When Gov. Bill Walker announced his decision last year to expand Medicaid under Obamacare, he described it as a fiscal no-brainer. He insisted that our state would save money in the long run.
So much for that. We’re now a little less than a year into the expansion, but the red ink is already starting to flow. As of Aug. 31, expanded Medicaid eligibility already cost $30 million more this year than originally expected — worsening Alaska’s existing budget crisis.
Medicaid already had an outsized role in Alaska’s finances before Gov. Walker expanded the program. Last year it consumed $640 million of the roughly $5 billion state budget. On top of that, Alaska recently spent more per Medicaid enrollee than any other state, and nearly twice as much as the national average.
Gov. Walker’s unilateral decision to expand the program only made things worse. Despite opposition from the state Legislature and his own claims that he “wanted to honor the [legislative] process,” Gov. Walker issued an executive order last year putting the expansion into effect. But as we’re now seeing, Medicaid expansion is more expensive than expected. The cost so far has been $175 million — more than 20 percent higher than the original $145 million estimate.
Gov. Walker has pointed out that federal government is picking up the tab, but that’s only partially true. In fact, Alaska begins paying its share for the Medicaid expansion as early as next year. By 2020 Alaska will be responsible for 10 percent of the overall cost of the program. It’s also worth remembering that we’re not immune from the other 90 percent of costs — the federal government’s share of Medicaid expansion is paid for entirely with new spending, adding to the debt we leave future generations.
As Medicaid spending continues growing — as it almost always has — our state’s direct share will be no small sum. There’s also no guarantee that federal funding for Medicaid will be around indefinitely or at the same levels. The federal government has already toyed with idea of slashing its share of payments. This will become even more likely as D.C. continues to dig itself into a fiscal hole. As the federal budget crisis gets worse, politicians will surely start looking for us to pick up more of the tab.
The bottom line is that there is more budget distress on the way for Alaska, no matter what. But we already have our fair share of financial trouble. We’re already suffering from a $3.5 billion budget deficit for the foreseeable future.
That means we lack the means to pay for roughly two-thirds of our budget. Adding Medicaid costs will only make that gap harder to close.
It will also lead to increasingly painful tradeoffs. State courts are closing early across Alaska because of budget cuts. The University of Alaska took a 14 percent cut this year. In Fairbanks, where I grew up, UAF is facing hundreds of job losses as a result. And all Alaskans felt the impact earlier this month when we received reduced dividends from the Permanent Fund, after Gov. Walker halved our checks to cover the budget hole.
As Medicaid expansion continues to take hold, our budgetary situation will only become worse — as will the sacrifices demanded of Alaskans. We have no choice but to balance our budget, so lawmakers are even floating the idea of introducing an income tax to help keep the budget under control. This would make it much more expensive to live and work in Alaska.
The governor’s unilateral decision to expand Medicaid under Obamacare has too many consequences for Alaska. For the sake of our state’s long-term fiscal health, it’s time for Gov. Walker to undo his short-sighted decision. The promises he made just last year have already been broken — and we’re the ones holding the bill.
• Jeremy Price is the Alaska state director of Americans for Prosperity.
