Health care consumes three-fourths of budget supplemental

At $67.3 million in General Fund requests, the 2017 fiscal year supplemental budget is among the smallest in recent years, but this year’s ask is dominated by a cost that is straining nearly every sector of Alaska, and that is health care.

Less $15 million for wildfire suppression — a retroactive payment that varies greatly by amount but is an annual request — health care-related appropriations comprise $40.8 million, or 78 percent of the 2017 supplemental budget.

Not coincidentally, Alaska has the highest health care costs in the nation.

Efforts to maintain costs within existing state department budgets have largely succeeded in keeping the additional asks to a minimum, Office of Management and Budget Director Pat Pitney said in an interview, but the high cost of health care in Alaska has trumped the belt-tightening in some cases.

“It’s only the most extraordinary things that we approved supplementals for,” Pitney said.

First on the list of requests is $6.1 million to cover the state’s share of an increase to the monthly employee health insurance rates. An increase from $1,346 to $1,555 per employee per month took effect Jan. 1 for employees in unions covered by the Alaska Care insurance plan.

Pitney said the administration forecasted the need for the increase early last year when budget cuts started putting state jobs at risk and state employees starting using their health insurance at a higher rate while they still had it.

As a result, the administration requested an amendment to the original fiscal 2017 budget a year ago, she said.

The Legislature added $7.5 million to a health reserve fund to cover the first six months of the 2017 fiscal year that started July 1, 2016.

The monthly rate increase is needed despite higher employee deductibles, premiums and co-pays, Pitney said.

“85 percent weren’t paying a co-pay before but now everybody’s got a co-pay,” she described.

Increased premiums to the base “economy” Alaska Care plan that started Jan. 1 are anticipated to generate $2 million over the remaining six months of the 2017 fiscal year, Pitney wrote in response to questions from House Finance Committee members. Another Alaska Care premium hike in Jan. 1, 2018, is expected to garner about another $5 million.

The employee premium increases should allow the state to hold the $1,555 per month rate through fiscal 2018, according to Pitney.

The Department of Corrections is requesting $8 million to cover an $11.7 million budget shortfall due to higher inmate health care costs and high turnover among DOC nursing staff that has resulted in overtime wages and high-cost temporary nurses, she said in testimony to House Finance.

While the Medicaid expansion program allows the state to bill Medicaid for prisoners with hospital stays longer than 24 hours, significant savings did not materialize for a host of reasons; one being it is easier for providers to bill the state and they get a higher reimbursement rate from DOC than Medicaid, Pitney added.

The department is being asked to absorb the remaining $3.7 million gap.

“This is going to take a combination of tight management in the rest of Corrections and tighter management within the health care area,” she said.

Finally, Health and Social Services is requesting $26.7 million to cover the cost of backlogged fiscal 2016 provider payments pushed into 2017. The collective $26.7 million ask, which is matched by federal Medicaid dollars, should be the end of the saga the department has dealt with in resolving problems stemming from the Xerox electronic billing system that started three years ago.

DHSS expects to be fully caught up on payments within weeks, according to Health Care Services Director Margaret Brodie.

While the DHSS request is for an unusual circumstance, Pitney said overall supplemental budget illustrates the need to control health care costs across Alaska, which otherwise will continue to grow within the state budget as well.

“How do we systematically look at the cost of care in Alaska? We’re starting those discussions and they’ll be going in earnest during the summer,” she said.

But first, “We’ve got to fix the $3 billion problem this session,” Pitney added.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

Updated: 
03/01/2017 - 12:01pm

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