No magic method for controlling rising state Medicaid budget
State officials and legislators are working to contain spiraling health care costs in the state budget. There’s no magic method they’re finding.
Medical costs are spread all through the budget, such as in health benefits paid to state workers and retirees, but an immediate concern is Medicaid, the state program that pays medical care for lower-income Alaskans and which is half paid for by the federal government.
Medicare, which pays senior citizens’ health care, is totally federally funded.
Costs for Medicaid, however, are increasing at about 14 percent yearly and will reach $1.5 billion next year, up from $1.23 billion this year, state Health and Social Services Commissioner Bill Streur said.
The state’s share of this is about half, which makes Medicaid one of the biggest items in the state operating budget.
It’s costs are tough to control partly because of federal guidelines, which set minimum eligibility requirements, but also because of choices made years ago in Alaska.
One decision at the state level is a high Medicaid reimbursement rate for Alaska medical providers, such as physicians and hospitals, compared to what other states pay their health providers.
While this imposes a cost burden on Alaska’s budget, Streur said it also makes Alaska one of the few states where people enrolled in Medicaid can typically find health care.
That’s not true in other states, where Medicaid reimbursement rates are low, and Medicaid patients have trouble finding health care.
In contrast, with Medicare, the federally controlled program for seniors, reimbursements rates to Alaska medical providers are miserly, which is why seniors in Alaska often have difficulties finding care, particularly with physicians.
A number other factors are driving up Medicaid costs, Streur said, including inflation in health costs, which he estimates is running at about 5 percent annually, but particularly in growth of the number of people enrolled in Medicaid and their increased use of medical services in recent years.
Consultants to the Legislature have said that both trends, the increased enrollment and use of services, may be linked to a slowing of economic growth in Alaska and more people being without full employer health benefits.
An increase in recent years in the number of children enrolled in Medicaid under Denali Kid Care and a long-term increase in Alaska senior-age population have particularly added to costs.
Seniors tend to require more medical services in general, but much of the growth in Medicaid also has been in payments for home health-care services for seniors as well as the disabled.
These are alternatives to institutional or nursing home care, goals that are worthy in helping keep people at home with their families. But it has also become expensive.
These trends have been in the system for years and state officials and legislators have few options to control them.
There are other areas where changes are possible although savings may be modest, at least in the beginning.
Streur, for example, is concerned with a seeming disorganization in the way people seek health care, which is also driving up costs. People enrolled in Medicaid aren’t alone in this. It’s a problem private health insurers are grappling with.
"Today too many people do self-referrals, going to clinics or emergency rooms and essentially directing their own care," the commissioner said. The ad hoc nature of this is very expensive.
Streur hopes to do something about this with a pilot program of having patients’ care being coordinated by a physician, a concept Streur calls "medical home" care, which would have a physician direct a patient to the appropriate care.
"We want people to have the right care at the right time, and at the right place," Streur said. "Not long ago people had family doctors who coordinated their care, but we’ve gotten away from that."
This should discourage people from going to hospital emergency rooms, unless it’s really needed, he said.
The medical home concept should result in better care as well as cost savings, and Streur hopes the pilot programs will show both outcomes. This is one of several recommendations expected from the state’s Medicaid Task Force the week of March 20.
The commissioner hopes to have the pilot program running this summer, and to enlist three providers, a private nonprofit, an Alaska Native tribal health organization and a community nonprofit to develop the concept. They will work with small grants to be provided by the federal government.
A second new initiative, long in the planning stage, involves a series of incentives to physicians and other providers to develop electronic information systems.
Too many health providers still rely on hand-written records, a system that is not only inefficient but also error-prone. Switching to electronic costs money, but the state is hoping to ease that burden with grants to help pay conversion costs.
Physicians are eligible for up to $63,750 over five years and hospitals are eligible for up to $2 million over the same period to go electronic, Streur said. Applications are now being accepted for the federal grants.
Streur said two pediatric groups have submitted applications so far and about a dozen other physicians’ applications are expected shortly, along with applications from four hospitals.
The financial savings of going electronic is uncertain at this point, but there will be other benefits, the commissioner said.
"We are assuming there will be benefits not so much in saving dollars but in reducing duplications of effort," and greater accuracy, which will prevent mistakes, he said.
Federal stimulus funds appropriated by Congress last year will pay for the electronic information system grants along with some funds made available under the federal health care reform law, Streur said.
Covering the budget
Another issue for the commissioner is the coming expansion of Medicaid under the federal law. In 2014 Medicaid coverage will expand to all low-income adults at or below income levels 43 percent above the federal poverty level for Alaska.
The federal law requires coverage at 38 percent above the federal law but allows an additional 5 percent for Alaska, Streur said.
Medicaid benefits for the expanded coverage will be basically similar to existing benefits for children, mothers and disabled, but there could be some changes in services offered that are options for states, the commissioner said.
State formula programs like Medicaid, where spending guidelines are set out in population-based formulas in state law, take up about half of the state operating budget, and legislators have few tools to reduce spending in these short of major overhauls of the enabling statutes.
To compensate for the growth in formula programs, lawmakers must cut spending in other areas where there is more direct control over budgets.
For example, the state fiscal year 2012 budget passed by the state House of Representatives March 10 appropriated $4.848 billion in state general funds, about $100 million above the $4.748 billion in general funds being spent in the current budget year, fiscal 2011.
With the state share of Medicaid costs running $100 million higher in fiscal 2012 along with increases in other formula programs like education, the House had to make cuts in state agencies and other programs to absorb the increases in the formula programs.
Another issue on the commissioner’s desk is to set up a state health insurance exchange program, a task Streur is sharing with Linda Hall, director of the state Division of Insurance. Health insurance exchanges were in the news recently after Gov. Sean Parnell turned down a $1 million federal grant to help pay for the state setting up an insurance exchange in advance of a mandate in the new federal health care reform law to have one operating by 2014.
The exchange will be a web-based system that will allow consumers to sort through different options for health insurance and will make it easier to apply for programs like Medicaid.
Streur didn’t comment on the governor’s decision to turn down the federal grant but he said the state’s establishment of its own system would result in one that is simpler and more suited to the Alaska health insurance market.
Utah has developed a health insurance exchange for its residents that provides a model for Alaska, Streur said. Utah has petitioned the federal government to have its exchange accepted in place of one created by the federal government in 2014 and Alaska could do the same, the commissioner said.
The exchange mandated under the federal law has some requirements, mainly technical in nature, that are more suited to Lower 48 states, which have many health insurance companies and options, compared to a relative few options available in Alaska, Streur said.
The intent of an Alaska version of an exchange, like that in Utah, is the same as the goal of the federal exchange, which gives the commissioner hope that the Alaska version will be acceptable.