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Nothing is bigger for Alaska than this health care vote

  • Author: Charles Wohlforth
    | Opinion
  • Updated: June 28, 2017
  • Published June 28, 2017

Sen. Lisa Murkowski, R-Alaska, walks to board a bus to the White House to discuss the upcoming Senate health care bill with President Donald Trump in Washington, D.C., on June 27. (Aaron P. Bernstein / Reuters)

Medicaid is a huge part of Alaska's economy and affects almost everyone. The votes facing our congressional delegation to change and shrink it are among the biggest they will ever make.

Compared to other programs of comparable size — the public schools, for example — Medicaid is relatively invisible. But it provides health care to a fourth of Alaskans and covers most births.

The state spends $1.8 billion a year on Medicaid, of which two-thirds is currently paid by the federal government. Economists estimate that rolling back the Medicaid expansion that came under the Affordable Care Act would cost the Alaska economy 3,000 to 5,000 jobs.

The individual marketplace that people think of as "Obamacare" is important too, but fewer than 9 percent of Alaskans have individual policies.

By comparison, Medicaid covers 24 percent, Medicare (for the elderly) 11 percent, VA and Tricare military cover 17 percent, and the Indian Health Service another 17 percent, according to figures from the Institute of Social and Economic Research at the University of Alaska Anchorage. (The numbers double-count people covered by more than one plan.)

The health industry is among Alaska's biggest employers and most of its revenue comes from government. To put it another way, we already have socialized medicine.

Besides bringing more money, the Medicaid expansion under the ACA also tackled deep-rooted problems. Medicaid became the primary path to addressing the opioid crisis, providing money for medication and treatment that wasn't available before.

The ACA also created the potential to revamp Alaska's mental health system so it cares for mentally ill people who wander our wooded parks and disrupt village life.

For many years we've sent the mentally ill into the streets, waiting for their miserable lives to spiral into crises that bring them repeatedly to jail or the emergency room. It's the least humane and most expensive way we could deal with the problem.

The state's Division of Behavioral Health is working on a plan to transform the mental health system using Medicaid expansion dollars. Mental health providers would follow patients into the community, integrate their care and keep them stable and housed.

Under the plan, Medicaid payments for mental health services would reward results rather than services rendered. That's critical for agencies that work with patients outside of clinics, where they live, rather than at discrete office visits.

Division Director Randall Burns said a complete plan for the new system should be done by the end of the year. But if new federal legislation passes, he doesn't know what will happen.

The Alaska Legislature passed a Medicaid reform law last year to make the state's health spending more effective and accountable. The Department of Health and Human Services is reviewing proposals to run the system and expects to announce a decision in the fall that could transform how care is delivered.

Before the reform, Alaska's Medicaid payment system was in disarray. But it already competed well on cost with private insurance.

The cost to cover a person on Medicaid is less than the average Alaskan spends on health care.

Even including high expenses for aged and disabled individuals, Alaska Medicaid costs about $10,000 a year for each covered person, according to the Kaiser Family Foundation. The average cost for care in Alaska was $11,000. (Those are fiscal year 2014 figures.)

Medicaid is intended to cover people with low incomes and few assets. That includes poor families, people on Social Security disability, and the elderly in long-term care.

Medicare is the health care system for the elderly, but it only covers 30 days of nursing home care. After that, elders have to pay down their assets until they are poor enough to qualify for Medicaid.

In the perverse language of health care, an elder who has too much money for Medicaid is called "over-resourced."

If you're single, the nursing home gets everything you own except your house and car, including investments, real estate or anything else you might have left to your heirs. If you're married, your spouse gets to keep many of the assets.

It's like a reverse lottery. For the family to keep their parents' life savings, the second parent to die has to go quickly.

But at least we don't put old people in the streets as we do the mentally ill. (Although the Republicans' legislation could eventually change that with its funding cuts.)

Medicaid holds down expenses by paying hospitals and nursing homes based on detailed studies of their actual costs rather than their inflated charges. Reimbursements don't cover the cost-shifting that facilities charge most paying customers for those who can't pay.

For doctors and other providers that are not facilities, Medicaid payments are determined by the state budget. Those reimbursements are going down in Alaska.

Medicaid had paid doctors the same rates as Medicare plus 30 percent, but under the new budget that is expected to go down to 15 percent, said Margaret Brodie, director of the Division of Health Care Services.

Medicare rates are set by government fiat, not by provider costs, and in Alaska many doctors won't accept patients at those low rates.

That's not a great system, but it manages expenses better than Alaska's private market. Private payers have to pay whatever monopolized providers demand, including cost-shifting for those who cannot pay.

With so many patients covered by fixed-price government programs, health inflation and cost-shifting is becoming an ever-larger problem for private payers, whose premiums are climbing unsustainably.

As I've written previously, competition among providers doesn't work in Alaska because our market is too small and isolated. Competing providers such as primary care doctors can be undercompensated by insurance companies, while monopolistic specialists and hospitals can be vastly overcompensated.

A universal system designed like Medicaid's hospital program, paying according to actual documented costs, would solve the problem.

That's another reason why the Republican bills under consideration are a step in the wrong direction for Alaska. They would cut back on what works.

The views expressed here are the writer's and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email Send submissions shorter than 200 words to or click here to submit via any web browser.

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