Alaska providers will recover some Medicaid cuts under legal settlement

Alaska’s hospitals and other providers will get back Medicaid dollars they lost due to the state’s emergency Medicaid cuts earlier this year, under a settlement announced Wednesday.

The settlement will allow Medicaid providers to recover the difference between current reimbursement and what they would have been paid if Republican Gov. Mike Dunleavy’s administration hadn’t rushed through the emergency cuts in late June.

The Dunleavy administration abruptly cut Medicaid payments to most hospitals and other providers by 5%, then suspended inflationary adjustments. It did so without soliciting public input on the emergency rule.

Hospitals will get back about 6% for the first quarter of the state’s fiscal year, said Becky Hultberg, CEO of the Alaska State Hospital and Nursing Home Association, which sued in July to overturn the emergency cuts. Providers will have to file claims to receive the settlement payments.

But substantial Medicaid cuts will remain in place through next year under permanent regulations implemented by the Dunleavy administration, since they aren’t affected by the settlement.

In August, Dunleavy vetoed $50 million in state Medicaid spending and eliminated $27 million in adult dental benefits from next year’s budget. Those cuts, combined with a legislative cut of $77 million earlier this year, will shrink state Medicaid spending by about 22%, according to Hultberg.

Those state cuts mean Alaska will receive at least $127 million less in federal Medicaid matching funds.

Nearly 30% of Alaska’s total population is covered by Medicaid, according to state statistics.

Hultberg said her group sued Alaska to ensure the state follows a fair and deliberate process for making important decisions on Medicaid.

“In an environment where it looks like the governor will engage in continual efforts to use a blunt instrument to cut Medicaid, it’s critical to have an adequate public process,” she said.

“I think this is a fair result for both parties,” Adam Crum, commissioner of the state Department of Health and Social Services, said in a written statement. “This settlement provides the process (the hospital association) feels providers needs, while also recognizing the current finances of the state.”

But Cori Mills, a health department spokeswoman, acknowledged that paying back the provider rate reductions would result in smaller Medicaid savings than originally projected.

Dunleavy has argued that his Medicaid cuts were necessary because the state has been suffering from an economic recession for several years due to a downturn in oil revenue.

But at the same time, he approved a $1,600 dividend payment to every Alaskan from the $60 billion permanent fund drawn from oil revenue, and promised to push for another $1,400 dividend payment this fall. Those payments are controversial because they helped drive the need for cuts in Medicaid and other popular programs.

Hultberg said the Dunleavy administration has offered no clear plan on how to implement the 22% Medicaid spending cut. She predicts it will have to seek a supplemental appropriation from the legislature to fund the program.

Mills said her agency is reviewing all available options for reducing costs, including enrollee eligibility, rate adjustments and benefit design.

Meanwhile, the Dunleavy administration is still exploring asking the CMS for a waiver allowing the state to receive federal Medicaid funds through a capped, block-grant model, which Alaska providers strongly oppose.