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Permanent Change in Medicaid Formula Sought
So Health Aid Matches Alaska's Higher Costs


January 26, 2005

U.S. Senator Lisa Murkowski on Tuesday introduced her second piece of legislation for the 109th Congress that seeks to retain an adjustment to Alaska's Federal Medical Assistance Percentage (FMAP), a federal Medicaid funding formula for Alaska that would take into account the cost of providing quality health care for the state's poor.

The bill requires the government to permanently recognize Alaska's higher costs of medical care when dispensing federal Medicaid funds.

"In recent years the Denali Kid Care program, an expansion of Medicaid in Alaska, has been very successful in providing health services for Alaskan children. Unfortunately that could all change within the next year unless the State maintains the extra funding we have been blessed to win in recent years to offset the far higher cost of health care in Alaska, partially caused by Alaska's higher cost-of-living and reflected in Alaska's higher poverty level," said Murkowski . Murkowski noted that when the FMAP formula was developed in 1946 -- 13 years before Alaska became a state -- cost-of-living calculations were ignored. For that reason states with high costs for health care -- like Alaska - - were shortchanged in federal aid. Former Alaska Senator, now Governor, Frank Murkowski in 1997 and again in 2000 won temporary changes in the formula so it would, in effect, take Alaska's roughly 70 percent higher costs for providing health care into account.

Senator Lisa Murkowski in 2003 proposed a permanent formula change and also another extension of extra state aid. In the absence of Congress tackling a revision of the overall Medicaid formula, she helped win a two-year change in the Economic Growth Reconciliation Act (the President's $350 billion tax cut package) that provided the state with an additional $34.11 million above the traditional Medicaid formula amount. That aid will expire at the end of FY 2005 without either another temporary extension or a permanent formula change. Senator Murkowski is moving to modify the Medicaid formula so the federal government will continue to pick up about 60 percent of the cost of providing health care for the poor in the state ­ Alaska being expected to pick up about 40 percent of the cost. The change has the effect of offsetting the far higher costs of health care in the state.

Without the change Alaska will receive about $40 million less in federal Medicaid funding in FY 06 than it otherwise would.

Murkowski said there is a strong case for the federal government paying more of the tab for health care in Alaska. The government already acknowledges that it costs more to provide services in the state, granting federal workers in Alaska a 25 percent Cost-Of-Living Adjustment (COLA). Estimates show that average health care costs are approximately 70 percent higher in Alaska than the average in the Lower 48 states. In urban areas alone health costs are about 50 percent more than what they are on the West Coast.

Murkowski added that Alaska also potentially has to serve more clients than the Lower 48 because the federal government sets Alaska's poverty level 20 percent higher than the national average, increasing eligibility numbers for government-funded health care.

Murkowski said she is reintroducing the legislation in hopes of winning a more permanent formula change that would allow Alaska to rationally plan for its future health care costs.

"Planning is the essence of good management and when it comes to health care we must allow states to plan for future needs. We need to cement this federal commitment to Alaskans so the state has the assurance that money vital for providing Medicaid health care will not just dry up and disappear," she said.

The bill now heads to the Senate Finance Committee for its consideration.


Source of News:

Office of U.S. Senator Lisa Murkowski
Web Site


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