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Medicaid Expansion and Beyond:

House Bill 148

Issues to be considered1

The present Medicaid program now covers the most vulnerable

populations:

The poor, elderly, blind, disabled, children, families with children

and pregnant women

The federal government generally pays 50% match for these

individuals2

Medicaid expansion as discussed in the media:

The addition of able-bodied individuals (ages 19-64) at or below

138% of the federal poverty level ($20,314 for single adults)

Throughout the following years – the match for expansion is:

2016 2017 2018 2019 2020 After 2020

100% 95% 94% 93% 90% ?

Throughout the above years, the State is still responsible for paying

generally 50% of the administrative expenses for administration of

Medicaid programs

HB 148 goes beyond Medicaid expansion

House Bill 148 also:

o Expands and grows Denali KidCare

1 Prepared by the Office of Representative Liz Vazquez 2Pregnant women and children who have family incomes that are too high to qualify for Medicaid who

qualify instead for Denali KidCare are reimbursed at 65%.

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o Expands the existing Medicaid by adding 3 new programs (the

1915 (i) and the 1915 (k) options and the 1115 demonstration

waiver).

o Reduces audits on providers - reducing accountability

o Instructs the Department of Health & Social Services (DHSS) to

propose tax even if providers do NOT treat Medicaid patients,

this can be expected to increase costs and drive away providers

Medicaid budget

Medicaid is the largest – and fastest growing – component of the state

operating budget

o It’s grown 250% -- from $200 million GF up to $700 million

general fund (GF) -- in just the past several years

o Alaska now spends $1.6 Billion each year on Medicaid

o FY14 Total Medicaid Recipients equal 165,7833 (22.5% of the

entire population of Alaska which totaled 736,732 for FY14)4

o By 2032 Medicaid without expansion is estimated to devour

the entire present budget and more, at over 6 billion dollars

Fiscal implications – enrollment is unknown

Unknown enrollment numbers – from 26,5355 to 40,2846

o Enrollment projections vary widely: disparity of at least 52%

o Experience of other states: enrollment greatly exceeds forecasts

3 According to data presented during the House Health & Social Services Committee on March 19, 2015 - Medicaid 101 – slide 13. 4 According to U.S. Census estimates of the entire population of Alaska. 5 Department of Health & Social Services (DHSS) during a presentation on March 5, 2015 before the House HSS Committee. 6 Lewin Group Final Report titled “An Analysis of the Impact of Medicaid Expansion in Alaska”, updated April 12, 2013.

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Seventeen states that expanded Medicaid underestimated

enrollment an average of 91%7

o DHSS has a history of underestimating enrollment

When selling Denali KidCare to the legislature, DHSS’

enrollment exceeded their projected maximum by 92%

(1999-2002)8

Fiscal implications – costs are unknown

The spread between the various cumulative cost projections and

savings projections is nearly $417 million

Can Uncle Sam keep his promises?

The federal debt is $18 trillion -- $56,378 per each man, woman, and

child living in USA

Historically, once you expand Medicaid, costs go up

Can the federal government always pay the new matching

reimbursement for the expansion at 90% or above?

The federal government can reduce their match/reimbursement at

any time – and they have done so before

No promises were made after 2020

Uncle Sam is silent about what the federal match will be after 2020

Squeezing out existing vulnerable populations

With the federal government’s fiscal situation, decreased federal

funding is a real probability

o If that occurs, the state’s most effective cost-reduction strategy

will be to reduce services to the existing Medicaid beneficiaries

7 Arizona, Arkansas, California, Colorado, Connecticut, Illinois, Iowa, Kentucky, Maryland, Michigan, Minnesota, Nevada, New Mexico, Ohio, Oregon, Washington, West Virginia (Arizona, Iowa and Michigan expanded using 1115 demonstration waivers) 8 Using the only available information regarding enrollment of all children from Medicaid.gov

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first – impacting the most vulnerable (the elderly, disabled,

children and low-income families with children)

Most Medicaid services are matched at 50%; the State

Children’s Health Insurance Program is matched at 65%

o Alaska offers the most generous Medicaid program in the

nation with 27 additional optional services provided to present

enrollees

o When cuts to services are needed, the 27 optional services

Alaska provides will likely be the first to be cut

Providers will likely be penalized

o HB 148 calls for a proposal to tax up to all 19 provider types

that are allowed by federal law – regardless of whether the

provider accepts Medicaid

o Taxes will be passed on to consumers, resulting in higher

health care costs

Unintended consequences

Squeezes out Medicare seniors

o Will make it even harder for Medicare seniors to find providers

o Higher Medicaid reimbursement rates will lead providers to

prefer Medicaid over Medicare patients - which will hurt

seniors

Creates a serious equity issue

o Medicaid beneficiaries (including prisoners) will receive better

benefits than:

Seniors on Medicare

Veterans’ Administration beneficiaries

Military

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Most private insurance plans

State Fiscal Crisis

o Existing Medicaid eligible groups (with lower federal match

50% to 65%) likely will suffer more cuts because of the higher

matching reimbursement for the new expansion group (at least

90% through 2020)

o New expansion group is reimbursed at least 90% through 2020

o The State is still responsible for 50% of administrative costs

Once we expand, can we change our mind?

o DHSS is relying only on a letter9, not legal authority, not a

regulation or statute

o Binding law applies – Social Security Act, 42 U.S.C. Section

1396(c)

o The State Plan - is a legally binding agreement between the

state and federal government

o The courts will enforce legally binding laws and agreements

Studies of the University of Oregon’s expansion shows that Medicaid

expansion causes negative consequences

Results in overuse/abuse of the ER

o Increased emergency room visits – by 41%

o Undermines a key justification for expansion

o A lack of enrolled providers will increase ER use

Health outcomes mixed

o Medicaid expansion beneficiaries self-report better physical

and mental health

9 Letter dated March 6, 2015 addressed to Governor Walker from the United States DHHS Secretary Burwell.

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However, no significant effects on measured health

outcomes such as hypertension, high cholesterol levels

and glycated hemoglobin (blood sugar)

System is broken – why expand a broken system?

Everyone admits the system is broken and needs reform

o Enterprise (formerly named MMIS) – payment system – had

numerous system defects affecting every area of operations

o Alaska has lost over 1,000 enrolled providers between 2010

and 2014

Old adage: If it ain’t broke don’t fix it

But if it is – fix it before you grow it and don’t throw more money at

it

Serious reforms NOT proposed

HB 148 goes beyond Medicaid expansion – but it doesn’t fix what is

broken

o Proposes only generalities, not specifics

o No measured standards or goals

o No deadlines

DHSS has not done enough due diligence

On the proposed 1115 demonstration waiver: DHSS personnel knew

of only one state trying expansion using a demonstration waiver –

Oregon

o Oregon however expanded its Medicaid program prior to the

Affordable Care Act – they were one of the first states to do so

o The following states implemented expansion through 1115

demonstration waivers/post the Affordable Care Act:

Arkansas, Indiana, Iowa, Michigan, New Hampshire, and

Pennsylvania

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o The following states have applied for demonstration waivers

but have had difficulties getting CMS approval: Arizona

California, Connecticut, Indiana, and Oklahoma

Uncle Sam denied changes in:

Arizona that sought cost-sharing increases

California that sought to increase co-payments

Connecticut that attempted to raise total asset tests

to limit eligibility

Indiana that sought to implement requirements that

would promote personal responsibility for failing to

meet co-pay obligations

Oklahoma because of enrollment caps

Possible alternatives to Medicaid expansion

Federally Qualified Health Centers such as Anchorage Neighborhood

Health Center

o Roughly $14 million budget including a $3.4 million federal

grant

o Provides discounted care to low-income patients (90% of their

patients) via a sliding fee schedule

o Getting the job done with less $: providing health care for the

community, including low-income and uninsured patients

Look Before We Leap

Imperative that we carefully weigh – and fully understand – both

fiscal and health care policy implications of both Medicaid

expansion and HB 148 – before we do it

o Arkansas stopped covering lifesaving drugs for Cystic Fibrosis

patients – forcing patients to sue

o Arizona hospitals see operating losses despite Medicaid

expansion

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o Massachusetts proposed to close a $1.8 billion state budget gap

by chopping benefits for the neediest and cutting rates of

reimbursements to providers

Printed May 20, 2015