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State predicts major cuts to Medicaid under proposed Senate bill

WASHINGTON — The Senate health care bill would ultimately cut nearly a third of Alaska's Medicaid funding, limit services and drop coverage for 34,000 adults, according to a research report prepared for the state government.

One-quarter of Alaskans — more than 185,000 people — are on Medicaid. Senate Republicans are considering legislation that would alter the way Medicaid funding is doled out to states, in a manner designed to lower federal spending in the long run.

In an analysis of the legislation as proposed, research group Manatt Health found, for the state Department of Health and Social Services, that the result would be a loss of 28 percent of Alaska's federal Medicaid funding under the current law. The roughly 34,000 Alaska adults who have gained coverage under Medicaid expansion would lose coverage beginning in 2020, the report estimates. And from fiscal year 2020 through 2026, Alaska would lose $3.1 billion in federal funding for Medicaid, the report said.

The Senate bill imposes a per capita cap on funding, meaning the state gets a certain amount of money from the federal government for each person enrolled in Medicaid. Currently, the federal government matches state Medicaid spending, 50-50. The federal government pays 90 percent to 95 percent for the expansion population — people who make between 100 percent and 138 percent of the federal poverty line ($15,060 annual salary for a single Alaskan and $30,750 for a family of four).

The amount rises each year in an amount that is tied to the consumer price index (CPI). That amount is smaller than the Medical CPI by several percentage points, since medical costs rise faster. Over time, the divide between the CPI and Medical CPI will mean growing "cuts" to federal Medicaid spending, the report said.

Not all Medicaid populations are limited to the cap under the Senate bill. The legislation would exempt disabled children and people who use the Indian Health Service from the caps.

That changes the numbers for Alaska, where as much as 40 percent of Medicaid billing could come from the Indian Health Service, according to Alaska Sen. Lisa Murkowski. Earlier this week, Murkowski said there is still "great uncertainty in terms of the impact" of Medicaid cuts to Alaska, because she was having trouble getting data on the demographic breakdown for Medicaid spending and IHS in the state.

What is known is the general demographic status of Alaskans on Medicaid: 48 percent (88,915) are children; 1 percent (2,455) are disabled children; 5 percent (8,070) are elderly; 8 percent (14,871) are disabled adults; 20 percent (36,883) are impoverished adults; and 18 percent (33,945) are adults living just above the poverty line who were added through the recent expansion of Medicaid.

The report's estimates of lost funding hinge on a few unknowns, some of which would be constant for the state government.

Manatt Health presumes that the 34,000 expansion enrollees would be dropped from Alaska's Medicaid program because the law shifts the group from "mandatory" to "optional" coverage under federal law. Because of the way Alaska state law works, that would mean, at the very least, that the state Legislature would have to approve the group for Medicaid coverage, experts say.

Before the Medicaid cap is in place in 2020, the state would have to set its Medicaid budget. That would be well before the state knew the actual pricing trends and enrollment for those years. So the state would have to make some assumptions, and likely err on the lower side, the report said. Any spending amount that surpasses the federal spending cap would be taken out of the next year's funding, in what is known as a "clawback" provision.

Still, the state would have to raise its own funding under the new system, the report found.

"During (fiscal years 2020-2026), Alaska would have to increase its own spending by $1.2 billion, or about 13 percent, to replace lost federal funds from expansion financing charges and the per capita cap," the report said.

Even so, the amount of per-person spending would still drop for both federal and state Medicaid spending, the report said. To keep below the caps, spending would drop by $632 for the six-year period. Those annual cuts grow as time passes, doubling between 2024 and 2026, because the way the growth trend rate slows.

The takeaway is that the state would have to limit services for some group or groups of Medicaid users to stay under the caps.

Estimated spending using current metrics would be $2.9 billion in 2026. The state would have to cut that by $202 million or face a "clawback" the following year.

"Individuals exempt from the cap — users of IHS and Tribal health facilities and children enrolled based on disability — could be affected by the cuts necessary to stay below the cap," the report said.

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