Legislature(2025 - 2026)SENATE FINANCE 532
03/12/2025 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Medicaid Levers and Federal Marketplace | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE
March 12, 2025
9:02 a.m.
9:02:05 AM
CALL TO ORDER
Co-Chair Hoffman called the Senate Finance Committee
meeting to order at 9:02 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Mike Cronk
Senator James Kaufman
Senator Jesse Kiehl
Senator Kelly Merrick
MEMBERS ABSENT
Senator Donny Olson, Co-Chair
ALSO PRESENT
Emily Ricci, Deputy Commissioner, Department of Health;
Lori Wing-Heier, Director, Division of Insurance,
Department of Commerce, Community and Economic Development;
Senator Cathy Giessel.
SUMMARY
^MEDICAID LEVERS and FEDERAL MARKETPLACE
9:03:17 AM
EMILY RICCI, DEPUTY COMMISSIONER, DEPARTMENT OF HEALTH,
discussed the presentation, "Medicaid Program Levers,
Senate Finance Committee" (copy on file).
Ms. Ricci addressed slide 2, "Medicaid Basics":
• Medicaid is a joint federal and State public
health insurance program for low-income
individuals and families
• The program is designed to support vulnerable
populations, including children, pregnant women,
seniors, individuals with disabilities, and other
low-income groups
• States have flexibility in designing and
administering Medicaid programs within federal
guidelines
• Eligibility is based on financial (income) and
categorical (age, disability, pregnancy) criteria
9:05:05 AM
Ms. Ricci pointed to slide 3, "Federal Financial
Participation":
• Medicaid is jointly funded by the state and federal
government
• The percentage of costs paid by the federal
government is known as the Federal Medical Assistance
Percentage (FMAP)
Varies across states, by eligibility category
for beneficiaries, by medical service type, and
across operational activities
• The lower limit for FMAP is 50 percent
Ms. Ricci noted that FMAP payment across the country varied
by per capita income averages. She shared that,
historically, Alaska received regular FMAP funding of 50.00
percent, but this had changed over the previous two years
and was currently 51,54 percent and was scheduled to
increase to 52.42 percent in the coming fiscal year.
Ms. Ricci looked at slide 4, "Federal Financial
Participation The slide illustrated participation
categories of who received FMAP funding by eligibility type
and administration type.
Eligibility Type
Regular Medicaid 51.54 percent
Childrens Health Insurance Program (CHIP) 66.08
percent
Expansion Population 90.00 percent
Indian Health Services 100.00 percent
Administrative Type
General Administration 50.00 percent
IT System Maintenance & Operations 75.00 percent
IT System Design & Development 90.00 percent
Ms. Ricci explained that regular Medicaid included
individuals who were not eligible for any other enhanced
match due to their eligibility. She said that if an
individual went to the doctor and received a service, and
the doctor billed the state through the Medicaid program,
the federal government would pay 51.54 percent and the
state would pay the remainder. She spoke to the other
eligibility categories listed, four were included on the
slide but others existed that had a smaller impact on the
program. She noted that children's programs and the
Medicaid expansion population were covered a higher level.
She relayed that the federal government reimbursed the
state 100 percent of costs associated with certain Indian
Health Services. These included individuals who were both
tribal members, and who were covered by the Medicaid
program. She said that when these individuals received a
service, either directly, through a tribal health
organization, or through another provider outside of the
tribal health system with a care coordination agreement,
100 percent reimbursement could be sought by the state for
the federal government to cover the cost. She related that
these numbers were tracked very closely because in FY2024,
total costs associated with the IHS services in the
Medicaid program was over $1 billion and accounted for 35
percent of the states total Medicaid program spend. She
noted that Administrative Costs were also closely tracked
and included the costs of IT systems and other
administrative costs associated with administering the
system.
9:12:02 AM
Senator Kaufman wanted to know the net financial impact to
the state related to IHS billing.
9:12:51 AM
Ms. Ricci replied that the issue was complex. She said that
when a tribal member went to a tribal health organization
there were specific rates that Medicare and Medicaid
programs were required to pay tribal health organizations
when an individual that was covered by the Medicaid or
Medicare program used services provided by those
organizations. The ratee were published in the financial
register annually and changed overtime. She furthered that
when a Medicaid eligible tribal health member used tribal
health services, the organization billed Medicaid based on
the federally established rate. She said that in those
cases the state was eligible to receive 100 percent federal
funding to cover costs. She relayed that in some cases
where a non-tribal member, also covered by Medicaid, used
tribal health services the state would pay the encounter
rate, but the federal match would depend on the eligibility
type. She said that analysis was being conducted to track
the various payment numbers.
9:14:46 AM
Senator Kaufman remarked that the financial impact should
be considered.
9:15:17 AM
Ms. Ricci displayed slide 5, "Mandatory and Optional
Eligibility Groups
Federal
Title XIX of the Social Security Act mandates Medicaid
coverage certain groups including low-income:
.notdef Families and individuals
.notdef Individuals with disabilities
.notdef Pregnant women
.notdef Children
.notdef Individuals receiving supplemental security income
State
Alaska Statute 47.07.020 outlines eligibility groups
for the Alaska Medicaid program:
.notdef Requires coverage of all mandatory eligibility
categories in Title XIX of the Social Security Act
.notdef Lists additional optional eligibility groups covered
by Alaska Medicaid
•Example: Home and Community Based Services
waiver recipients
9:16:45 AM
Ms. Ricci highlighted slide 6, "Medicaid Expansion":
.notdef Alaska adopted Medicaid Expansion in 2015
.notdef The Affordable Care Act (2010) allowed states to
expand Medicaid coverage to low-income adults (ages
19-64) up to 138 percent of the federal poverty level
who were not otherwise Medicaid-eligible
.notdef Nearly 1 in 10 Alaskans are covered through Medicaid
Expansion
Ms. Ricci drew attention to the chart on the bottom of the
slide. She cited that in FY2024, there were a total of
80,000, who at one point in the year were enrolled in the
Medicaid Expansion program. She explained that when looking
at average monthly participation in the expansion group,
there were between 72,000 and 74,000 enrollees monthly. She
said that 66 percent of those individuals were receiving
care; not everyone enrolled in the program necessarily went
to the doctor or sought services. She furthered that the
difference between enrollees and recipients was the
difference between those who had insurance through Medicaid
and those who received actual services.
Mr. Ricci stated that in FY2024, the total cost in claims
to the Medicaid Expansion program was $765 million and
accounted for 20 percent of the total cost of Medicaid
claims for Alaskas Medicaid program for that time. The
states share was $51 million with a remainder of $714
million. She said that the federal match for the expansion
population was 90 percent, and the state match was 10
percent. She pointed out that the aforementioned totals of
$51 million and $714 million did not equate to 10 percent.
She said that this was due in part to the 100 percent
funding that the state received through IHS. She stated
that just over 7,000 individuals in the Medicaid expansion
population in FY2024 were also Tribal members, so the state
was able to receive 100 percent federal match for
individuals who received services through Tribal health
organizations. She added that 33,000, or 66 percent, were
not Tribal members.
9:20:08 AM
Ms. Ricci pointed to slide 7, "Mandatory and Optional
Services":
Federal:
.notdef Title XIX of the Social Security Act mandates
Medicaid coverage for certain services
.notdef Early and Periodic Screening, Diagnostic, and
Treatment program for children under 21
.notdef Affordable Care Act Essential Health Benefits
State:
.notdef AS 47.07.030(a) requires that Alaska Medicaid cover
all mandatory services under Title XIX of the Social
Security Act
.notdef AS 47.07.030(b) lists additional optional services
Alaska Medicaid may cover. Examples include:
.notdefPrescription drugs
.notdefEmergency hospital services
Ms. Ricci discussed overlaps between state and federal
requirements for Medicaid. She explained that the federal
government could mandate coverage for specific services for
specific coverage groups, in particular broad protections
for children mandated at the federal level. She discussed
the state mandatory and optional services. She argued that
the term optional was a misnomer as the statue had not
been updated since the passage of the Affordable Care Act.
She noted that some services considered optional could be
critical to a persons ability to access healthcare, such
as prescription drugs and emergency hospital services. She
said that the federal level requirements overlapped with
several state services listed as optional and that the
issue of services that were deemed optional by state
statute were sometimes mandatory on the federal level.
9:23:27 AM
Ms. Ricci looked at slide 8, "Medicaid State Plan":
The Medicaid State Plan is an agreement between the
State and the federal government that outlines how the
State will administer its Medicaid program.
.notdef Defines who is eligible for Medicaid services
.notdef Specifies the types of services covered
.notdef Details how providers are reimbursed for
services
.notdef Explains how the State will administer the
program
Ms. Ricci thought it was important to understand that any
change to the Medicaid program must be approved in the
state a state plan and much go through a state plan
amendment process. She stated that this was important
because federal matching funds were only provided for
services that were approved in the state plan or through
the waiver program. Additionally, because the program was
joint federal and state, changes to the program could not
be mad unilaterally by the state.
Ms. Ricci pointed to slide 9, "State Plan Amendment
Process":
Changes to the Medicaid State Plan are called State
Plan Amendments (SPAs) and must be reviewed and
approved at the federal government by the Centers for
Medicare and Medicaid Services (CMS).
The amendment process flowed as follows:
Public Notice and Tribal Consultation (60 days 30
day minimum requirement)
SPA Submission to CMS
CMS Review (90 days)
CMS Decision
Effective Date
Ms. Ricci said that if CMS took no action within 90 days
the SPM would be considered approved and became enforced.
She said that in Alaska once a state plan amendment was
underway it typically required regulatory changes to align
with the submissions.
9:27:30 AM
Ms. Ricci looked at slide 10, "Waivers":
The U.S. Secretary of Health and Human Services may
grant waivers to certain Medicaid provisions, allowing
states to test and implement innovative approaches.
Demonstration Waivers
Example: Section 115 Demonstration Waivers
Program Waivers
Example: Section 1915(c) Home and Community-Based
Service Waivers
Ms. Ricci discussed slide 11, "Reimbursement Rates":
Medicaid reimbursement rates are developed at the
state level, subject to federal approval.
Types of Rates
Per Diem
Encounter
Fee-for-Service
Percent of Charges
Diagnosis Related Groups
Rate Adjustments
Inflation
Rebasing
Legislative
Federal
Ms. Ricci directed committee attention to the column on the
right of the slide. She said that rate adjustments could
occur routinely and included annual inflationary
adjustments that did not require regulatory or statutory
action. She furthered that periodic rebasing investigated
the underlying costs for providers based on a cost basis
and updated them for coming years. She continued that the
adjustments included possible legislative direction and
federal changes and/or federal requirements. She stated
that some of the rates that were established in the
Medicaid program were benchmarked to federally established
rates. She noted that Encounter Rates were determined by
IHS and were published annually, sometimes months after
they had taken effect. She stressed that considering all
the levers was especially important when discussing
programmatic changes to Medicaid.
9:30:13 AM
Senator Kiehl asked how the rate setting mechanisms,
whether federal or state, worked.
9:30:44 AM
Ms. Ricci replied that it was different for every service
type and every provider type. She spoke to behavioral
health rates, which had four different rates that had all
been established differently and had different rate
adjustment factors. She suggested that the committee
examine the states rate adjustments and the nature of
inflationary effects, and all the various levers that could
be tweaked to effectuate change in the Medicaid program.
She mused that the issue was nuanced, which was frustrating
but also allowed for flexibility.
9:33:13 AM
Senator Kiehl thought that there were a variety of
approaches to making changes in the Medicaid system. He
asked whether there were other things that affected rates
that were not listed on slide 12.
9:33:56 AM
Ms. Ricci said she would add Diagnosis Related groups. She
suggested that one approach would be to step back and
examine, depending on the goal, the services that aligned
with achieving the goal, and the underlying adjustment
mechanisms that supported rates for those services. She
thought then, based on that information, one could consider
what changes would be helpful or useful to achieve the
goal.
9:34:54 AM
Senator Kaufman understood that the federal government was
looking to move from block grants to a fee-for-service
model. He wondered how that would tie into the Medicaid
system.
9:35:36 AM
Ms. Ricci responded that Alaskas system currently
functioned on a fee-for-services basis. She offered that no
state in the country worked under a block grant financing
method. She related that the Medicaid was currently
financed by the joint sharing of administrative and claims
costs by the state and the federal government. She shared
that there were discussions happening at the national level
and block grants had been discussed for over a decade. She
said that Congress had provided no clear guidance over
action they may or may not take.
9:36:33 AM
Ms. Ricci highlighted slide 12, "Changes to the Medicaid
Program
Medicaid Program Levers
Federal Financial Participation
Eligibility
Services
Rates
Federal Mechanisms
Statutory changes
Appropriations Acts
Rulemaking
State Mechanisms
Statutory changes
Regulatory changes
State Plan Amendments
9:40:41 AM
Ms. Ricci remarked that there were continuous changes made
by the federal government, either through statutory changes
or appropriations acts, that often when unnoticed until
repercussions were directly felt. She spoke to the
Consolidated Appropriations Act of 2022, which reduced
enhanced federal match to the state. The state learned of
the act in December 2022, the reductions too effect in
April 2023, at which time the department was not able to
incorporate the change into their standard budgetary
process. The same act created new requirements for coverage
and the provision of services to new groups in the Medicaid
program, specifically Justice Involved Youth. The
requirements took effect in January 2025, which the
department was currently working to incorporate into state
practice. She added that changes could also take place
through rulemaking, which took the form of federal
regulations and sub regulatory guidance. She relayed that
the guidance could be impactful and included new IT
requirements or guidance related to administrative policy
goals. She spoke to the state mechanisms for making changes
to the Medicaid program. She reiterated that changes were
constant.
Ms. Ricci related that Alaska had joined the Medicaid
program in 1972 and that the program had evolved
continually since that time. She said that the program
would continue to evolve and change, and the department
would focus on using the $3 billion to improve health
outcomes for Alaskans.
9:41:26 AM
Co-Chair Hoffman asked about the states financial exposure
as the program evolved under the current federal
administration.
9:42:26 AM
Ms. Ricci responded that there had been no clear guidance
from Congress and that there were many disparate ideas
under discussion. She noted that state statute outlined the
actions that must be followed during tight budgetary times.
AS 47.07.036 required the department to, first, take
reasonable steps to avoid limiting eligibility or scope of
services. She said this could include implementation of
utilization reviews, changes in payment rates, and the
addition of precertification requirements. If those steps
were not fruitful the department would consider optional
services and eligibility, which were considered optional to
the extent authorized under federal law. She thought this
was why defining optional was important.
9:44:22 AM
Co-Chair Hoffman voiced concern about the states financial
liability due to changes made on the federal level. He
wondered whether the state would need to make statutory
changes or would the administration be able to make changes
to protect the stats exposure under federal changes.
Ms. Ricci reiterated that there was no clear guidance
coming from Congress. She noted that there were many
different arguments benign made that voiced varying
opinions.
9:45:49 AM
Senator Kaufman asked about waste and fraud. He thought
that there had been some successes in lowering the error
rate. He asked whether the department had the resources to
continue to bring down the error rates.
9:47:05 AM
Ms. Ricci replied that the error rates had been a focus for
the department. She stated that the error rates were broken
down into two categories: the error rates in the actual
payments made to providers, and error rates related to
eligibility. She said that the error rates in payment sot
providers were low. She relayed that eligibility error
rates were higher but were dropping as improvement in
services increased. She said that error rates would
continue to be examined.
9:47:59 AM
Senator Kaufman asked about the financial impacts of the
error rates.
9:48:33 AM
Ms. Ricci agreed to follow up on the question.
9:48:52 AM
AT EASE
9:49:41 AM
RECONVENED
9:50:01 AM
LORI WING-HEIER, DIRECTOR, DIVISION OF INSURANCE,
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT,
introduced herself, and Ms. Carpenter. She discussed the
presentation, "Division of Insurance, Senate Finance,
Committee Overview." She addressed slide 2, "What does
Alaska look like with so many payers? She shared that
healthcare in Alaska was extremely fragmented.
9:51:00 AM
Ms. Wing-Heir discussed slide 3, "Eyes on Washington,
D.C.":
Working with the Department of Health, we are
continually monitoring the proposed actions coming
from Washington, D.C.
• Section 1332 Waivers -Alaska Reinsurance
Program
• Advanced Premium Tax Credits
• Enhanced Advanced Premium Tax Credits
• Cost Sharing
• Work Requirements -Medicaid
• Changes to Medicare and impact to Alaska's
health care system
• Changes to the Individual Market and/or
Medicaid due to Federal layoffs or buyouts
9:52:53 AM
Ms. Wing-Heier discussed slide 4, "Affordable Care Act -
2010":
• The Affordable Care Act, passed by Congress in 2010,
the full ACA Market Reforms became effective in 2014.
• As this was a new program that did not allow
underwriting to consider lifestyle or preexisting
conditions, many states found that the rates that were
approved for the 2014 year were insufficient. Alaska
was amongst those states.
• In Alaska, rates were significantly increased for
2015 but even with the increase, insurers were
hesitant to commit to remaining in Alaska a solution
needed to be found to stabilize the market.
9:53:53 AM
Ms. Wing-Heier pointed to slide 5, "The ACA Individual
Market Rates History The slide provided individual
market rates from 2014 through 2025, under Premera and
Moda, and provided an average between the two. She noted
that between 2015 and 2016 the state recognized that the
rates were a problem. Between 2017 and 2019, Moda left the
market for lack of profit, with Premera planning to do the
same.
Ms. Wing-Heier looked at slide 6, "The Alaska Reinsurance
Program":
• Due to market conditions, the legislature passed
HB374 which funded the program for one year with a $55
million appropriation under the condition that the
division seek a Section 1332 State Innovation Waiver
for future funding from the United States Department
of Health and Human Services/Centers for Medicare and
Medicaid and the United States Department of Treasury.
• The waiver was reliant upon the Advanced Premium Tax
Credits (APTC), provided in the Affordable Care Act.
• The Affordable Care Act provided that enrollees in
the individual market would be subsidized, based on
their income. As it was based on income, some
enrollees were 100 percent subsidized and some were
subsidized at a lesser amount.
Ms. Wing-Heier displayed slide 7, "The Alaska Reinsurance
Program":
• The concept of the Alaska Reinsurance Program (ARP)
identifies 33 high risk conditions, which would be
paid by the program, thereby removing the claims from
the insurer.
• Going forward, this would reduce the premiums that
the insurer would need to pay claims and, at the same
time, reduce the amount of the federally funded
Advanced Premium Tax Credits.
• If we could demonstrate that this was possible,
would the federal government allow us to use the
difference to fund the Alaska Reinsurance Program?
Ms. Wing-Heier asserted that the program had been very
successful and had served the state well and lamented that
under the current federal administration the Alaska
Reinsurance Program was on the chopping block.
9:56:48 AM
Co-Chair Hoffman announced that Ms. Wing-Heier had
introduced the idea of the Alaska Reinsurance Program to
the legislature and that many states had followed suit. He
felt credit was due to Ms. Wing-Heier for her contribution
to the success of the program.
9:57:01 AM
Ms. Wing-Heier highlighted slide 8, "How the ARP funding
works:
Projected 2024 APTC without waiver - $343,804,489
Projected 2024 APTC with waiver - $228,747,896
Projected 2024 APTC savings - $115,056,593
Total 2024 PTC subsidy/APTC 98.25 percent
Projected total PTC subsidy savings - $112,966,100
Ms. Wing-Heier addressed slide 9, "Advanced Premium Tax
Credits (APTC)":
• The Affordable Care Act requires a percentage
payment from enrollees for a silver plan based on
their household income and size, which determines
their Federal Poverty Level (FPL). The amount between
the second lowest cost silver plan (2LCSP) and this
contribution amount is a household's subsidy, also
known as APTC.
• During COVID in 2021, the American Rescue Plan
reduced the contribution level to make premiums more
manageable for 2021 and 2022 (Enhanced Subsidies). The
Inflation Reduction Act continued this level
assistance for 2023, 2024, and 2025.
• With no change in law, the "enhanced" subsidy levels
will expire December 31, 2025.
Ms. Wing-Heier discussed slide 10, "Single Adult Example
The slide showed the numbers for a single, 50-year-old
adult on the Silver and Bronze plans. She said that with
the Enhanced APTC and a household income of $58,650, their
premium was $282/month. She shared that under the original
tax credits the monthly premium went up to $407/month.
Under the Bronze plan a single person, making $78,396 would
pay $9/month premium with the Enhanced APTC, but with the
original APTC the monthly premium would rise to $881/month.
Ms. Wing-Heier pointed to slide 11, "Family of Four
Example She said that a family of four, at 300 percent
federal poverty level, would see an increase of $250/month.
A family of four at 400 percent federal poverty level,
where there would be no subsidy, would see a premium
increase $2,070/month. She said that people under the plan
would be paying a health insurance premium equal to their
mortgage, if not greater.
Ms. Wing-Heier reiterated that it was unknown what would
happen with the funding for the reinsurance program. She
said it could be cancelled, underfunded, or not funded at
all. She said if the tax credits went away, she was unsure
how the $140 million would be realized. She expressed
concern for the future of the program and said that the
department was taking things day to day. She relayed that
insurance companies had to file rated annually and the
filing for 2026 would begin in June. She said she was
expected to tell insurance companies the reinsurance rates
in June 2025, but she would not know until after the
federal budget was passed in September of 2025. She said
contingencies were being discussed.
Ms. Wing-Heier asserted that loss of the reinsurance
program would result in a 67 percent increase in insurance
rates.
9:59:32 AM
Co-Chair Hoffman asked whether individuals receiving IHS
services would be affected by the loss of the reinsurance
program.
9:59:34 AM
Ms. Wing-Heier replied in the affirmative.
10:00:54 AM
Co-Chair Hoffman explained that Ms. Wing-Heier had been
brought to the committee to enlighten members on the
workings of the program and the exposure to the state
should the program be compromised.
10:01:33 AM
Senator Kaufman asked for the definition of APTC.
Ms. Wing-Heier reiterated that APTC was an acronym for
Advanced Premium Tax Credit.
Co-Chair Hoffman thanked the testifiers.
ADJOURNMENT
10:02:46 AM
The meeting was adjourned at 10:02 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 031225 DOI Presentation to SFIN.pdf |
SFIN 3/12/2025 9:00:00 AM |
|
| 031225 SFIN DOH Medicaid Levers.pdf |
SFIN 3/12/2025 9:00:00 AM |
|
| 031225 DOI ACA Subsidies White Paper 3.11.2025.pdf |
SFIN 3/12/2025 9:00:00 AM |
|
| 031225 DOI Alaska 1332 Waiver Summary 3.11.2025.pdf |
SFIN 3/12/2025 9:00:00 AM |