Report shows Medicaid savings largely from travel cost-shifting
Reforms to Alaska’s Medicaid program are producing savings but state budget officials still expect costs to rise up to $75 million next year.
Provisions in the state Medicaid reform legislation that passed in 2016 with overwhelming bipartisan support saved the state more than $30 million in fiscal year 2017, according to companion reports issued Nov. 15 by the departments of Health and Social Services and Law.
The annual status updates on the effectiveness of the reforms were mandated in the bill itself, Senate Bill 74, in part so legislators could track anticipated cost savings. Various other portions of the omnibus legislation were aimed at studying broader health care systems and models and the long-term potential benefits of applying them in Alaska.
Fiscal year 2017, which ended July 1, was the first full year SB 74 was in effect.
SB 74 was projected to save the state up to $365 million over six years when Gov. Bill Walker signed it into law in June 2016. Annual cost savings were supposed to increase each year as the numerous changes in the bill are gradually implemented.
As expected, the primary savings to the State of Alaska totaling $24.7 million came from shifting costs for Medicaid-covered health care travel to the federal government, according to the DHSS report.
Overall Alaska Medicaid travel costs increased by 18 percent in fiscal 2017 to total $100.2 million, the report states.
However, the state’s share of those expenses fell by 69 percent from $35.5 million in 2016 to $10.9 million in 2017 despite the larger travel cost growth. That’s because in February 2016 the federal Centers for Medicare and Medicaid Services expanded what the federal government would fully reimburse to include services “received through” Indian Health Service Facilities and tribal health organizations for Alaska Natives, according to the report.
Capturing the higher reimbursement rate requires care coordination agreements between Tribal and non-Tribal health organizations.
While health costs for Alaska Natives are generally 100 percent covered by Indian Health Services, travel and other arrangements made through non-Tribal care providers had previously been covered half by the state and half by the feds.
“The department worked with Tribal health organizations to initiate care coordination agreements with non-Tribal organizations to achieve the enhanced federal match,” the DHSS report states.
It also notes the department saved more than $35 million by refinancing claims made between after the February 2016 CMS ruling until March 31, 2017, paid with a 50 percent state match that were found to be eligible for 100 percent federal reimbursement because of preexisting coordination agreements. There are currently 751 such agreements between 18 Tribal health organizations and 64 non-Tribal providers in the state.
“In fiscal year 2018, with the additional of one more tribal health organization as a travel services provider, the count will increase to well over 1,000 travels per week financed at 100 percent federal match,” the report notes further.
State Medicaid spending, matched by the federal government through a 50-50 split of costs from most recipients, went up by $19.3 million, or about 3 percent, year-over-year in 2017.
Yet, the cost increase did not match the corresponding enrollment, which went up by 14 percent to 201,925 Medicaid recipients during the 2017 fiscal year, according to the report.
As a result, the state spent 9.9 percent less on each recipient in 2017 than it did in 2016. DHSS officials surmised in the report that the per-capita spending decrease could be attributed to more Tribal care coordination agreements and the resulting growth in federal contributions.
According to Office of Management and Budget Director Pat Pitney, the state’s Medicaid costs will increase another $75 million in the upcoming 2019 fiscal year.
During a presentation to Commonwealth North, a state policy nonprofit, Pitney said that about half of the cost increase would be due to the gradual ramp-down of federal reimbursement for recipients enrolled under Medicaid expansion, which Walker accepted in 2015 despite challenges by the then-Republican controlled Legislature.
The federal government paid for 100 percent of claims in 2016 by expansion-class recipients — low-income adults with no dependents — but the federal funding rate steps down to 90 percent by 2022.
Pitney added that the administration attributes about half of the growth in Medicaid enrollment to Alaska’s poor economic situation.
“We believe the recession has really created an increase in traditional Medicaid eligibility,” she said.
Comparatively, the Legislative Finance Division expects Medicaid costs to grow slower, by $32 million, in 2019, based on flat enrollment expectations, Pitney noted.
Heightened scrutiny of Medicaid fraud and abuse saved the state another roughly $8 million, according to the joint Law and Health department report.
SB 74 added positions to the Medicaid Fraud Control Unit in the state’s Criminal Law Division with the aim of catching additional improper Medicaid claims from patients and providers.
Like Medicaid itself, the attorneys and support staff tasked with investigating fraud reports are funded through a state-federal split.
In fiscal 2017 the Medicaid Fraud Control Unit reviewed 79 sets of allegations that led to criminal or civil investigations and charged 24 individuals criminally.
The division also recorded eight criminal convictions and another civil settlement, which could relate to cases originally filed in prior years, the report acknowledges.
When combined with the DHSS Program Integrity system, which among other things audits Medicaid claims, the departments recovered $2.3 million in illegitimate
Medicaid expenses and avoided paying out another $5.7 million in potentially troubled claims, according to the report.
Elwood Brehmer can be reached at [email protected].