Respectfully, in the midst of a $3.93 billion deficit this year (and expected multibillion-dollar deficits for the foreseeable future) the House minority has sought increased multi-year government spending in exchange for their vote to fully fund state government. As the majority considers all options for funding, some say the minority’s position, from a financial perspective, is simply too risky.
Keep in mind: The Senate has already passed legislation to fully fund government. All eyes are on the House minority and, as some have deemed, their “demand list.”
What’s on the list?
The minority is committed to raising state employee pay, expanding the Medicaid system and increasing education funds.
But some think those positions “sound good.”
The positions sound good, but we have to analyze what they really mean and what costs would be incurred. There are already expanding costs, hidden costs and not-so-hidden costs that may create substantial financial risk for Alaska.
What are the concerns about the minority’s position?
Demands for increased government spending, including a large open-ended entitlement program, would expose the state to considerable risk (especially considering well-documented billion-dollar deficits). The deficits may last years and are directly related to the lower price of oil (a factor beyond state control).
One particular problem is the demand for Medicaid expansion.
To begin with, Medicaid already costs the state lots of money. Historically, the Department of Health and Social Services general fund budget for Medicaid has already grown from $381.7 million in FY2006 to an amount budgeted in 2016 (not including additional expansion) of $643 million. Even without expansion, that’s an increase of $261.3 million, or 68.5 percent. That’s a significant cost driver.
In addition to costs, other lingering questions remain.
Does Alaska even have enough providers to handle Medicaid expansion? What will the quality of care be?
Remember: Enrollment figures are estimated to be 41,910 newly eligible adult Alaskans in 2016. A disciplined review of other states reveals that enrollment across the country has skyrocketed. In fact, enrollment has been hundreds of thousands beyond initial projections.
That’s not a good sign.
Will Alaska enrollment figures exceed expectations?
There’s a reasonable probability that may occur.
Let’s look at Medicaid enrollment in other states:
In Illinois, in 2014, 199,000 adults were estimated to enroll. As of April 2015, 634,000 adults signed up.
In Kentucky, by the end of fiscal year 2014, 148,000 were projected to sign up. The final figure was 311,000.
In Michigan, first year enrollment projections were 323,000 people. As of May 2015, the amount was 582,000.
In Washington, 190,365 newly eligible enrollees were projected to sign up. Instead, 535,000 people enrolled as of March 2015.
Alaska may face the same reality. That’s a major ongoing concern for those who, in a disciplined manner, are charged with managing the fiscal health of the state. States like Arkansas have already learned “the hard way” after the state was over budget and forced to repeal its Medicaid expansion program earlier this year, effective 2016.
Are there any other concerns people should be aware of?
Yes. As many know, expanding Medicaid was one of the key elements of the Affordable Care Act (ACA). The ACA itself is subject to tremendous risk because of the U.S. Supreme Court case King v. Burwell. The key question in front of the court: Does the Affordable Care Act authorize the IRS to provide tax credits to individuals who purchase health insurance on a federally facilitated exchange?
If the answer is no, at least 34 state exchanges created by the federal government (including Alaska) will not receive tax credits for their populations.
Why does this matter?
Because Medicaid expansion is tied to the Affordable Care Act. If the majority of the people in the exchanges are not provided tax credits, there are significant concerns about affordability of the ACA nation-wide. Quite simply: Without help, people can’t afford the cost.
If unaffordable, the infamous “death spiral” begins.
If the “death spiral” occurs, what happens to federal promises to fund Medicaid expansion 90 percent? Will the federal government be able to pay? As stated by Robert F. Graboyes, a senior research fellow and health care scholar, “(I)f King wins, big dominoes begin falling. Congress and/or states will have to take drastic action, soon.”
That doesn’t sound good.
What does this all mean?
The best intentions may have damaging collateral consequences. If the state’s fiscal position was different (with no deficits and no “risk factors” surrounding an expensive entitlement program), the analysis would change.
However, thus far, the minority has not adequately answered important questions:
Will Alaska be able to handle the increased costs?
What will the “quality of care” be for an already strained system?
Do we even have enough providers to handle the influx of “newly eligible” people?
What happens if the “death spiral” begins during the summer?
Until we have solid answers, the minority’s position (considering our expected multi-year, multi-billion dollar state deficits) remains “fraught with risk.” Risk that the state may not be able to absorb.
• Chad Hutchison is an attorney from Fairbanks. He works under the direction of Sen. John Coghill, R-North Pole.