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The federal government plans to slash the amount it contributes to Alaska's Medicaid costs beginning in October, which could mean a $53 million loss to the state next year and $73 million the year afterward, according to state estimates.
The potential losses are not included in Gov. Frank Murkowski's proposed budget for next year, and state officials are counting on Alaska's delegation in Washington, D.C., to push a measure through Congress that would keep the funding level steady.
"It's going to be a challenge for the delegation, and the delegation is keenly aware of this," Health and Social Services Commissioner Joel Gilbertson told the state Senate Finance Committee on Wednesday.
The federal-state split in paying Alaska's Medicaid costs is now around 58 percent federal and 42 percent state under the federal medical assistance percentage formula. After Oct. 1, that split is scheduled to go to 50-50, Gilbertson said.
That would mean a loss of $53 million to the state by the end of fiscal year 2006, the Department of Health and Social Services calculates. The department has projected additional losses of $73 million by fiscal year 2007 and more than $900 million lost in federal Medicaid funds over the next 10 years.
Alaska now has a higher federal payment rate thanks to a special extension passed by Congress in 2003, but which is set to expire Oct. 1. That expiration would account for about half the planned federal reduction, said state Medicaid director Jerry Fuller.
The other part of the cut is due to the formula itself. States that are better off financially receive less federal money, with a bottom limit of 50 percent, said Mary Kahn, a spokeswoman for the federal Centers for Medicare and Medicaid Services.
Alaska is expected to have a revenue surplus in the hundreds of millions of dollars this year due to high oil prices. A state surplus would play a role in the reduction of federal Medicaid funds through the formula, Kahn said.
Fuller said if the cuts go through, the state will have three options, or a combination of the three: Reduce health care services, remove people from Medicaid rolls or reduce Medicaid reimbursement rates.
U.S. Sen. Lisa Murkowski, R-Alaska, has refiled a bill to make permanent the 2003 extension to Alaska's federal Medicaid funding rate, and the Alaska Legislature is considering a resolution calling on Congress to keep the current rate and re-examine the formula used to determine federal funding.
State officials say the funding formula does not take into account the cost of delivering medical services in Alaska, a state that stretches more than 3,000 miles from east to west and where there are few highways connecting communities.
"Alaska has a higher cost of living than in many places in the country," said Elliott Bundy, spokesman for Sen. Murkowski. "The cost of medical services in particular are higher than in many places in the country."
Cheryl Frasca, the executive director of the state Office of Management and Budget, said the governor is optimistic that the state can stave off the cuts.
If not, she said, the administration will have to go to the Legislature with an appropriate budget amendment.