Alaska editorial: Alaska's looming Medicaid dilemma lacks attention

Posted: Thursday, April 20, 2006

This editorial appeared in the Fairbanks Daily News-Miner:

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The long-term forecast about the Medicaid program in Alaska didn't seem to get too much attention when it was made public back in February.

It should have, for it provides a lengthy list of projections that support the finding that Alaska will have one heckuva pricey program over the next 20 years. The effect of a burgeoning Medicaid system has already been felt, in fact. Growth in the program was one of the factors offered by Gov. Frank Murkowski as justification for his $294 million request to the Legislature to supplement the current year's budget.

The Medicaid dilemma ranks right up there with the recent debate about the financial problems in the state-run employee retirement systems. Both are major financial thickets that, in the end, affect individual lives throughout the land.

So Alaskans would be wise to pay attention now.

In 2005, Alaska spent about $380 million for its share of the Medicaid program, a state-federal program that provides health coverage for low-income people, children in low- to moderate-income families, seniors and others.

That's already a load, but the study commissioned by the Alaska Department of Health and Social Services finds that the state's share will rise to about $2.1 billion by 2025. That's a behemoth of a budget issue that the governor and Legislature should have in mind during their budget talks for the coming fiscal year and that should move to the forefront in subsequent years.

The study by The Lewin Group and ECONorthwest had several important findings, including an observation that the Alaska Medicaid program will "fundamentally change over the next 20 years from a program that centers on children to one that is dominated by seniors (age 65 and older)."

That demographic shift will be profound: "In calendar year 2005," the analysts write, "approximately 42 percent of spending on Medicaid claims was devoted to children and 22 percent was devoted to seniors. By 2025, we expect that approximately 45 percent of Medicaid spending will be devoted to seniors and approximately 30 percent will be devoted to children."

The study also found that Medicaid enrollment will nearly double the pace of annual population growth, 1.4 percent for enrollment and 0.86 percent for population growth.

That will make Medicaid's costs soar since services for seniors are more costly.

At the same time, the state can be expected to take on an increasing share of the cost in the partnership with the federal government. "State matching funds for Medicaid claims are projected to increase at a faster rate than the total Medicaid program - 8.9 percent versus 7.6 percent for total funds," the study says.

So Alaska will face the double whammy of sharply rising costs associated with having more older people enrolled and of an increased percentage that the federal government will require it contribute.

Medicaid is the elephant in the living room. And at some point the elephant is going to have to go on a diet or the living room is going to have to become larger. That's the choice in the years ahead.

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