Lawmakers eye lower health care cost as way of lowering budget

Sen. Peter Micciche, R-Soldotna, during Senate debate. Micciche expects the state will be able to save money on health care costs. (Photo by Skip Gray/360 North)

The amount Alaska’s state government spends on health care is one of the biggest drivers of state spending. That’s why the legislature is looking at ways to reduce health care costs.

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Alaska provides health care for a lot of different groups. There’s Medicaid, but there’s also state workers, retired state workers and retired teachers, University of Alaska employees and employees of state corporations like the Alaska Housing Finance Corporation. And the state pays for teachers’ insurance indirectly, by funding school districts.

Different groups of workers are insured under different agreements with insurers. Lawmakers believe the state could save money if there was one insurance pool that covered everyone with state-paid insurance.

Soldotna Republican Sen. Peter Micciche said these savings could be a way to help close the nearly three billion dollar gap between what the state spends and what it raises in oil royalties, taxes and fees.

“We believe there are significant savings that do not reduce dollars to the classroom, that do not reduce key, constitutionally required services to Alaskans,” Micciche said. “And it’s something we plan to pursue.”

The legislature ordered a study last year, looking at whether the state could save money by creating a new health care authority. The report by Washington, D.C.,-based PRM Consulting Group is due June 30. That deadline will make it difficult to include much savings in the budget that starts July 1, but Micciche said the senate is looking for roughly $100 million dollars through structural reforms this year, including savings from health care. And he said health care savings could equal hundreds of millions of dollars in the future.

“We do believe that pooling can deliver substantial savings, and we intend to promote that forward,” Micciche said.

Anchorage Democratic Rep. Ivy Spohnholz said she’s interested in the report, but she’s skeptical about the immediate effect.

“It’s incredibly complex, and it’s not likely that we’re going to see substantial savings next year as a result of anything that comes out of that report,” Spohnholz said. “Instead, what we’ll see is information that helps us to understand the cost drivers and the structural challenges that we’ll need to address. And that’ll just basically prepare us to roll up our sleeves.”

One group that will be eager to read the report will be the state’s health care providers.

Alaska State Hospital and Nursing Home Association President Becky Hultberg said it’s not known what the report will recommend, but key elements could be ways to reduce the amount and how people use health care or the rates providers are paid.

“There are lots of different ways in health care to save money,” Hultberg said. “One is through reducing utilization. Another is through reducing provider rates. So, until we see where those savings are captured, it’s really premature to pass any judgment on the outcome or to express concerns.”

Micciche said providers and other health care stakeholders will be invited to discuss how to save money.

“So, we will be assembling a group of experts and those that are most concerned about, perhaps, their margins, on determining how we can deliver health care in this state at a much lower cost to the state,” Micciche said.

Health care consultant D.J. Wilson said the study – and the idea of a health care authority negotiating lower rates for those covered by the state – holds promise.

“I think that will bring pricing pressure to the market that is otherwise absent in Alaska,” Wilson said.

Wilson also said that along with negotiating lower rates, the authority could coordinate patient care to eliminate unnecessary procedures.

There’s one additional obstacle to saving health costs in the next year. Most state workers have health insurance through union contracts – and those contracts don’t expire soon.

Details about how much starting an authority would cost would be included in the report.