Study finds billion-dollar benefit to Medicaid expansion


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Expansion of Alaska’s Medicaid program under the new federal Affordable Care Act would create $1 billion to $1.5 billion in new wages in the state between 2014 and 2019 from added jobs in health care and employment generated by new business activity, according to a study by Northern Economics Inc., an Anchorage-based consulting firm.

Expansion of Medicaid under the federal law is discretionary to states and Gov. Sean Parnell is now considering whether to allow the expansion in Alaska.

The Northern Economics study, which assessed the costs and benefits of Medicaid expansion, was done for the Alaska Native Tribal Health Consortium, or ANTHC, and was released Jan. 18.

ANTHC operates health care facilities for Alaska Native people, most in small rural communities.

The state Department of Health and Social Services is doing its own study of Medicaid expansion. The study is reported to be complete, but it has not yet been released.

Under the federal law the federal government would pay for 100 percent of the costs of expanded Medicaid for three years starting in 2014, and then 90 percent after.

“If the expansion is authorized, about 97 percent of the program costs will be federally paid over the first six years and 94 percent over the first decade,” the Northern Economics report said.

The expansion would cover adults who are currently not covered by Medicaid and who have annual incomes up to 138 percent of the Federal Poverty Level, or $20,000 in annual income for an individual and $26,000 annually for a couple.

If the expansion in Alaska is allowed, an estimated 34,760 low-income Alaskans currently not covered by Medicaid will be covered, Northern Economics said in its report.

This estimate was developed by the Urban Institute, a national organization, but it actually represents about two-thirds of the full population that could be covered, said Pat Burden, a principal at Northern Economics.

If all Alaskans that could be eligible were covered, the number could increase to about 65,400 in a “full case” scenario, Burden said.

The employment and wage effects of the expansion consider only the more conservative “mid-case” scenario, Burden said.

There a lot of reasons why not all people eligible for Medicaid may not take advantage of it, including that many low-income people may live in remote rural communities with limited access to information, or that there may be language barriers, Burden said.

Valerie Davidson, government affairs director for ANTHC, said her organization estimates that about one-fourth of all Alaskans currently covered by Medicaid are Alaska Native.

Although he has not yet made a decision, Parnell has expressed concern about the expansion because of the additional state costs, estimated by Northern Economics at $34.9 million for the Alaskans newly covered by the expansion under a mid-case expansion scenario.

However, the actual state costs will be much lower because many health care services now paid by the state outside of Medicaid, such as care for prisoners, public health immunization programs and the state Catastrophic and Chronic Assistance Program, will be paid by Medicaid if the program is expanded.

“This would reduce the net effect of the expansion on the state budget by about half,” Northern Economics said.

Tribal health organizations that operate hospitals and clinics serving mostly rural communities, but also in Anchorage and Fairbanks, have a big stake in the Medicaid expansion issue, said Davidson.

Federal Indian Health Service funds cover only about half the average cost of health services provided to federal employees, as measured on a national scale, Davidson said.

Because of that, Congress allowed Alaska Natives to be covered by Medicaid, to supplement the IHS funding, but also provided that 100 percent of the Medicaid share be paid by the federal government.

However, that only happens if the care is given in a Tribal facility. If an Alaska Native goes to a non-Tribal care provider the state picks up 50 percent of the cost, Davidson said.

One of the state’s goals is to encourage more Alaska Natives to get care in the Tribal-operated facilities so the federal government picks up all the cost, State Health and Social Services Commissioner Bill Streur has said previously.

Davidson said one effect of the expansion would be to improve the Tribal health facilities’ ability to expand care, including to more specialized services.

That will encourage more Alaska Natives to use Tribal facilities, such as in urban centers. That will help the state because those costs will all be paid for by the federal government, she said.

Tim Bradner can be reached at tim.bradner@alaskajournal.com.

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