The Financial and Political Implications of the Affordable Care Act Expansion in Alaska

PADM A628

Sue Fallon, Nantia Krisintu, Carla Raymond, and David Smith

Running head: ACA EXPANSION IN AK

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Abstract

The Affordable Care and Patient Protection Acts of 2010 embody nearly a century of health care

reform efforts in the United States. For the first time in history, a national system of health care

has been ratified and is now in the process of implementation. Based on the Supreme Court

ruling, individual states may choose to opt out of the expansion of Medicaid, Medicare, the

establishment of Health Care Exchanges and the accompanying increased federal spending for

these programs. The financial and political impacts of the ACA in Alaska are analyzed

including: the historical context, the options for developing a health insurance exchange, the

decision not to expand Medicaid, alternative measures to address the rising costs of health care,

and policy recommendations.

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The Financial and Political Implications of the Affordable Care Act Expansion in Alaska

The Affordable Care and Patient Protection Acts of 2010 embody nearly a century of

health care reform efforts in the United States. For the first time in history, a national system of

health care has been ratified and is now in the process of implementation. Based on the

Supreme Court ruling, individual states may choose to opt out of the expansion of Medicaid,

Medicare, the establishment of Health Care Exchanges and the accompanying increased federal

spending for these programs. The financial and political impacts of the ACA in Alaska are

analyzed including: the historical context, the options for developing a health insurance

exchange, the decision not to expand Medicaid, alternative measures to address the rising costs

of health care, and policy recommendations.

Historical Overview

The history of legislation regarding health care in the United States is complex and

spans over the course of nearly a century. While recent history reflects the work of the Obama

and Clinton administrations, the foundational elements of the ACA can be traced to Franklin D.

Roosevelt's social reforms during the Great Depression of 1930's (Hoffman, 2012).

The Role of the Social Security Administration

The Great Depression, with its growing income disparity and high unemployment saw

corollary effects in the health care sector. Sickness was a leading cause of poverty, access to

health care was limited and medical costs increased. Many hospital services were left unpaid.

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Welfare agencies began to take on the costs of health care and to provide services themselves

(Hoffman, 2012). FDR appointed a Committee on Economic Security, and while National

Health Care Reform was discussed, it was tabled in favor of policy programs addressing

unemployment and social security. One significant development during this era were programs

providing federal funds to match state spending to fund health care at the local level (Hoffman,

2012).

With the economic prosperity that accompanied the end of the second world war, the

focus of legislation returned to National Health Insurance (NHI). Under Truman administration,

the Wagner- Murray- Dingell Bill of 1943 included a single federal system, providing universal,

comprehensive health insurance. Ultimately, opponents of NHI were able to dissuade the public

reorienting focus on the prevailing political fears of the day, threats of socialism and

communism, unseating any further legislation.

In the 1960’s, Medicaid and Medicare emerged from the Kennedy and Johnson

Administrations, as part of the "The Great Society" movement (Hoffman, 2012). These

programs were enacted without significant discussion of economic impacts. The origins of

Medicaid and Medicare began as extensions of the Kerr-Mills act in 1960, to provide for the

health needs of the elderly populations, and "Bettercare", Kennedy’s federally subsidized

private option. The two programs were combined to create Medicaid A, servicing hospital fees,

nursing, and home health care, and Medicaid B, proving physician compensation. Medicaid

was designed not only for the poor, but also to address the needs of the disabled and the elderly.

As stated earlier, funding for these programs was not a priority, and government cost controls

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were not instituted when Medicaid and Medicare were incorporated into the Social Security

Administration (Hoffman, 2012).

Rising Inflation and the Economic Impacts

The lack of economic forethought proved challenging as health care costs rose from 4% in 1965

to 11% by 1973 (Hoffman, 2012). Limits were put in place and then lifted within a year. By

1974, health care regulation was in full swing, with the introduction of HMO's, certificate of

need programs and hospital rate setting. Under the Nixon administration several pieces of

legislation were proposed to mitigate the problem. Senator Ted Kennedy fashioned a Health

Security Act featuring single payer health insurance, financed through payroll taxes (Hoffman,

2012). Nixon proposed a Comprehensive Health Insurance Plan (CHIP), with universal

coverage, voluntary employer participation, and a co-pay of 65%. Senator Kennedy attempted

to work with the Nixon plan through the bills co-sponsor Representative Mills, to no avail.

Others proposed new legislation and before long, the waters were too murky to allow progress.

Mills fell to scandal and ultimately, National Health Insurance became a political casualty.

Inflation was in the forefront during the Ford and Carter administrations. Ford

abandoned his ideas for National Health Insurance based on fears of further inflationary effects.

Instead, the focus turned to cost containment (Hoffman, 2012). Senator Kennedy disagreed and

proposed another round of health care reforms, utilizing market forces and private insurance

companies who would sell policies to the public at rates commensurate with income. President

Carter then countered with his own proposal, with employer mandates, expanded versions of

Medicaid and Medicare, and a new corporation to service all others. The effects of high

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inflation on the economy did prove conducive to health insurance reform, and both Kennedy

and Carter's plans failed. Progress occurred in the form of changes hospital billing practices for

services leading the way for future reforms to Medicare, specifically, the Medicare Prospective

Payment System of 1983 (Hoffman, 2012).

Health Care Reform at the Forefront

A surprising win in the Senate in 1991 by Harris Woffard, campaigning on a platform of

health reform, created renewed interest in health care reform. Although costs were rising to

12% of GDP, and various different strategies had been discussed by each presidential

administration since Carter, no significant improvements had occurred. President Clinton

vowed to send a health care bill to Congress within the first 100 days of taking office (Hoffman,

2012). Hillary Clinton rose to the task and assembled a team that produced a hefty 1400 page

plan, whose complexity offended nearly all relevant parties in some way, who in turn were not

eager to get behind the plan until the pieces fit as they preferred. This situation, and a divided

democratic majority in Congress rendered the Health Security Act moot. However, provisions

for low-income children were expanded in 1997 (Hoffman, 2012).

Affordable Care Act

President Obama ran on a platform responsive to the public’s perception that health care

reform was crucial. Entire lifetimes of hard work and societal contributions were wiped out by

a single unfortunate acute illness or accident; an appendectomy had the potential to wipe out

years of savings and render people homeless as they tried desperately to keep afloat financially.

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Public outcry over the injustice of not being able to obtain health insurance due to pre-existing

conditions was at a fever pitch.

On March 25, 2009, the White House held its first health care summit (Smith, 1970).

President Obama differed from his predecessors by simply outlining broad goals and principals

for health care reform, declining to draft an executive proposal he asked Congress to sort out the

legislative details. Both the House and Senate began working that very month, with the House

taking a distinctive lead (Cannan, 2013).

While both the House and Senate worked separately with their respective committees,

their procedures were similar. The initial House drafts were procedurally incongruous, although

quite similar in content. In the Senate, the first of three roundtable discussions occurred on

April 21, 2009, with Senate Finance Committee Chairman Max Baucus and Ranking Member

Chuck Grassley presiding. They brought together expert advisors on health care policy and

industry for discussions (Smith, 1970). The House committees that pertain to health care, Ways

and Means, Energy and Commerce, and Education and Labor leaders agreed to cooperate in this

endeavor, differentiating themselves from the foibles of the Clinton failure (Cannan, 2013). In

concert with Nancy Pelosi, the assemblage of politicians and experts agreed to draft a proposal

released June 19, 2009. None of the ideas proposed pertained to funding at this stage.

The work of the House and Senate led to the passage of The Affordable Health Choices

Act passed on July 15, 2009 by the Senate's Health, Education, Labor and Pensions Committee.

The bipartisan bill endured one of the longest mark-up periods in Congressional history,

carrying 160 Republican amendments (Smith, 1970). On July 31, the bill was reported out of

the House Committee on Energy and Commerce by a vote of 31 to 28, segueing nicely in the

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August recess. President Obama took advantage of the break by traversing the country

garnering support for the bill and vehemently clarifying the popularly touted "death panel"

rumor.

The following month, on August 26, 2009, Senator Ted Kennedy passed away and the

Senate Democrats entered into a precarious position of losing their 60-seat filibuster proof

supermajority. This was especially tragic, as Senator Kennedy had been more intricately

involved with health care reform for a longer period of time than any other member of

Congress. Through a great deal of legislative maneuvering, the Senate found its majority

through member in Ben Nelson, a conservative Democrat, who assumed the role of the 60th

vote vacated by Ted Kennedy. Nelson secured substantial Medicaid funding for his home state

of Nebraska, and was able to include provisions for separate categories of health care and

abortion (Cannan, 2013).

The Senate passed its bill, after melding the two drafts, on December 24, 2009, and

renamed them, Patient Protection and Affordable Care Act. This passage was clearly

orchestrated by Henry Reid, whose deft execution of legislation procedure enabled a stay of

intentional delays and other such obfuscations.

The coming of the new year brought fresh challenges as yet another seat was lost to

Scott Brown, a stalwart Republican, who had vowed to oppose healthcare at every turn. It

appeared that the future of health care reform hung in the balance (Smith, 1970). On February

25, 2010, President Obama appeared in a televised health care summit with leaders of both

parties to clarify and discuss the health care bill, most likely in response to Brown's election.

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On March 11, 2010, Majority Leader Harry Reid communicated via letter to Senate

Minority Leader Mitch McConnell, expressing that Democrats will use reconciliation to pass

the healthcare bill, as it needed only 51 votes versus 60 (Smith, 1970). Reconciliation was the

most expedient route to accomplish the task, bypassing many legislative channels. On March

23, 2010, President Obama sign the bill into law. The bill was distinctive given that the

legislative route to "yes" was unconventional. The House unanimously opposed expanding the

reach of the measure, and attempts at legislative maneuvering were not able to block the path of

the Senate bill to the President. Instead, any House measures were required to go to the Senate

first, effectively allowing the President to sign the Senate’s version.

Given the controversial nature of the reform and many of its details, all parties involved

were well aware of the impending barrage of lawsuits (Cannan, 2013). Individual cases were

filed at the state level, most notably, the 11th Circuit Court of Appeals which ruled that the parts

of the law were unconstitutional on August 12, 2011. In November of the same year, the U.S.

Court of Appeals in Washington found that contoversial elements of the law were constitutional.

Inevitably the cases were brought before the Supreme Court who heard challenges on three

counts: whether a pre-enforcement action could be brought under an Anti-Injunction Act,

whether the individual mandate was constitutional, and whether the individual mandate was

severable from the rest of the law (Cannan, 2013). The Supreme Court ruled that the Affordable

Care Act was legal with one exception: the federal government could not require states to

increase Medicaid eligibility. Since that day, there have been and continue to be efforts by

opposition members to repeal this law.

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Economics

Of late, the issue has turned to the macroeconomic effects of the ACA. The

Congressional Budget Office released a report in early February generating serious criticisms

and concerns regarding the overall impact of the ACA from a fiscal perspective. Subsequently,

The White House issued a summary of six economic benefits of the Affordable Care and Patient

Protection Act recently, through the Council of Economic Advisors who are keen to point out

that the CBO report is not complete.

The first benefit discussed in the report is the personal economic boon that reduced

healthcare costs bring, allowing for larger amounts of money in people's pockets. They cite the

CBO's data of 5 million persons obtaining tax credit that equate to $4700 per person in 2014. In

2015 that number is expected to rise to 11 million people, and in 2016, to 19 million. The

greater personal cash flow will serve to stimulate the need for goods and services and in turn

will stimulate the job market.

Curbing the rate of growth in health care spending is the second benefit, leading to

increased hiring rates in the near term, and bolstering worker’s paychecks. The third benefit is

the reduction of the long-term federal deficit, and laying the foundation for future growth. The

CBO's numbers indicate that in the fiscal cycle 2013-2022, the ACA will reduce the deficit by

$109 billion, and from 2022-2032, will decrease the deficit by .5% of GDP each year to a total

of $1.6 trillion over 10 years. This is a significant advance, given the deficit crisis looming

ahead, which concurrently leads to an increase in the quality of life for the public at large.

The fourth benefit is the increase in both access to health care and improved outcomes

based on prevention-focused practices. Improving people's health in turn improves their

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productivity and efficiency in the work place. As was seen in FDR's time, lack of access to

health care was the road to poverty, dramatically hindering efficiency in industry. The fifth

benefit is reducing job-lock and encouraging job mobility and entrepreneurship (Furman, 2014).

Once employees are able to maintain quality health care without being tied to a select group of

employers providing health insurance as an employee benefit, the range of opportunities

expands providing opportunities for both mobility and self-employment.

The sixth and final benefit is improving financial security in the face of illness. Here the

Economic Council speaks directly to the most popular critique of health care pre-ACA. No

longer is the threat of a catastrophic medical emergency able to derail one's entire life, financial

plans, and retirement funds. The Council argues that this form of security will serve the worker

in a multitude of ways, enhancing productivity and creativity.

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Every President since FDR has plied their hand at health care reform in some fashion,

from pure policy implementation as a response to public need, or through regulation and cost

control, health care and health insurance has been a stalwart part of the political landscape for

the better part of the last century. Perhaps it is because few things about the human condition

compare to the fundamental impacts health has on the quality of our lives; the state of our health

as individuals contributes directly to the health of the state of our nation as a whole.

The Impacts of the Affordable Care Act on Alaska

Critical Issues in the Implementation of a Health Care Exchange

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In evaluating whether or not to implement a Health Insurance Exchange (HIE) in

Alaska, the state commissioned a report for the Public Consulting Group (2012) to evaluate the

issues and options. Per the report, at its core, the HIE is intended to attract and retain customers

by offering comprehensive health plans at affordable prices. To accomplish this goal, the HIE

must: 1) establish a streamlined eligibility and enrollment process; 2) adjudicate transactions

effectively and efficiently; and 3) provide members with information to make informed

decisions. The following section provides information related to several key HIE issues,

outlining decision points that must be addressed and proposing additional analyses that may

support decision-making.

The governance and administrative structure of the HIE was important. The ACA

allows for it to be organized in one of three ways: (1) Establish the HIE within an existing state

agency; (2) Create an independent state agency or quasi-state agency; or (3) Create a not-for-

profit entity. Each option has its own unique financial and implementation challenges. Per the

report, data and analytical requirements argued for a federal partnership option.

The Eligibility Determination Process was a consideration. Per the report, The ACA

expected Alaska to establish a single application and entry point, possibly feeding into a single

eligibility engine, to determine eligibility for Medicaid, Denali Kid Care, and the HIE. The

intent of this process is to enable an individual to supply a limited amount of information to

determine whether the person is eligible for coverage under the various medical assistance

programs available in the state. The data and analysis requirements of this component are

extensive and would require significant funding to create a streamlined system across all

required stakeholders. That in turn requires that stakeholders be engaged and willing to

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participate in the process. Once the exchange was established, outreach, education and

enrollment would be the key issues. Successful outreach and enrollment would require a

comprehensive plan that would be unique to the culture and landscape of Alaska. Tribal

partners would be key.

The next step would be a web portal, which would serve as the central point of access

for employer and individuals to obtain insurance. A successful statewide web portal would be

costly to create and maintain. Again, the unique landscape and technical capabilities of Alaska

would make the sustainability of the web portal difficult. Once the portal is available, plans that

meet the essential health benefits determination must be offered. Per the report, determining the

most appropriate EHB benchmark plan for the State of Alaska requires two broad analyses: 1) a

comparison of the coverage provided by plan options; and 2) an analysis of the cost impact on

premiums for each option. Once the plans are identified, they must be maintained in order to

remain offered on the exchange. This requires a system of monitoring and certification ensuring

that plans meet minimum requirements and communities are receiving services needed in their

area. This requires trained staffing and technical capabilities that the state does not currently

have. Next, a healthy exchange would require a “robust consumer and customer support team”

to help individuals navigate the system and purchase insurance (Lewin, 2012).

Finally, the exchange must be financially sustainable. The report lays out a five step

plan to financial sustainability.

1. Market Projections: In order to fully analyze all options

available for financial sustainability, the State must first

understand how many individuals are expected to enroll in the

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market, both through individual coverage and small group

coverage. This enrollment number provides a baseline for

projecting variable costs and initial capacity requirements for

various HIE functions.

2. Budget: Budget projections begin with construction of an HIE

organizational structure. Any new staff positions or shared

positions with other agencies are included by full time

equivalency (FTE). For states that have chosen to establish an

independent State agency or to operate the HIE as part of an

existing State agency, government salary benchmarks and

fringe rates apply. For states looking to establish a nonprofit

entity, market-competitive salaries should be used.

For the purposes of an initial budget, the most straightforward

approach to capturing costs is to group expenses into large

functional categories. Under this model, the budget may be

used to reflect the total available budget for competitive

procurement, for additional internal staffing, or to expand

capacity of existing systems and offices to include HIE

functionality. Thus a complete draft budget may be developed

prior to finalizing build-or-buy decisions. Benchmarking using

budget projections developed by other state HIEs, private

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HIEs, and current State business processes is the most

common and likely most appropriate approach to budget

development.

3. Expected Revenue: Once a high level understanding of

expected costs has been defined, all feasible revenue sources

should be considered to cover HIE operating costs. Some

states are attempting to rely heavily on advertising, Medicaid

cost allocation, and other non-consumer directed revenue

sources. Other states have decided to apply a simple user fee

on HIE plans, while still others are considering some form of

statewide assessment to cover costs.

4. Pro Forma Balance Sheet and Income Statement: The pro

forma balance sheet and income statement will combine

budget and revenue projections to form the foundation of the

HIE’s accounting system.

5. Contingency Planning: Given the inherent uncertainty of

market projections for any new product, the HIE should

consider implementing a mix of potential revenue streams to

ensure that fixed costs are met regardless of enrollment. For

some states, this process will involve a careful cost allocation

plan to ensure that Medicaid matching funds are appropriately

captured combined with, potentially, reinsurance transaction

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fees, advertising revenue, etc. For other states, the

contingency plan will default to the use of general funds while

the HIE is reorganized to address funding shortfalls.

In sum, an Alaska HIE would cost between 5.5 million dollars assuming 38,000

enrollees and 7.5 million at 115,000 enrollees.

Rational for Not Implementing a Health Insurance Exchange in Alaska

The report from the Public Consulting Group came out a week before the United

States Supreme Court upheld the constitutionality of the Affordable Care Act and was unable

to make a solid recommendation citing political uncertainty around the constitutionality of the

ACA.

Ultimately, Governor Parnell decided not to implement a health insurance exchange in

Alaska seemingly for political reasons, stating that in his opinion, it does not make sense for

the state to be enticed bite the "shiny but poisonous apple" of federal dollars and mandates

"that create federal dependency and control." The only option left to the people of the state of

Alaska was to but insurance through a purely federal system.

ACA Medicaid Expansion: Critical Issues

The decision of whether or not implement the Medicaid expansion under the ACA is one

of weighing budgetary realities against citizen welfare issues. Such issues do not lend

themselves to a simple financial calculation. It is common knowledge that a lack of insurance

can make even highly treatable injuries and illnesses a financially devastating event in the life of

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a family struggling to make ends meet. Further, the state has a vested interest in the health of its

citizenship. With those notions in mind, Alaska’s administration set about to decide whether or

not Medicaid would be expanded in Alaska. Whether you agree or not with the ultimate

decision is largely dictated by your particular political machinations.

In the weeks and months leading up to the expansion decision deadlines, some

governors favored the expansion focusing on the desire to expand coverage to uninsured

persons, arguing that insurance would lead to greater access to care and improved health. Many

governors who support the Medicaid expansion argued that it builds on previous coverage

expansions in their states and that it would actually save their states money by replacing local

dollars with federal funds.

Beyond cost, other governors have expressed concern about the lack of state flexibility

or their belief that Medicaid may foster dependence among beneficiaries. Others argued that

Medicaid itself is the problem, calling it a “broken pro- gram” that provides poor care.

Among uncommitted governors, there were three dominant themes. First, three quarters

of these governors said they needed more information on federal requirements, cost and

enrollment projections, and policy alternatives. Second, affordability was a key concern,

including the possibility of decreased federal funding in the future. Still other governors were

waiting until the election to evaluate their options. (Sommers & Epstein, 2013)

Cost shifting between private insurance payers and public insurance payers is another

factor. A report prepared for the Alaska State Hospital and Nursing Home Association explains

the pros and cons of the Medicaid expansion from their perspective. If Alaska implements

Medicaid Expansion, then the following are expected:

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• If Alaska implements the Medicaid expansion program, combined with those projected

to be insured through the Health Insurance HIE (HIE), then the number of uninsured is

projected to decrease from 129,702 in 2013 to 18,102 in 2014 and to 17,288 in 2019.

• With Medicaid expansion and the HIE, the amount of uncompensated care provided by

non-tribal hospitals is projected to decrease to $19.8 million in 2014. Without Medicaid

expansion and the HIE, uncompensated care is projected to be $131 million in 2014.

• The need to shift costs because of uncompensated care in non-tribal hospitals to the

privately insured individuals is projected to decrease, from $301 to $45 in 2014, due to

Medicaid expansion and the HIE.

• It is projected that the premiums of an individual policy will need to include only $7

additional dollars instead of $47, and the family plan premium will need to include only

$38 additional dollars instead of $254 to cover uncompensated care, if Medicaid is

expanded and HIE occurs.

• Across the period 2014-2019, privately insured individuals and families could,

potentially, save $717 million in premiums, if the reductions in uncompensated care

were all passed to privately insured individuals.

• Without Medicaid expansion in 2014, $131 million of uncompensated care would be

shifted to private insurance, compared to $20 million if Medicaid expansion is

implemented.

• Across the period 2014-2019, $841 million of uncompensated care would need to be

shifted to private insurance without Medicaid expansion, compared to $124 million with

Medicaid expansion.

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Rational behind the Decision Not to Implement the Expansion

The Lewin Group (2013) was commissioned by the state of Alaska to help the

administration decide if the expansion of Medicaid under the ACA was in the best interests of

the state. The report was released to the administration in April 2013 and then released to the

general public in November 2013, several days before Governor Parnell announced that he

would not be electing to expand Medicaid coverage.

In announcing that the state would not expand the Medicaid option to persons at 138 of

the Federal Poverty Level, Governor Parnell articulated several reasons for his decision

including that the Alaska Medicaid budget is already one of the largest spending items in the

state budget and he was not inclined to accept federal dollars to expand the program. He added

that he was unsure if the promise of the federal dollars, which was projected to pay 100% of the

costs of the expansion programs within the state for the first three years and then gradually

reduce to 90% in the following years, would actually materialize or be a stable funding source.

He also believed that since the federal dollars were adding to the federal deficit that the

spending of federal dollars now was only adding to the debt that would be owed in future

generations. Finally, Parnell was clear that his political ideology against the ACA in general

was apparent when he explained that expanding Medicaid on top of the “broken” ACA was

undesirable (Feidt, 2013).

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Special Consideration for Targeted Groups (Dave’s Section)

This issue may have serious implications for Natives, pregnant women, legal refugee

immigrants and low-income Alaskan veterans and we will look at each group separately. The

true list of Alaska residents currently receiving medical benefits is “restricted” and there is

current legal controversy utilizing FOIA about opening up this public record to scrutiny by both

the public and the news media.

Most experts anticipate well over 50,000 Alaskans will chose not to obtain health

insurance in Alaska. This may be due to the fact that 19.2 percent of the state represents Alaskan

Natives with IHS medical programs provided by prior federal treaty obligations.

Alaskan Natives

Alaskan Natives are thought by most Alaskans to have free health care in Alaska; but in

reality they are granted access to medical facilities and treatment based on historical federal

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treaties approved many years ago. The federal government historically funds this through the

Indian Health Service (IHS) and in 2012 it amounted to $606 million in Alaska. The Alaskan

Native is the only population in the USA that is born with a legal right to health care services.

This is not health insurance; rather IHS provides health services to members of federally

recognized tribes or subcontracts with other organizations to provide services based upon treaty

obligations between U.S. government and recognized tribes and Native non-profit corporations.

Historically the IHS revenue covers only 60 percent of total Native Alaska medical delivery cost

and both Medicaid and Medicare cover much of the unfunded balance. Possibly 20,000 Alaskan

Natives have no Health Insurance to cover other or needed health needs. Federal statistics

estimate that 63 percent of all Alaska Natives may be eligible for Medicaid based upon low

income. Alaskan Natives are typically served by the Alaska Tribal Health Services.

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Obama Care (ACA, Affordable Care Act) was not designed with Indian health programs in

mind. The ACA bill actually extended the Indian Health Care Improvement Act (IHCIA)

authorization in recognizing Native Americans as having a separate health care system.

The Alaskan Native health care system is administered under the Alaska Tribal Health

Compact that authorizes Alaska Native health organizations to provide health care instead of the

U.S. government. The compact is signed by 25 tribes and tribal organizations, including the

consortium and serves 229 federally recognized tribes across the state.

The 2013 Revenue budget for ANTH shows IHS supplying $150,000,000 and Medicare

& Medicaid combined supplying an additional $190,000,000 million for Alaska medical

services. Grants and projects received an additional 100 million. This is part of the huge

shortfall from HIS not covering the full cost of medical services as outlined in above mentioned

treaty agreements.

In 2014, compact groups are scheduled to receive approximately $500 million in federal

funding from all sources. With the economic multiplier effect; any new funding made available

would substantially enhance many of rural Alaskan communities with health clinics. Each dollar

spent by the state would generate $28 in federal spending plus the multiplier effect benefiting

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Alaska as a whole. Poverty stricken western Alaska and the Arctic region would receive an

estimated $170 million from the multiplier effect alone over a 6 year period. The bulk of the

“multiplier effect” approximately 50 percent of all additional funding; benefits South Central

Alaska.

The identified Alaska Native medical system serves more than 123,000 Alaskan Natives

and American Indians; it includes a statewide hospital in Anchorage (ANMC), 25 sub-regional

clinics, six regional hospitals, nearly 200 village clinics and five residential substance abuse

treatment centers. In most rural clinics the highest level medical professional is a health aide

assisted by a telemedicine provider at a regional medical facility.

The health status of rural Alaska Natives is also related to low socio-economic status,

subsistence lifestyle, rapid social change, harsh climate and terrain and the isolation of the

communities in which they live.

Native medical hospitals are currently located in Anchorage, Wasilla, Sitka, Juneau,

Fairbanks, Bethel, Nome, Kotzebue and Barrow. Anchorage currently has four major buildings

and is designing a 135 unit guest hotel to accommodate visiting patients from rural Alaska.

The reimbursement by the Indian Health Service to Alaska’s tribal health system is part

of the “broken promises” by the federal government as it only covers a portion of total cost of

service delivery by all providers. It does however cover most fixed-cost such as mortgage

payments, electricity, heating, staff and medical supplies. One significant Alaskan improvement

would expand “telemedicine” in rural Alaska, primarily serving Alaska Native populations.

Medicaid is one of Alaska’s most expensive social services programs with an annual

cost of $1.5 billion and of 140,000 Alaskans enrolled: Native Alaskans make up 20 percent of

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all Alaskans per the recent census counts and nearly 40 percent of Medicaid recipients. Children

are the primary recipients of Medicaid in Alaska today and the majority of new Alaskan

Medicaid recipients would be extremely poor Native adults age 19-64.

Medicaid covers medically necessary travel, and Indian Health Service funding typically

only covers “urgent” travel - when the patient is at risk of the loss of life or limb. This

represents one of the major benefits to including Alaskan Natives under ACA in Alaska.

While it is estimated that possibly 43,000 uninsured Alaskans would participate if the

program was expanded; 17,500 would be Alaskan Natives; primarily the very poor, who may

utilize the emergency services currently, but fail to submit qualifying insurance documentation

to enable the medical facility to obtain reimbursement for services performed.

Pregnant Women

Pregnant women are not an important medical issue for this project as all children and

mothers are covered under existing Medicaid regulations and/or Denali KidCare Programs and

the new Medicaid ACA legislation only covers low income adults between 19 and 64 years of

age.

Legal refugee/immigrant alien residents

There are in excess of 10,000 legal refugee immigrants in Alaska and they initially

receive a state funded health insurance package called Refugee Medical Assistance and/or

Medicaid. It costs the State of Alaska over 5 million annually and we currently have

approximately 700 refugees in the above described basic new refugee program. Refugees (as

opposed to legal immigrants) are defined as: persons residing in Alaska or the USA that were

forced to leave their chosen or preferred homeland in order to protect and safely exist as a

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family unit. Refugees as opposed to immigrants are a guest in the USA with a guarantee of free

health benefits for their first 5 years in the USA by congressional and internationally

agreements; often negotiated by the United Nations.

There appears to be some politics in collecting data on their true impact upon the State

of Alaska and this may be the largest group of potential Medicaid applicants that could generate

substantial new revenue to the State of Alaska. Dr. Ann Ferguson at HSS and RAIS at Catholic

Social Services in Anchorage wear several hats and manage all refugee programs in the state.

Currently all new and legal refugees in Alaska are given Medicaid benefits for their first

5 years only. This group currently contains over 700 individuals. After this initial 5 year period

they are on their own and need health coverage from some source. It is estimated that possibly

6,000 Long Term refugees in Alaska need some form of health insurance and they are low-

income qualified. I am contacting the Homong Group in Mt. View with over 20,000 members to

get current data on Asians in need of health care services.

When we look at immigrants as a class of residents we find that many are lawfully

present in the USA; and eligible for benefits based upon restrictions due to citizenship and

immigration status. By law they are eligible for State funded “means-based” Medicaid

programs.

Alaskan Veterans

Alaska veterans do have a federally funded Health Insurance program available if

honorably discharged and all US veterans making less than $34,000 are automatically covered

for medical benefits; but, only “if” the appropriate paperwork is filled out. Currently the

Alaskan “system” shows 74,671 “registered” veterans but has no idea how many other veterans

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are not registered. I would guess that there are at least an additional 100,000 that are not

“registered”. There appears to be some politics in collecting the true status of these individuals

as to total numbers and bureaucratic paperwork needed to receive the potential benefit.

The veteran’s health benefits are funded under a program called Medical Care

Collections Fund authorized under Public Law 99-272 enacted in 1985. Currently medical

benefits are 36% of the VA Budget. The VA currently has health centers in Anchorage,

Fairbanks, Kenai, Juneau and Wasilla. As they have a shortage of trained staff; they are

currently subcontracting with Native village clinics in rural Alaska and locally in Anchorage

with the Anchorage Neighborhood Health Center to eliminate a listed backlog of over 900

Alaskan veterans.

It looks too complicated for low income, poorly educated and/or homeless person to

follow up on. VA representatives at the State level could not establish a need for additional

insurance coverage and appeared to be political in describing the program. I utilized the

program to obtain a back-up medical plan and find it too complex and bureaucratic to be useful

for me as an older Alaskan resident with other health provider options.

With the appearance of pressure that is being generated in this area I am guessing that

there would be a huge benefit to the State of Alaska if we could reach uninsured veterans. VA

officials do not appear to be cooperative due to a recognized shortage of VA approved facilities.

In conclusion the media is reporting that only 5% of Alaskans in need of medical

insurance will have signed up as the March 31st cut-off date. This is not surprising as many or

most may be either low-income, Native Alaskan, refugee/immigrants or former veteran. We

appear to have mounting political pressure to not get too involved in looking at either the

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Refugee/Immigrant or Veteran issues as both categories rely heavily on “outsider” federal

programs and funding sources for their existence in Alaska.

Policy Recommendations

General Considerations

The HIE has been sold as a mechanism for moderating the growth of health insurance

costs. Jost (2010) examines eight of the most difficult issues that the states and the federal

government face in implementing the exchanges: governance of the exchanges; avoidance of

adverse selection; making self-funded plans compatible with exchanges; making exchanges

attractive to employers; exchanges' use of their regulatory authority; determining the

information that exchanges must make available to consumers and employers; the exchanges'

role in making eligibility determinations for premium tax credits and cost-sharing reduction

payments and their relationship with public insurance programs; and reducing administrative

costs.

Achieving this goal will be possible only if exchanges are implemented so as to

maximize competition, choice, and participation and to minimize administrative cost and

adverse selection. Alaska currently has some of the highest medical costs in the country.

Consequently, health insurance has been identified as one of the top two barriers facing

Anchorage business owners. (Hanlon, 2014). Currently, only two companies are offering

insurance plans in Alaska, Moda and Blue Cross Blue Shield. It will be interesting to see how

the situation changes once the federal exchange is functional. While it may be possible that it is

Alaska’s remote location is to blame. Everything, not just medical care and medical insurance,

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costs more in Alaska. But it may also be that a lack of competition in the marketplace could be

a contributing factor. Also, by resorting to a federal exchange, it may be that Alaska’s unique

access issues are not being addressed as holistically as they could be. Since the Affordable Care

Act is seemingly not going anywhere anytime soon, Alaska should move forward with some

sort of exchange to make sure that Alaskan’s needs are met to the fullest potential.

Alternative Cost Control Measures

The Alaska Department of Health and Human Services (DHSS) commissioned the

Lewin Group (2013) to analyze the impacts of Medicaid expansion in Alaska. As part of this

report, recommendations regarding alternative cost control measures of interest to the state were

provided. The state cost curve for Medicaid in Alaska is expected to increase by 76 percent

from 2013 to 2020 in the absence of Medicaid expansion (Lewin, 2013). Based on programs

utilized in other states as well as evidence-based practices (e.g., Cohen, Neumann, Weinstein,

2008; National Conference of State Legislatures, 2010), five broad recommendations were

suggested that may potentially control costs. The recommendations include: promotion of

patient-centered medical homes, prevention and wellness, quality incentives, drug benefit

management, and telemedicine for behavioral health. It should be noted that many of these

techniques are already part of the Medicaid system, but independent of the method of funding

all of these measure point to the necessity of transforming our current profit-drive medical

system into an system providing patients with accessible high-effective, and cost efficient

services.

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Patient-Centered Medical Homes

Patient-centered medical homes are based on a wrap-around model of care designed to

not only integrate medical and behavioral health, but also to coordinate with community-based

programs providing essential social supports. For example, collaborative health models have

shown that individuals with the seven most prevalent chronic diseases (cancer, heart disease,

diabetes, mental illness, hypertension, and pulmonary conditions) benefit from a bio-

psychosocial approach to health care. Both the quality of care and treatment outcomes are

improved at a reduced cost relative to the traditional biomedical model.

Numerous states have documented the successes of medical home models. For example,

North Carolina is reported to have saved $1.0 billion in state and federal funding over a four

year period using the medical home model official acknowledged under Section 2703 of the

ACA. Cost reductions are largely realized in reductions in hospitalizations and emergency

room visits (Milliman, 2011). An internal evaluation at the Colorado Department of Health

Care Policy and Financing also reports similar savings (Levin, 2012).

While system transformation is often difficult and slow, the integrated care model

epitomized by patient-centered medical homes should reduce costs. If Alaska had participated

in the Medicaid expansions, additional saving would have been realized by the enhanced

Federal Medicaid Matching Rate provided for the first two years of enrollment as an incentive

to states utilizing medical homes as part of the ACA.

Prevention and Wellness

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Although preventative services have been demonstrated to be both cost-saving and cost-

effective (Cohen, Neumann, and Weinstein, 2008), American utilize preventative services at

about half the recommended rate (U.S. Department of Health and Human Services, 2011). For

example, smoking cessation programs, vaccines, and cancer screenings are significantly

underutilized. Studies examining the underlying causes of underutilization reveal that a regular

source of primary health care results in improved health outcomes partially due to outreach and

awareness regarding preventative services.

Once again, a shift in the current system is required to place a greater emphasis on

prevention and wellness. The investments in the prevention-oriented health care workforce are

limited. Although the role of scope of nurse practitioners and physician assistants is increasing

in regards to the promotion of primary care and preventative services, the current medical

system is characterized by a lack or underuse of the current systems to increase preventative

care.

Once patients are networked with a primary care provider and have both the awareness

of and access to preventative care, the financial aspects of preventative care remain as issue.

For patients, there are high out-of-pocket costs for some types of preventative care. And, the

ACA prohibits cost-sharing on most preventative services, which may lead to the increase of

preventative services (Lewin, 2012). And, given the current state of the medical care in the

Unites States, the differentiation between cost-saving preventative services and services that add

to total health costs despite being cost-effectively is not an issue at the forefront of the

discussions of preventative care (Cohen, Neumann, and Weinstein, 2008).

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Overall preventative services are cost-effective and even cost saving. And, since the

process of outreach, education, and increased availability of preventative services tends to foster

connections between individuals and a regular source of health care, improved health outcomes

rest both from the use of preventative services and creating a link with a primary care provider.

Patients receiving regular primary care have fewer preventable emergency room visits and

hospital admissions.

Quality Incentives

Another method to institute a systemic transformation is the use of quality incentive

such as pay-for-performance (P4P). P4P rewards providers for providing efficient high-quality

care (National Conference of State Legislatures, 2010) include preventative services as well as

less expensive treatments. Since the profit motive drives providers to utilize numerous or

expensive services, the P4P incentive was designed as an attempt to motivate providers using

economic incentives.

Similarly, Medicaid programs include the use of health information technology as part of

the P4P programs. Improving health information technology systems has the potential to

increase the quality of care and reduce administrative costs through the use of easily assessable

records, e-services (prescriptions and patient monitoring), and other innovations.

Drug Benefit Management

In 2011 the Lewin Group examined the management of Medicaid pharmacy programs in

Alaska. In an examination of the two Medicaid pharmacy programs, fee-for-service and

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managed care organizations, it was clear that the costs for fee-for-service programs were

significantly higher than the managed care organizations. The increase fees were based on:

higher rates of prescriptions per patient, decreased utilization of generic drugs, higher

dispensing fees, and high reimbursement fees to pharmacies for ingredients. Lewin (2011)

estimated that Alaska could save $92 million from 2011 to 2022 by aligning the fee-for-service

programs with the requirements for the managed care programs.

Telemedicine

The use of various types of electronic communications (web-based applications, smart

phone technology, and email) to increase assess to health services and meet patient demand is

increasing particularly in rural areas of the United States (American Telemedicine Association

2012). Alaska, and many other states, cover telemedicine under Medicaid, in part due to

geographic challenges leading to high medical costs. The advances in telecommunications over

the last thirty years, have led to the development of a network of telemedical services in Alaska

(Patricoski,2004).

Conclusions

Alaska is one of 24 states opting out of Medicaid. In the overall analysis, the Lewin

Group (2013) noted that there benefits and drawbacks to Medicaid expansion in Alaska. The

Lewin Group concluded that state costs, incoming federal funds, and the total number of insured

individuals are the relevant factors to examine as well as design options impacting both state

and federal costs.

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Not surprisingly, on a national level the states opting out are the conservative “red

states” whose political ideologies do not support providing social services. Alaska Governor

Parnell’s unwillingness to adopt the Medicaid expansion was due to his belief that the federal

government would not continue to fund expansion in future years rather than the complex

analyses performed by the report commissioned by the Alaska State Department of Health and

Human Services. His decision was characterized as “more of a rant against the president's

Affordable Care Act, which critics call ‘Obamacare’, than a reasoned presentation of the issues

involved” (Bradner, 2013).

States that choose to participate in the expansion will experience a more positive net

flow of federal funds than will states that choose not to participate. In addition to providing

valuable health insurance benefits to low-income state residents, and steady sources of

financing to state health care providers, the Medicaid expansion will be an important source of

new federal funds for states (Glied, S. & Ma, S., 2013).

From a broader perspective, working on a systemic transformation of health care

moving away from a profit-driven system of distinct silos and professional guilds to a system

with an emphasis on prevention and wellness is in order. This could include warp-around care

models with multidisciplinary teams working together. Existing Medicaid regulations are

beginning to work to shape a systemic transformation as noted in the discussion of alternative

measures to reduce costs.

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Buettgens, M., Dorn, S., &Carroll, C. (2011). Consider Savings as Well as Costs: State Governments Would Spend at Least $90 Billion Less With the ACA that Without IT From 2014 to 2019.

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