Increasing Medicaid access to 41,000 more Alaskans will save the state several million dollars per year according to Gov. Bill Walker’s administration.

In the first year of expansion, fiscal year 2016, the State of Alaska will save $6.1 million based on figures in a Department of Health and Social Services report.

“Medicaid expansion helps Alaskans and healthy Alaskans is a healthy economy,” Walker said during a Feb. 6 press conference. “It’s not about just bringing revenue and jobs; it’s about doing what’s the right thing to do.”

The savings are expected to come from shifting health care costs the state currently pays that could be covered by federal Medicaid dollars. 

For instance, the Alaska Department of Corrections should save $4.1 million next fiscal year by having federal Medicaid funds pay for inpatient treatment of inmates done outside of a correctional institution. 

Those services are covered if the inmate is otherwise eligible for Medicaid, according to the DHSS report, “The Healthy Alaska Plan: A Catalyst for Reform.”

Walker said he hopes to launch the plan sometime in July; the state fiscal year begins July 1.

More than 20,000 new enrollees are expected in the 2016 fiscal year and the number should plateau at about 26,500 by 2018.

The Alaska Mental Health Trust Authority will “graciously” cover about $1.3 million in administrative costs, including staff to cover enrollment and expanded payments, in the first year, Health and Social Services Commissioner Valerie Davidson said. 

That will allow the DHSS to develop a plan to either take on the work internally or contract it out.

“Thanks to the Mental Health Trust Authority, they have funded the opportunity for us to engage stakeholders and look at what other states are doing so we can develop an Alaska plan,” she said.

The federal government will cover all of the expansion cost projected at $145.4 million in fiscal year 2016 other than administrative expenses. 

In 2017, a $3.8 million state match will be required to get $170.6 million from the federal government. 

By fiscal year 2021 the match approaches 10 percent; the state will contribute $19.5 million of the overall cost estimated at $224.5 million, the report states — if the Legislature signs off.

As the state’s appropriators, legislators must approve the receipt and expenditure of all funds, regardless of their source.

Some legislators hesitant about expansion also are eager to reform the current state system and the two “go hand-in-hand,” Davidson said.

Technical changes are needed to state statutes to keep Medicaid in line with the Affordable Care Act, she said, providing an opportunity for larger changes once the expansion is in place.

Medicaid expansion will increase access to health insurance for an estimated 41,910 low-income Alaskans. These are adults from 19 to 64 years of age who are currently not eligible for Medicaid — those not caring for dependent children, not disabled or pregnant, and who earn at or below 138 percent of the Federal Poverty Level, or FPL, for Alaska. 

The Alaskans who will be eligible for Medicaid through the expansion live in all areas of the state.

Expansion will benefit single Alaskans without dependent children earning up to $20,314 a year, and married couples without dependent children earning up to $27,490 per year. 

Once these Medicaid recipients in the expansion population achieve a higher income they will be able to transition to the Health Insurance Marketplace and receive a subsidy to help afford coverage until their income reaches 400 percent of the FPL.

Davidson said she has been told most legislators could be on board if the administration can show that expanding Medicaid would be net revenue neutral to the state general fund; the plan laid out Feb. 6 indicates there will be savings.

A statement from the Alaska Chamber said the business group conditionally supports the plan, and Medicaid expansion must be tied to reform. The state’s current system covered $481 million of services in 2013 not required by the federal government, according to the Alaska Chamber.

“Alaska businesses will pay for uninsured Alaskans through the proposed Medicaid expansion or through increased health care costs. The Alaska Chamber supports Medicaid expansion for this reason,” the statement read. “The Chamber’s support for Medicaid expansion ends when the federal funding ends or falls below its initial promise. Our support also ends if expansion exacerbates the state’s fiscal situation.”

A push for Medicaid expansion during his campaign was a key contrast between Walker, a Republican turned independent, and former Republican Gov. Sean Parnell, who rejected expansion.

Even in 2021, when the state could be paying $19.5 million in match funds and covering staffing and paperwork fees, the Healthy Alaska Plan report projects nearly $3.3 million in overall savings because of increased federal grant opportunities and savings in the Department of Corrections alone growing to $7 million annually.

Expansion will come as the state’s current Medicaid payment system is in shambles. The state is under contract with Xerox Corp. to process roughly $1.3 billion of Medicaid payments through its Medicaid Management Information System, but problems in the system have delayed payment and forced the state to advance payment to some health care providers, although this is most likely to ultimately be paid by the federal government so that the state’s outlay is refunded.

According to Department of Law, Xerox has failed to solve the Medicaid information system problems and as of August the state of Alaska had paid more than $154 million to doctors and other health care providers in need of payment for their services.

Walker said he thought about changing Medicaid payment providers but determined enough improvements are being made to keep Xerox in place. The governor gets updates on the situation through weekly reports, he said.

“Every indication I’ve received is that we’re on the improvement side of the problems,” Walker said. “We are very focused on, and we have zero tolerance for any unnecessary delays.”

Davidson said the belief is the payment delays and other application backlogs should be resolved by the July rollout.

Elwood Brehmer is a reporter for the Alaska Journal of Commerce.