02/16/2005 09:00 AM Senate FINANCE

                                                                                                                                
     SENATE JOINT RESOLUTION NO. 6                                                                                              
     Relating to a reduction in the Federal Medical Assistance                                                                  
     Percentage for Alaskans, and urging the United States Congress                                                             
     to take action to prevent the reduction.                                                                                   
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken  stated  this  resolution,  "addresses  a  proposed                                                            
reduction to the federal  share of Alaska's Medicaid program. If the                                                            
announced  reduction takes  place as scheduled  on October  first of                                                            
2005, the estimated loss  to the State in FY 06 is approximately $53                                                            
million.  This  resolution  encourages  that  decision to  not  take                                                            
place."                                                                                                                         
                                                                                                                                
9:06:26 AM                                                                                                                    
                                                                                                                                
JOEL  GILBERTSON,  Commissioner,  Department  of Health  and  Social                                                            
Services,  testified that  this resolution  addresses the fact  that                                                            
the  federal  match rate  for  the Medicaid  program  is  due for  a                                                            
"sizable  reduction" as of  October 2005.  The Medicaid match  rate,                                                            
also referred  to as FMAP,  Federal Medical  Assistance Percentage,                                                             
for each  state is  calculated based  on the  per-capital income  of                                                            
that state  with wealthier  states required  to contribute  a larger                                                            
portion  to  its   Medicaid  costs.  A  limit  of  50   percent  was                                                            
established. For several  years, this rate applied to Alaska and the                                                            
State paid 50 percent of its Medicaid costs.                                                                                    
                                                                                                                                
Mr.  Gilbertson  informed  that  in 1997  then  U.S.  Senator  Frank                                                            
Murkowski  enabled  the passage  of a  temporary  adjustment to  the                                                            
match rate  the state  of Alaska  from 50 percent  to 59.8  percent.                                                            
This generated approximately  $100 in additional federal funding for                                                            
the  State between  the  federal fiscal  years  1998  and 2000.  The                                                            
adjustment  expired   after  three  years  at  which   time  Senator                                                            
Murkowski was  successful in securing  a five-year extension,  which                                                            
generated  an additional  $250  million for  the  State. The  second                                                            
extension is due to expire  in October 2005 and the match rate would                                                            
revert to 50 percent if no action were taken.                                                                                   
                                                                                                                                
Mr. Gilbertson  stressed the adjusted  match rates are not  intended                                                            
to benefit the state of  Alaska without reason, but rather to offset                                                            
the higher  cost to deliver health  care in Alaska in comparison  to                                                            
other states. Although  per capita income is incrementally higher in                                                            
Alaska,  health care  delivery  costs  are significantly  higher  as                                                            
well. The federal government  in the cost of living adjustments paid                                                            
to  federal   employees  has  acknowledged   this.  Congress   twice                                                            
supported higher federal contributions for Medicaid in Alaska.                                                                  
                                                                                                                                
Mr.  Gilbertson spoke  to  the fiscal  impact  to the  State if  the                                                            
adjustment  were not extended. The  federal contribution  match rate                                                            
would be reduced  to 50 percent. The  seven percent reduction  would                                                            
calculate  to  $53 million  for  FY 05,  which  the State  would  be                                                            
required to replace with  general funds. He emphasized that the rate                                                            
reduction  in FY 06 would  only affect three-quarters  of the  state                                                            
fiscal year. By FY 07,  the revenue reduction would equal almost $73                                                            
million.   Over  ten fiscal  years, the  total impact  to the  State                                                            
would be $914 million.                                                                                                          
                                                                                                                                
Mr. Gilbertson  stated that this resolution requests  the match rate                                                            
hold harmless the state  of Alaska. He informed, "It is almost twice                                                            
the size of the second  most affected state, which is Wyoming, which                                                            
sees a  three-percentage  point drop." The  underlying formula  that                                                            
determines  the federal share is fundamentally  flawed and  does not                                                            
reflect  the cost  of health care.  This resolution  addresses  this                                                            
discrepancy.                                                                                                                    
                                                                                                                                
Co-Chair Wilken noted the  $53 million reduction is not reflected in                                                            
the  FY 06  operating  budget.  If  Congress  failed to  provide  an                                                            
extension, a supplemental appropriation would be required.                                                                      
                                                                                                                                
Co-Chair Green ascertained  that the State's revenue for FY 06 would                                                            
be reduced $53 million.                                                                                                         
                                                                                                                                
Senator Hoffman  understood the State's position on  this matter. He                                                            
employs the  same arguments  to stress the  high cost of  delivering                                                            
services  to  rural  Alaska.  He  asked   the  likelihood  that  the                                                            
extension would be granted.                                                                                                     
                                                                                                                                
Mr. Gilbertson  replied that the chances are dependent  upon various                                                            
factors,  including other  legislation.  He worked  for former  U.S.                                                            
Senator Frank  Murkowski at  the time of  the current extension  and                                                            
reported that the process  was challenging. Achieving this extension                                                            
would also be a challenge,  although possible. The Alaska delegation                                                            
is aware  of the importance  of this funding  and U.S. Senator  Lisa                                                            
Murkowski has introduced legislation to address the matter.                                                                     
                                                                                                                                
Senator  Bunde  commented   to  the  issue  of  reduced   government                                                            
spending.                                                                                                                       
                                                                                                                                
Co-Chair  Wilken indicated  that the  matter of  whether the  fiscal                                                            
note for  this resolution  should be zero or  reflect a loss  of $53                                                            
million. He requested the  resolution be held in Committee until the                                                            
matter was resolved.                                                                                                            
                                                                                                                                
Co-Chair Green ordered the bill HELD in Committee.                                                                              
                                                                                                                                
AT EASE 9:15:22 AM / 9:16:59 AM