ANCHORAGE — Alaska has trouble affording the Affordable Care Act.
Alaska’s new Medicaid enrollees are already costing more than what economists predicted they would in 2021. This matches a national trend. Centers for Medicare and Medicaid Services recently reported to Congress that Medicaid expansion enrollees cost $6,366 per person for fiscal year 2015 (ended last Sept. 30), about 49 percent higher than estimated.
President Barack Obama’s Affordable Care Act, or ACA, expanded Medicaid eligibility in 2014. More than 4.3 million additional Americans now qualify, for a total of 64 million. By 2024, state and federal governments will spend $920.5 billion on the program, at which time 77.5 million people will get coverage.
The Medicaid expansion covers 41,910 low-income Alaskans from 19 to 64 years of age who are currently not eligible for Medicaid — those not caring for dependent children, not disabled or pregnant, and who earn at or below 138 percent of the Federal Poverty Level, or FPL, for Alaska.
For Alaska, which already has the highest per capita Medicaid costs in the nation, this could turn into increased state spending when the treasury is hurting and already bitten by other ACA-related backfires.
As of July 31, 2016, Medicaid expansion covered 20,371 people in Alaska and according to Department of Health and Social Services records, claims for the new group have amounted to $175 million so far, entirely paid for by the federal government.
That’s $30 million more than was estimated, or nearly 21 percent, for 11 months with a month to go until marking a year of coverage for the expanded Medicaid class.
The per capita cost equals $8,591 in the first 11 months, more than the national average for 12 months of $6,366 in 2015. Gov. Bill Walker unilaterally chose to expand the Medicaid program by accepting the federal payments last year.
In the fiscal year 2016 budget recently passed by the Legislature, an amount was included to cover the state’s 5 percent match for the expanded group beginning Jan. 1, 2017.
DHSS Deputy Commissioner Jon Sherwood said his department takes the cost overage seriously and is addressing it with a study.
“It is running somewhat over what we’ve estimated, though the actual number of enrollees are where we thought they’d be,” Sherwood said. “We actually started in September of 2015. We’re just getting through August, so we’re sort of coming up to having one year of data. We’re in the process of analyzing it to see where our numbers differ from the projections and try and get a feel for what’s causing that. We haven’t finished our analysis yet.”
Because the program only began less than a year ago and Medicaid providers are still trickling bills in to DHSS, Sherwood said there isn’t a clear view of why the costs are higher than expected. Other states, however, give some guidance in what to look for.
“Just knowing from how some other states started like Ohio, it’s not unusual to see a bump when the program is first starting,” Sherwood said. “As people are coming onto the program, they haven’t had insurance and there’s kind of a whatever you want to call it, pent up demand.
“Someone needs an operation or procedure they’re not going to need every month, they come into the program and have that worked on. In some states they see an initial peak and then the average spending goes down.”
Sherwood said a supplemental budget request to the Legislature would be premature before the study’s results pin down a clear trend.
“I don’t know whether or not we’re seeing the trend over time,” he said. “You expect it to be a little higher initially as you have that pent up demand, but whether or not this is a long term trend or coming down … we’re just now getting the billings for recent months. We’ll continue to do that analysis and figure out whether or not we have sufficient authority in our budget.”
Before Walker expanded Medicaid under the ACA in 2015 without the Legislature’s approval, Evergreen Economics estimated 20,066 new enrollees in fiscal year 2016 at an average cost of $7,250 for a total cost of $145 million.
For the 2016 calendar year, the federal government will pay 100 percent of the expansion claims, but that number will gradually shift more and more to the state’s burden. The state will bear 5 percent of the cost in calendar year 2017; 6 percent the next year; 7 percent in 2019; and 10 percent in 2020 and beyond.
Evergreen estimated that the fiscal year 2017 expansion class would grow to 23,273 with an estimated cost of $7,495 per person, or $171 million to the federal government and $3.8 million to the state.
By fiscal year 2021, this number will have grown to 26,623 people at $8,433 per person and $20 million total cost to the state.
Alaska has a history of spending more per Medicaid enrollee than most states, though the most recent numbers for post-expansion enrollment are not yet available.
In 2011, Alaska spent $9,474 per Medicaid enrollee, higher than any state in the union and approaching twice the national average of $5,790. During fiscal year 2012, Medicaid spending nationwide amounted to $415.2 billion, or $6,833 per enrollee.
During the same year, Alaska spent nearly twice as much as the national average per enrollee at $12,047, according to the Kaiser Family Foundation.
Alaska spent $1.4 billion on Medicaid in fiscal year 2014. The Legislature appropriated $1.6 billion for that fiscal year. With a 50 percent federal match, this means the state spent $700 million on 122,521 Alaska Medicaid enrollees as of June 2015, meaning the state and federal government both spent $5,713, or a total of $11,426 per person.
Most recently, the Legislature approved a total appropriation for Medicaid services in fiscal year 2017 of $1.7 billion, or $10,911 per Medicaid user.
The ACA has had other unintended consequences for Alaska, and at a higher cost. In May, the Legislature bailed out insurance provider Premera Blue Cross Blue Shield of Alaska with a $55 million reinsurance bill.
The ACA forced insurers to accept high-risk patients for coverage. This drew high-risk patients away from the Alaska Comprehensive Health Insurance Association with lower cost, federally subsidized plans. When federal reimbursements for insurer losses came up short, insurance companies hemorrhaged money and have been forced to raise insurance rates to recoup losses or leave the state altogether.
In this case the reinsurance plan draws proceeds from a statewide insurance premium tax. This tax of 2.7 percent per plan typically draws between $50 million and $60 million per year, according to Lori Wing-Heier, director of the Division of Insurance.
In two years, Alaska’s individual insurance market provider pool shrank from five providers to one as Moda Health, Aetna, State Farm and Assurant Health left Alaska’s individual insurance market.
On July 18, Premera Blue Cross Blue Shield of Alaska filed a request for a 9.8 percent increase of individual insurance rates, ending a two-year run of 37 percent and 39 percent increases.
• DJ Summers is a reporter for the Alaska Journal of Commerce. He can be reached at daniel.summers@alaskajournal.com.
