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