Report concludes private-Medicaid doable, but costs uncertain

A Medicaid overhaul analysis commissioned by Gov. Michael J. Dunleavy’s administration concluded Alaska could see benefits from shifting a subset of its Medicaid population to private insurance, but the details of potential cost savings and whether or not the change can be implemented remains unclear.

Boston-based Public Consulting Group Inc.’s 48-page Alaska Proof of Concept Analysis Medicaid report says the public policy firm believes there is “a plausible path to approval of a ‘Private Option’ waiver for Alaska” from the federal Centers for Medicare and Medicaid Services, or CMS, based on similar approvals for other states.

While federal Medicaid officials could be amenable to such a plan, Alaska Department of Health and Social Services leaders would likely have to establish a new pricing system for services provided to Medicaid recipients on private insurance, according to the report.

Additionally, the state would probably need to bring at least one other private insurer — and competition — into the individual health insurance market to gain CMS approval, it states.

Currently, Premera Blue Cross Blue Shield of Alaska is the only private insurer in Alaska’s individual health insurance market.

Under the private-Medicaid concept, a group of relatively low-utilization Medicaid recipients would be moved to private insurance plans and the state would subsidize the premiums and other out-of-pocket expenses paid by those individuals.

A new “reference-based pricing” mechanism would be necessary to curb reimbursement costs for procedures paid for by the state through a private insurer that were previously paid at Medicaid rates.

According to Public Consulting Group, which cited estimated figures from other recent reports on Alaska’s Medicaid program, Medicaid reimbursement rates in the state are approximately 126 percent of what Medicare pays for particular services. However, commercial insurers in the state pay providers on average 353 percent of Medicare, rates that would significantly increase Medicaid costs to the state.

To counter that, state officials could implement reimbursement rates specific to the Medicaid population moved to private insurance, according to the report, but also not without potential consequences.

“In selecting targeted (reference-based pricing) reimbursement rates, Alaska will need to consider trade-offs between cost savings and the impact those savings may have on provider network access,” the report states.

A 2016 study, known as the Milliman report, and done when state lawmakers were debating a suite of Medicaid reforms, concluded that shifting low-income adults enrolled under expanded Medicaid coverage to the individual private insurance market would cost the state an additional $57 million per year growing to $97 million per year over the first five years of the plan.

Milliman Inc., a Seattle-based actuarial and consulting firm, submitted a proposal for the latest study but was not chosen by DHSS officials.

The contract for the Medicaid analysis was for up to $100,000.

DHSS officials requested the report this past spring, which was obtained by the Journal Aug. 13 through a public records request, after the Dunleavy administration initially proposed cutting $225 million from the state’s Medicaid budget in February.

Office of Management and Budget officials at the time acknowledged the $225 million proposed cut was an arbitrary figure needed to reach an overall balanced state budget and DHSS leaders said in March they could cut about $100 million from Medicaid this year largely through regulatory actions, such as cutting provider reimbursement rates.

The Legislature ultimately cut the state’s Medicaid services appropriation by about $70 million to $493 million, and Dunleavy vetoed another $50 million before signing the budget.

Many legislators were critical of the veto because short-funding the program on the front end without major changes to Medicaid will likely necessitate supplemental appropriations later in the fiscal year — a scenario that has played out in recent years.

While overall Medicaid spending in Alaska continues to rise, the state’s part of that bill is shrinking. According to the Legislative Finance Division, overall spending on Medicaid in Alaska has increased from $1.7 billion to more than $2.3 billion since fiscal year 2015, but the state’s portion of that has actually gone down from $724 million in 2015 to $677 million in the just-ended fiscal year 2019, which includes other services such as behavioral health as well as a $15 million supplemental budget request.

The Dunleavy administration has also suggested shifting the state’s federal Medicaid funding to block grants as a way to limit overall costs. Public Consulting Group recommended a “global cap” to self-impose spending limits while giving the state flexibility in how it would stay under the cost cap.

Doing so could also help the state offset any extra costs from the private insurance option by using a portion of the expected federal savings to cover higher reimbursement rates, according to the report.

Any such changes to Alaska’s Medicaid program would require CMS approval.

Elwood Brehmer can be reached at [email protected].

Updated: 
08/14/2019 - 9:00am

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