Alaska Gov. Bill Walker (I) announced in July his plans to circumvent the State Legislature to expand Medicaid in his state using executive powers.
Under Obamacare, states have the option to expand Medicaid eligibility to able-bodied, working-age adults with incomes below 138 percent of the poverty line, which is currently about $20,300.
Medicaid is a joint program that splits costs evenly between states and the federal government, but under the Obamacare expansion the federal government picks up 100 percent of the costs of those newly eligible until 2017.
Like Alaska, multiple states have jumped at the chance to get what appears to be “free” federal money, but in 2017 the federal share of the expansion drops to 90 percent, which means states will have to scramble to find funds to pay their share of the expansion costs. There is no guarantee the federal government will keep providing 90 percent of Medicaid expansion funds indefinitely.
Costs Will Skyrocket
Alaska’s Medicaid program is unusually expensive, so expansion should have an even bigger budget effect than in other states, says Josh Archambault, a senior fellow at the Foundation for Government Accountability.
“The Medicaid program in Alaska pays more [to providers] than Medicare, which is a very unusual situation,” Archambault said. “The governor is deliberately underestimating the cost of coverage and enrollment numbers to try and make the expansion look less expensive, but this guarantees expansion costs will skyrocket well above the projections.”
Walker’s move comes at a time when the price of oil is down, which is important because 90 percent of the Alaskan government’s operating budget is funded by oil, says David Boyle, president of the Alaska Policy Forum.
“Alaska is already in the midst of a fiscal crisis, so opening up an entitlement to able-bodied people doesn’t make any sense at all,” Boyle said.
“This year there is a $4 billion hole in the budget, which means every man, woman, and child in the state would have to pay $5,000 this year to close the gap,” Boyle said. “Expanding Medicaid will be a bullet to the head [Alaska’s economy].”
Potential Legal Troubles
Naomi Lopez Bauman, director of healthcare policy at the Goldwater Institute says Walker’s move is bad policy and also more than likely illegal.
“Gov. Walker couldn’t get his way with the legislature, so now he is trying to do an end run around that process, but he might end up getting stung,” Bauman said. “Arizona and Kentucky are now in court because their governors tried to circumvent the legislative process in order to expand Medicaid.
“Playing fast and loose with a state’s constitution is a losing proposition,” Bauman said. “Gov. Walker’s maneuver should remind other states such executive overreach may appear to have a payoff but, in the long-run, it inflicts long-lasting damage on a state’s legislative process, shuts taxpayers out of the public debate, and could land the state in court.”
Raiding a Trust Fund
Since the federal government is initially covering the benefit costs of Medicaid expansion, Walker claims he won’t have to use any general funds to pay for expansion. He says he can take $1.6 million from the Alaska Mental Health Trust Authority (AMHTA) to cover administrative costs.
It’s not likely though $1.6 million will be enough to cover all of the state’s administrative costs for Medicaid expansion. Walker estimates administrative costs will be only 2 percent of the total cost of Medicaid expansion, or about $158 per enrollee, but historically Alaska’s administrative costs have averaged more than 8 percent. The Alaska Office of Management and Budget says state taxpayers are spending $696 per enrollee on administrative costs for current Medicaid enrollees.
Bauman says the transfer from AMHTA to cover administrative costs for Medicaid could be illegal.
“That fund was established to support mental health services for Trust beneficiaries, not to bankroll a broad-based federal program,” Bauman said. “Beneficiaries could challenge such actions in court.”
If there are any legal challenges to Walker’s action, the governor doesn’t have a leg to stand on, says Boyle.
“It will be up to the legislature to sue him, but if it doesn’t do it, then it will be a long three years,” Boyle said.
Matthew Glans ([email protected]) is a senior policy analyst at The Heartland Institute.
Ted L. Helvoight, “Memorandum: Analysis of Enrollment and Spending Impacts of Expanding Medicaid in Alaska Under the Affordable Care Act,” Evergreen Economics, February 6, 2015: https://www.heartland.org/policy-documents/memorandum-analysis-enrollment-and-spending-impacts-expanding-medicaid-alaska-under
Matthew Glans, “Research & Commentary: Alaska Medicaid Expansion Update,” The Heartland Institute, May 13, 2015: https://www.heartland.org/policy-documents/research-commentary-alaska-medicaid-expansion-update