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Alaska Carveout in Revised Senate Health Bill’s State Stability Fund Doesn’t Address Unique Harms to Alaska

Updated 5:30 PM EDT

As we’ve explained, Alaska is among the most harmed states under the Senate health bill to repeal the Affordable Care Act (ACA). The bill reduces tax credits that help people afford individual market health insurance more sharply for Alaskans than for people in any other state, while also cutting Alaska’s Medicaid program deeply and eliminating key benefits for Alaska Natives.

A few weeks ago, Senator Lisa Murkowski explained why no special deal for Alaska could solve the problems that the Senate bill creates for her state. “Let’s just say that they do something that’s so Alaska-specific just to quote, ‘get me,’” she commented, referring to the efforts of Senate Republican leaders to secure her support. “Then you have a nationwide system that doesn’t work. That then comes crashing down and Alaska’s not able to kind of keep it together on its own.”

The latest revisions to the Senate bill prove her exactly right. The revised bill includes a purported “Alaska fix,” guaranteeing Alaska more funding than it would otherwise get from the bill’s market stabilization fund and state stability and innovation grants. But the extra grant funding for Alaska comes nowhere close to addressing the unique harms to the state from the Senate bill, and it would expose Alaska to growing cuts and rising risk over time.

The revised bill’s extra funding for Alaska is much less than it appears. The bill includes $182 billion for near-term market stability and “state stability and innovation,” and it includes a special provision reserving 1 percent of these funds for Alaska. But within the $182 billion:

  • Some $70 billion is earmarked for payments to insurers in an attempt to offset the harmful impacts of the Cruz amendment, which lets insurers return to offering plans that discriminate against people with pre-existing conditions. This funding is similar to the high-risk pool funding included in the Upton amendment to the House-passed health bill: at best it would help keep people with pre-existing conditions from being dramatically harmed (and it is likely far from adequate for that purpose).
  • Another $65 billion is earmarked for reinsurance payments to insurers from 2018 to 2021. Alaska is entitled to $650 million of that funding, which might help mitigate the damage that the bill would do to its individual market over the next few years. The Congressional Budget Office (CBO) projected that the underlying Senate bill would raise premiums in the individual market by 20 percent in 2018 and 10 percent in 2019 nationwide, compared to current law, and would sharply shrink enrollment; Alaska’s market is likely even more vulnerable than other states’. But this funding will shrink and disappear exactly as the Senate bill’s deep Medicaid and marketplace subsidy cuts hit.
  • That leaves $47 billion for broader state grants. Of that amount, Alaska would be guaranteed $470 million. Notably, this funding would disappear completely after 2026, even as the bill’s cuts to federal Medicaid funding continue to grow.

The roughly $500 million in state grants would come nowhere close to offsetting the bill’s cuts to Medicaid and marketplace subsidies.

  • The bill would cut federal Medicaid funding in Alaska by $3.1 billion between 2020 and 2026, according to the state’s Department of Health and Social Services. Notably, Alaska’s Medicaid expansion under the ACA would likely end even earlier than in most other states, since the Senate bill would put it in legal jeopardy beginning in 2020 (due to a provision that’s unchanged in the revised bill).
  • The Senate bill’s marketplace cuts would cost Alaska at least hundreds of millions more over the same 2020 to 2026 period. On a per-person basis, Alaska consumers would be hit harder than those in any other state by these cuts.

Not only would $500 million in stability and innovation grants fall far short of making up for these cuts, but Alaska would likely need most of the grant funding for other purposes. In particular, Alaska would likely need to use much of it to continue reinsurance payments to insurers to keep its market stable and avoid sharp increases in premiums. Notably, CBO assumed that states would spend most of the Senate bill’s state stability and innovation grant funding on reinsurance. Even so, it projected that individual market premiums for older consumers would rise by thousands of dollars (even without taking into account the Senate bill’s cuts to financial assistance to help consumers afford coverage). If states used their grant funding for other purposes, these increases would be even larger.

Alaska would also have to put up state matching funds in order to access the stability and innovation grant funds. By 2026, the match would amount to more than half of the available federal funding (35 percent of the total funding).

Compared to the Medicaid and marketplace funding that Alaska receives under the ACA, the stability funding would be far riskier and less well designed to meet Alaska’s needs.

Even if Senate Republicans increased its dollars, the stability and innovation grant funding is no replacement for the flexible federal funding that Alaska would lose due to the Senate bill. Under current law, federal funding for Medicaid expansion automatically adjusts based on changes in the number of people needing coverage and in per-person costs. Federal funding for marketplace subsidies similarly adjusts based on need and costs. In contrast, the Senate bill’s state innovation grants are essentially a block grant that provides a set amount of funding for a limited number of years: the grants would not adjust for recessions, demographic shifts, drug price spikes, or other changes in the cost to states of providing coverage.

It’s also not clear that the Senate bill’s special provision for Alaska is sustainable, given that senators from other states are likely to view it as an unfair special deal. Even assuming that the provision survives in this bill, it may not survive future bills for which policymakers are looking for ways to offset the cost of whatever policies they’re proposing, or in which they simply see an opportunity to change an allocation formula that they regard as unfair.