Injunction sought against unilateral expansion

Superior Court Judge Erin B. Marston must decide by Aug 31 whether to halt the enrollment of new Medicaid recipients under Gov. Bill Walker’s expansion of the program.

In a lawsuit filed Aug. 24, the Legislative Council, acting mainly under direction of Republican House and Senate leaders, asked for an injunction blocking the governor’s Sept. 1 start of Medicaid enrollment.

Medicaid is a state-federal program that provides health care to low-income Alaskans. Under the current program only low-income women and children and the disabled with incomes at the Alaska-adjusted federal poverty level, are eligible. The services are paid for by the state and federal government on roughly a 50-50 basis.

However, the federal Affordable Care Act allows for the program to be expanded to include all individuals under 65 with incomes up to 38 percent above the federal poverty level. Walker campaigned for governor with a promise to expand Medicaid, but Republican legislative leaders blocked legislation allowing the expansion.

If the program is expanded it will extend health care coverage to a group of about 40,000 Alaskans, with an estimated 19,000 expected to enroll.

Walker ordered an administrative expansion of the program, which he argues he has the authority to do. That prompted legislative leaders to file the lawsuit to block the expansion.

Walker argues existing law gives him authority to order the expansion because the federal law makes Medicaid coverage required, or mandatory, for low-income people including those to be newly-covered. Legislators argue with this, saying the expansion is optional, which means that it requires legislative approval.

The lawsuit will basically hinge on an interpretation of a U.S. Supreme Court ruling that new people to be enrolled for health care represents an “optional” population or whether the terms of the federal Affordable Care Act make the coverage “mandatory.”

If the “optional” interpretation is upheld, Walker must seek legislative approval before expanding Medicaid under current state law. If the expansion is ruled “mandatory,” then legislative approval is not required and Walker’s decision is on secure ground.

The question is not clear cut. Legal opinions have been prepared in Alaska, but now that the issue is headed for court a judge will ultimately decide.

Two opinions by the state Department of Law say Walker is on secure ground. Two prepared by the Legislature’s attorneys say the governor is probably secure, but that there are uncertainties.

Optional vs. mandatory

The lawsuit will hinge on a state court’s interpretation of the U.S. Supreme Court’s decision in National Federation of Independent Business v. Sebelius, which struck down requirement that states must expand Medicaid or lose all federal funding, and left the decision up to governors and Legislatures.

In making the case that the expansion is “optional”, and requiring legislative approval, State Sen. John Coghill, R-North Pole, said the U.S. Supreme Court, in Sebelius, “declared that the additional group of able-bodied, childless adults is an optional group and that states have a genuine choice as to whether to expand Medicaid to include that population.

“That being the case, state statute requires legislative approval for any new additional groups. The governor may not expand unilaterally,” Coghill said.

However, Rep. Andy Josephson, D-Anchorage, who is an attorney, says that Sebelius doesn’t say that.

“I believe Sen. Coghill is wrong,” he said, citing part of the majority decision where Chief Justice John Roberts described provisions of the federal Affordable Care Act on Medicaid expansion as “required” of states, or mandatory.

According to Josephson’s interpretation of the Sebelius decision, the expansion remains mandatory even though the financial penalty was struck down.

In only two states — Ohio and Kentucky — have governors expanded Medicaid without legislative approval, and both of those states grant such a power to the executive branch.

Josephson said Walker may be on weak legal ground on other parts of his decision to expand Medicaid, such as in the appropriations area, but on “mandatory” or “optional” argument the governor is on firmer ground.

There is disagreement on this. Attorneys who filed the lawsuit on behalf of the plaintiffs, the Legislative Council, have selected their own citation of from the Sebelius decision and Justice Roberts to bolster their case. The decision also refers to states having a “choice” to participate in Medicaid expansion, which argues for the optional interpretation, according to the complaint filed by the Legislative Council.

Legislative attorneys, meanwhile, said the issue is not clear cut. In a legal opinion written last Nov. 26, attorney Jean Mischel of the Legislative Affairs Agency’s Division of Legal Services, wrote, “Although the ACA (Affordable Care Act) expressly mandates coverage for newly-eligible individuals (the expansion group) coverage for those individuals is not clearly required of coverage since the penalty (provision of the ACA) has been judicially amended,” by the U.S. Supreme Court.

“Therefore, it is unclear whether the newly-eligible individuals would be automatically covered under current state law if the Legislature took no action and if (then Gov.-elect) Walker accepted the federal funding for expansion.”

Mischel also explained that, “state law provides that all residents of the state for whom federal law requires coverage are also eligible for coverage in the state. State law also provides for optional coverage for individuals who meet eligibility criteria, including varying income levels and conditions.”

Opponents of expansion point to the varying income criteria that can be used for optional groups under Alaska law as reinforcing the claim that the expansion group, which is eligible under an income provision, meets the criteria of an “optional” group, and therefore requiring legislative approval.

In its complaint filed Aug. 24, the Legislative Council also cited a March 6 letter from U.S. Heath and Human Services Secretary Sylvia Burwell to Walker that stated, “There is no requirement for the state to maintain coverage for the new adult group.”

Arguments that the court intended to leave intact the mandatory aspects of the ACA for the expansion population point to the fact that Sebelius, as it related to Medicaid expansion, dealt mainly with funding issues. The decision struck down the provision of the ACA that cuts all funding for Medicaid for states that did not expand Medicaid.

The decision on the Alaska lawsuit will rest mainly on how Alaska judges interpret the U.S. Supreme Court decision in Sebelius, and whether can be interpreted that expansion is optional or mandatory.

A second legislative legal opinion, by attorney Megan Wallace, written July 31, reaches similar conclusions to Mischel on the main points of the dispute, that there is some uncertainty as to how Sebelius can be interpreted, but it also supports Walker’s argument that he has authority under existing law and under language of the 2016 fiscal year budget act approved by legislators to accept new federal money.

In his opinion Wallace quoted existing state law, which “authorizes the governor to increase…an appropriation item based on additional federal or other program receipts not specifically appropriated by the full Legislature.”

The statute requires the governor to submit his plan to receive new federal Medicaid funds to the Legislative Budget and Audit Committee, which Walker has done in this case.

This is a frequent occurrence, in practice, and the Legislature typically includes language in the budget act to allow receipt and use of new federal funds, and did so in the fiscal year 2016 budget bill, the opinion said.

Wallace noted in his opinion, however, that the procedure only allows an increase of an existing appropriation by legislators, not a new appropriation. A question,  is whether the existing appropriation item in the budget, for “Medicaid services,” is broad enough to meet the criteria of expanding an “existing” program, or whether receiving federal funds for the additional Medicaid expansion population constitutes a “new” expansion, requiring a approved appropriation. This will be an issue before the courts, too.

The budget also included language that stated: “no money appropriated in this appropriation may be expended for services to persons” who are eligible under the expanded language of the Affordable Care Act.

What may weigh into the court’s decision on this is a previous 2001 state Supreme Court decision, Legislative Council vs. Knowles, dealt with a somewhat similar issue regarding a change in budget language for an appropriation to the Alaska Seafood Marketing Institute. Under his veto authority, “The governor can delete and take away (funding), but the Constitution does not give the governor power to add or divert for other purposes the appropriations enacted by the Legislature,” the court’s decision in that case said.

In the Legislature’s lawsuit the Legislative Council argues that existing statutes and the state Constitution give the Legislature the sole authority to decide who is eligible under the state-run Medicaid program, and under a subsection of the statute sets out how the Legislature approves the additions of optional groups.

The letter to Walker from Burwell stated that, “Alaska may take up the Medicaid coverage expansion, and then later drop it at state option.”

Further, the governor’s own bill introduced to expand Medicaid, introduced on March 17 after legislators asked the governor to introduce a bill, added the Medicaid expansion population as an “optional group” under the existing state statute. The Legislature did not pass the bill, however.

Reappropriation or transfer?

The Legislative Council also challenged the governor’s use of $1.6 million from the Alaska Mental Health Trust Authority to help cover implementation costs of the Medicaid expansion. Appropriations to the authority must be used to benefit mental health recipients, the complaint said, and its reallocation to the health and social services department to pay administrative costs for Medicaid expansion amounts to a reappropriation, which only the Legislature can do, the complaint said.

Jeff Jesse, executive director of the Mental Health Trust Authority, of MHTA, said the authority’s budget procedures allow this kind of funding transfer and that similar transfers to other state agencies to support services to mental health clients, including the health and social services department and the Department of Corrections, have been done for years.

The Legislature appropriates funds to the trust authority, but the services are actually provided by other agencies, Jesse said, so the authority transfers funds under a “Mental Health Trust Authority Receipt,” or MHTRA, procedure.

“Various departments use trust authority funds through MHTRAs under the ‘receipt authority’ given by the Legislature,” to receive federal funds or money from sources other than a general fund appropriation, Jesse said. “It’s just like an agency receiving a federal grant.”

The agency follows a procedure to notify the Legislative Budget and Audit Committee of the receipt, similar to the way the committee was notified about the receipt of federal funding for the expansion population.

Former Health and Social Services Commissioner Bill Streur, in an affidavit filed to support the Legislative Council’s lawsuit, said, “the purpose of the MHTA trust fund is to provide funding for a comprehensive statewide mental health treatment system. Many beneficiaries of the trust authority system are currently eligible for significant state assistance from other sources. There will be only incidental benefit to the current beneficiaries (of the trust) from expanding Medicaid.”

Streur declared that because trust funds ($1.5 million this year) are being diverted to help establish a program that will serve people who do not require mental health treatment, the effect is to drain funds that support service to those who do need that help.

Streur also argued that the administrative costs will increase over time — the $1.5 million is just to help the startup — and that the federal law requires states to pay for half of the overhead for enrolling the newly eligible group.

Jesse argues with Streur’s point that the money helps people not in need of mental health services. He has long been an ardent supporter of the expansion because state funds to support many services mental health trust beneficiaries need are not available — drug and alcohol counseling for released prisoners, for example — and the new federal money will make them available, reducing the reincarceration rates using the released prisoners example.

Also, “the cuts in state funding for many health and social services have made us (the authority) more and more dependent on Medicaid,” Jesse said, so the new federal money will in effect replace state dollars from a treasury under increasing strains.

Updated: 
11/24/2016 - 9:46am

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