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New report says Medicaid expansion will save Alaska money

  • Author: Laurel Andrews
  • Updated: September 28, 2016
  • Published February 6, 2015

Gov. Bill Walker announced Friday that a new report commissioned by his administration confirms that 40,000 Alaskans would become newly eligible for Medicaid and that the state would save money by expanding the government program.

At a crowded news conference in the Anchorage Neighborhood Health Center, Walker said the release of the report marked a "great day" for Alaska. Dozens of people from health care organizations lined a conference room as Walker and Department of Health and Social Services Commissioner Valerie Davidson discussed the new analysis by Evergreen Economics and a second report, "The Healthy Alaska Plan: A Catalyst for Reform," which outline how Medicaid expansion can benefit overall health care reform.

Walker hopes to implement Medicaid expansion by July 1. But first, he will need the Alaska Legislature to agree.

Medicaid expansion was one of the tenets of the Affordable Care Act, designed to be implemented in every state as a way to ensure that low-income Americans would get health care. It was a funded mandate -- Congress agreed to pay for nearly all the additional costs to the states.

But a 2012 U.S. Supreme Court ruling made the expansion optional and left it to the discretion of state leaders. Twenty-eight states have chosen to expand Medicaid thus far.

Alaska isn't one of them. Former Gov. Sean Parnell rejected Medicaid expansion, calling it a "failed experiment" when he announced his decision in November 2013.

Walker ran on a platform that Medicaid expansion would be one of his first priorities upon taking office.

Lawmakers must approve the receipt and expenditure of federal funds. In his budget released Thursday, Walker included that request, Davidson said.

Davidson said some legislators aren't "necessarily so hot" on expansion but are seeking greater efficiencies in Medicaid to reduce its costs.

"If the two go hand in hand and we can show there are savings to the state … then I believe they will come on board," Davidson said.

Davidson said the new analysis by Evergreen Economics is a "more refreshed analysis" of the potential impacts of Medicaid expansion on the state and demonstrates cost savings for Alaska at a time of budget challenges.

Evergreen's report adds to three other analyses examining Medicaid expansion in Alaska. Two of the reports were commissioned by the Alaska Native Tribal Health Consortium, where Davidson worked before Walker brought her into his administration. The third was commissioned by Parnell.

All told, the state would receive cost savings of $6.1 million in the first year of Medicaid expansion, Davidson said, $4 million of which would be from incarcerated individuals who will become eligible for Medicaid for inpatient services.

The report estimates that under expansion, Alaska would see 41,910 newly eligible adults in 2016. About half of those people would sign up for Medicaid in the first year, the report states.

Evergreen Economics found that the cost to Alaska during 2017 -- the first year the state would have to share a portion of the costs -- would be $3.8 million. That's less than the Lewin Report commissioned by Parnell, which estimated several cost scenarios, all of them higher than $4 million.

Why the discrepancy? Davidson said the Lewin Report used costs based on Medicaid recipients under long-term care, which includes disabled Alaskans. The Evergreen report released Friday relies on cost estimates of working families on Medicaid. That would be a closer comparison to the newly eligible population, Davidson said.

More than half of the newly eligible would be men, many aged 19 to 34, who cost less in terms of health care, Davidson said.

Sen. Pete Kelly, a vocal opponent of Medicaid expansion, said that he "might" support Medicaid expansion if the savings outweigh the costs, but that he still feared the federal government will renege on its promise to fund the expansion at 90 percent after 2020.

Also announced Friday was that the Alaska Mental Health Trust Authority has agreed to cover administrative costs for the first year of expansion. Walker noted that administrative costs were "one of the pushbacks we received in the past" from expansion opponents.

Kelly questioned how those costs, estimated at $1.3 million, would be funded after the first year.

The second report released Friday, "The Healthy Alaska Plan: A Catalyst for Reform," states that the Medicaid program is "unsustainable as currently designed." A checklist of reforms includes payment changes, strengthened access to primary care providers and improvement in the management of Medicaid services.

Some of the reforms are already underway and will be strengthened, the report states. Among them, a crackdown on fraud and abuse prevention, coordination with patient-centered home-medical initiatives and efforts to control overutilization of hospitals.

Before expanding Medicaid, the state health department must work through a backlog of payments stemming from a bungled Xerox contract and a backlog of Medicaid applicants, which Davidson said she hopes to have completed by July.

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