What They’re Watching: Jonathan King, Halcyon Consulting

Jonathan King is the Founder of Halcyon Consulting, an economic and performance consulting firm. He joins us in this edition of “What They’re Watching” to discuss the intersection between the economy and Medicaid, where he predicts that Medicaid budget cuts in FY2020 may send the state back into recession.

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“One thing that I’m watching is the intersection between the state of Alaska’s economy and the state’s Medicaid budget. Alaska has just gone through three years of recession – it’s just emerged from recession. There’s a good chance that actually we’ll go back into recession in part because of budget cuts at the state level.

“We’ve seen the number of Alaskans that are in traditional Medicaid go from 125,000 to 135,000. We’ve seen that grow all the way up to 165,000 to 175,000, and we added the Medicaid expansion population which is now between 40,000 and 50,000 Alaskans. So, we’ve gone from that 125,000 Alaskans being on Medicaid, to over 200,000 Alaskans being on Medicaid. For the most part, the state did this without an increase in costs to the state because the Medicaid expansion population is primarily covered by the federal government, and the state got very aggressive over the last couple of years about managing its traditional Medicaid populations costs. That’s a really important part of our economy, and better than 1 in 4 Alaskans is now on Medicaid.

This year is the FY20. So the fiscal year 2020 budget for the state of Alaska has the state cutting the state portion of the Medicaid budget from $1.1 billion, down to something less than $900 million. The question is: are those costs going to be realized and how much of the federal match are we going to lose? And then, what’s that mean for the people that are on Medicaid and the services that they’re going to receive? And then finally, how [will] that flow into the economy with providers and so forth?

It’s a radical change; it’s not clear how those savings are going to be realized. What will probably happen is that the state legislature or the Department of Health and Social Services will have to go back and ask for a supplemental budget and they won’t see those savings. But what makes this really interesting from a policy perspective is this is the first time we’ve tried to reduce savings not because we’re trying to make the system more efficient, but literally just simply because we want to spend less and we’re willing to give up federal dollars to do it. And that has a big implication for an economy that just spent 3 years losing jobs and right now isn’t really adding a whole lot of jobs. It’s probably enough of an effect to throw the state back into recession on top of all the health care implications that you’ll see for patients, providers, communities, and that whole intersection there. That’s the one thing that I’m really paying attention to right now.”