A preliminary analysis for Alaska's Department of Health and Social Services spells out some dramatic changes for Alaska under the proposed "Graham-Cassidy" legislation to repeal the Affordable Care Act.
The Senate is considering voting on the legislation this week, facing down a Sept. 30 deadline, after which any legislation will have to attract bipartisan support. Until the end of the month, Republican leadership can pass legislation with only 50 votes, under the fiscal year's budget reconciliation measure.
In an analysis by Manatt Health for the department, released Friday, DHSS said that Graham-Cassidy "requires sweeping changes that go beyond earlier 'repeal and replace' bills and pose unique challenges for Alaska."
Central to the change is that the bill will remove all federal subsidies for the individual marketplace and Medicaid expansion and replace them with a steadily declining block grant, which states can distribute how they like.
"By 2026, Alaska will see an 65% reduction in federal funding relative to current law," the report found.
Alaska is particularly "at risk" because the government sets block grant funding levels using a national per-person level of spending that doesn't take into account Alaska's high cost of care, the report said.
The state does get some special treatment at the start.
There is a pot of extra federal funding for five low-density states, including Alaska, in 2020 and 2021. The state would get a 73 percent boost in 2020 ($392 million) and 34 percent boost in 2021 ($194 million), according to the report.
But that wouldn't last, and the federal funding would fall precipitously after that, according to DHSS. Even with the funding boosts, the state would lose $1.1 billion from its previously expected Medicaid and marketplace funding between 2020 and 2026, according to the report. That's one quarter of Medicaid and marketplace funding.
There is an out, through 2026.
Alaska could be exempt from the Medicaid caps through 2026 if the U.S. Health and Human Services secretary determines that the state's funding is insufficient.
Earlier this week, Alaska Sen. Lisa Murkowski described it thus: "If you receive less under the combined pool of Medicaid expansion, tax credits and (cost-share reductions) than you would have received … then you're not subject to the per capita caps. So basically, as long as we are in the loser category, then our Medicaid structure doesn't change."
"So here I am, I've gone out on point saying when we talked about repealing and replacing the (Affordable Care Act), we never talked about structural reform to Medicaid. So now we've jumped from 'repeal and replace' to structural reform of Medicaid. But maybe it won't be for us, if we lose under this proposal," she said.
But after 2026, the numbers are more dire for Alaska, according to the report.
"Alaska is estimated to lose nearly two thirds of its federal funding for Medicaid expansion and Marketplace subsidies in 2026," the report said.
The criteria for Alaska to be exempt is based on the bill's block grant funding, which is only authorized through 2026. So from 2027 on, there is no exemption, unless there is some new action by Congress.
Alaska's individual market will also face great stress under the proposed legislation, the report said.
By eliminating the requirement that people buy insurance, there is likely to be lower enrollment, and fewer healthy people in the market — meaning higher premium costs, the report said.
The state could also face "significant administrative burdens" in the face of lessened federal efforts, the report said. And because the bill eliminates tax credits, the state would likely have to overhaul its reinsurance program, which is expected to drive down premium prices in 2018 by 25 percent, the report said.
The state would have the ability to waive market rules that require certain levels of coverage in the individual market, and "the prohibition against charging higher rates for people with pre-existing conditions." But even "if Alaska does not exercise this flexibility, the elimination of standard federal rules puts at risk the future of the federally-facilitated Marketplace," the report said.