Sunday, February 28, 2010

Controlling Medicaid Costs (Short Summary from House Finance Report)

I'm going to do two or three posts on Friday's Finance Committee Hearing on Medicaid Costs.  This is "single greatest line item of state spending."  So,
  • it is very complicated (but not impossible)
  • it is important for Alaskans to understand
  • the information provided at the hearing made things fairly easy to understand
This post is introductory, brief, and an looks at ways to control costs.   This is stuff most people hide from because it seems too difficult to grasp.  I challenge you to read this post carefully.  It's short.  It should give you some handles for starting to understand this issue.  The next post will offer my rough notes of the actual presentation so you can see the kinds of questions that legislators asked and the answers they got.  This post is extracted from that. 

What Happened Friday and Why?
The House Finance Committee commissioned, Janet Cooke, a former Health and Social Services employee, to evaluate the HHS' supplementary budget request for $88 million for Medicaid. (Supplementary budget means coming back mid year after seeing actual costs and adding to the original budget.)  They wanted to know:

  1. What caused the increase from FY 2009 to FY 2010?  (Fiscal Year 2009.  Alaska State fiscal years begin July 1 the year before - for FY 2009 that would be July 1, 2008)
  2. How much should the legislature add to the existing FY 2010 budget? (This year has already been budgeted so how much will the Department need to cover the costs? *
  3. How much should the legislature spend for the next FY (2011)?
Two Terms

*Medicaid is an entitlement program.  This means if people meet the criteria for the program, they are eligible for services.  Thus the cost is not predictable.  If more people qualify (lose their jobs) or if those qualified get sick more, or if prices rise, the State is still obligated to pay and the costs will rise.

Also, the state shares these costs with the federal government.  FMAP stands for Federal Medicaid Authorized Percentage - the federal matching rate.  Alaskaʻs FMAP would have fallen to 50% (this year, I think) but the Economic Stimulus Bill (ARRA) [American Recovery and Reinvestment Act of 2009] increased the rate to 61.12%, meaning the federal government will pay 61.12% and the state 38.88%.  (Actually there are different formulas for different populations and programs.  So, for instance, Alaska Natives treated in an IHS facility get 100% federal reimbursement.)

Control of Costs:

Medicaid is an entitlement program.  If people are eligible, they are entitled.  So if the pool of eligible people increases, the costs go up.  That leaves limited options.  Here are some of the options I heard discussed at the hearing:

1.  Alaska Natives treated at IHS (Indian Health Service) facilities are covered 100% by Medicaid.  Therefore, the more Alaska Natives get care at IHS facilities, the less the state has to pay.  Thus there are several places where the state has some leverage:
  • Helping set up IHS facilities in places where large numbers of Alaska Natives live but can't get to IHS care.  The issue of longterm care came up as one with the most potential, because now there are few or no such facilities in rural Alaska.
  • Encourage Alaska Natives to use IHS facilities
As one legislator said, because of the IHS Alaska Natives get 100% paid by the federal government, and that leaves more money for non-Native Alaskan care.

2.  Prevent small problems from escalating into large problems
  • Make more preventive care available.  (I believe it was Clarke who pointed out that Medicaid won't pay for this)
  • Make primary care facilities (including quick access) available in communities so that people go to primary care doctors instead of emergency rooms. 
  • Develop the economy, create jobs so that people move out of poverty and get health insurance
These ways that the State can affect Medicaid costs are just one issue that arose in the Friday hearing on Medicaid costs of the House Finance Committee.  I'll put up at least one other posts on this.  It is complicated, but Janet Clarke's report helps a great deal.

Getting a sense of Medicaid costs - a huge part of the Alaska State budget ($1.2 Billion) - is not that hard.  There will be repetition in the next posts, but I'm finding that the repetition is critical in my own understanding of this.


  1. I bet a lot of bloggers leave this spammer's comments up. He wrote:

    "It is utterly right. I admire your thoughts and perception. Hope to see new updates from your soon. Thanks for sharing."

    And then put a link to his scheme.

    Just letting you know the kinds of things I delete.

  2. The statement made about Medicaid not paying for prevention is not correct as it relates to children's Medicaid services. Medicaid does pay for children's prevention and treatment services under EPSDT (Early Periodic Screening Diagnostic Treatment Services) for children ages 0 through 20 years of age. For more information on EPSDT services, click here -

    FMAP stands for Federal Medical Assistance Percentage - more information can be found here -

    Note - the description for enhanced FMAP which pertains to the Children's Health Insurance Program (CHIP) in Alaska known as Denali KidCare.

    Under the Health Care Reform legislation enacted on March 23, 2010, the CHIP enhanced FMAP will increase by 23 percentage points on October 1, 2013, thus the State match or contribution will be about 11 - 12 cents on every dollar spent on CHIP funded children.

    Focusing on short-term cost containment on the backs of children who cost the least in Medicaid and not taking long-term outcomes into consideration is short sighted and in the long-term will cost the State more.


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