said in an email Monday. Sen. Bill Wielechowski, D-Anchorage and a proponent of Medicaid expansion, said he was "a little bit shocked" to read it.

"They could have very easily not put their opinion in, but they came straight out and said the benefits are significant and justify making a considerable state investment," he said. "That's nothing short of stunning, from my perspective, for a group that was hired by people that are not supportive of Medicaid expansion."

One Republican lawmaker was skeptical of the findings. Sen. John Coghill, R-North Pole, whose office is leading the legal challenge to Medicaid expansion, stressed the section of the report that outlined the program's costs, saying that they have been minimized.

"There are real benefits," he acknowledged to reporters at a news conference Monday. But, he added: "It does cost the state of Alaska more money."

The Menges report also included several recommendations that it said could lead to quick Medicaid savings for the state. One is using more generic drugs, as Alaska's Medicaid costs-per-prescription are among the highest when compared to other states, the report said.

Another idea is to establish more nursing homes and other services that can be run by tribal health care providers, which are fully reimbursed by the federal government for care given to Alaska Natives. Each Alaska Native Medicaid patient transferred to tribally run nursing homes could save the state $75,000 a year — or tens of millions of dollars, if hundreds of patients are moved, the report said.

Chris Ashenbrenner, the state's Medicaid redesign and expansion coordinator, said in an interview Monday that the nursing home recommendation is "just the sort of thing we're thinking about," though the state's multibillion-dollar budget deficit "limits our options," she added.

State health officials are also awaiting clarification on a policy change by federal officials that should allow them to use more federal money, rather than state funds, to pay for Alaska Natives' and American Indians' medical care, Ashenbrenner said.

Meanwhile, a second report, released Friday, recommends larger structural changes to Medicaid that state health officials hope could ultimately lead to savings. The changes are a first step in a long reform process aimed at moving Alaska's Medicaid program away from a largely obsolete model of paying for individual appointments and procedures toward one that pays for results and efficiency. Alaska and Wyoming are the only two states that exclusively rely on the per-appointment model, according to the report.

The 182-page document was written for the state for $460,000 by an Anchorage consulting firm, Agnew::Beck, with assistance from a national health policy consulting company, Health Management Associates, and cost estimates from Milliman Inc., an actuarial firm.

The report's recommendations include:

• An initiative that would pay day-to-day health care providers, known as primary care providers, a $5 monthly per-patient fee to coordinate care for Medicaid recipients. Those with chronic conditions and bigger health problems would be referred to more intensive programs to make sure they get care "as early and appropriately as possible," the report says.

• Creating a new data analytics program to link the state's hospitals, emergency departments, local doctors and prescription drug database into a "single repository" — along with the hiring of a contractor to analyze the data collected. Currently, the report says state health officials don't have the ability to connect different health care providers and analyze health data. The new program could help detect abuse of prescription drugs, ensure follow-up from emergency room visits and better connect the health department with Medicaid providers, the report says.

• Creating a new test program in which health care providers would band together into a group called an "accountable care organization." Under the program, the organizations would work with the state to estimate the cost of care for a specific group of patients. If the organizations can provide the care for less money than the estimate, and still hit quality measures, they get to keep some of the savings; if it costs more, they could be held responsible for some of the overrun.

The five total initiatives proposed in the report would combine to save the state about $4 million annually by the year 2021, according to Milliman's analysis.


The report also examined another proposed reform that's already been implemented in dozens of other states called "managed care," in which managed care providers get fixed per-patient payments to administer a full set of Medicaid benefits.

That's one idea that's been suggested by Republican lawmakers, but the report says it would cost Alaska an extra $7.5 million by 2021 because the state's large rural areas and widely distributed populations would make it difficult for managed care programs to achieve economies of scale.

The state's health department is now analyzing what it would take to implement the report's recommendations, said Ashenbrenner, the state Medicaid official, and some could end up before the Legislature this year.

Sen. Pete Kelly, R-Fairbanks, said he's met with the health department and they're "eager to get a reform bill through."

"I think they have a lot of support in this building," said Kelly, co-chair of the Senate Finance Committee and the author of a separate Medicaid bill, Senate Bill 74, that began working its way through the Legislature last year.

But it's not clear how the changes contemplated by Kelly, a fiscal conservative and Medicaid expansion skeptic, will mesh with the Walker administration's ideas.

"I don't think the administration has the level of enthusiasm for the kind of drastic change to reform Medicaid that needs to happen," he said.

Becky Hultberg, a former commissioner of administration who now leads the state's hospital and nursing home trade group, said that the new report on Medicaid reform amounts to "one step in the process," and one that will be developed in further conversations with health care providers.

Reforms, she added, will take both hard work, and money — the latter of which the state has in short supply.

Nathaniel Herz

Anchorage-based independent journalist Nathaniel Herz has been a reporter in Alaska for nearly a decade, with stints at the Anchorage Daily News and Alaska Public Media. Read his newsletter, Northern Journal, at