Alaska governor signs sharp Medicaid cuts as hospitals sue

Many Alaska hospitals and other healthcare providers face significant Medicaid payment cuts following Republican Gov. Mike Dunleavy’s veto Monday of a bipartisan bill to restore Medicaid funding that the governor pushed to reduce.

Dunleavy, an ultraconservative who narrowly won election in a four-way race in November, vetoed $50 million in state Medicaid spending and erased the $27 million in adult dental benefits from next year’s budget.

He is one of several Republican governors around the country who have sought to roll back Medicaid this year. In Utah and Idaho, GOP governors and lawmakers pushed through laws scaling back voter-approved Medicaid expansions.

Gov. Dunleavy’s cuts, combined with a legislative cut of $77 million earlier this year, will shrink state Medicaid spending by about 22%, according to Becky Hultberg, CEO of the Alaska State Hospital and Nursing Home Association, which opposes the cuts.

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

Dunleavy also vetoed $6.1 million in grants for behavioral health treatment and recovery.

In June, the Dunleavy administration abruptly cut Medicaid payments to most hospitals and other providers by 5%, then suspended inflationary adjustments.

The hospital association sued last month to block those rate cuts, arguing that the administration did not follow federal and state rules requiring it to seek public input and assess the impact before issuing the cuts through emergency regulations.

The Dunleavy administration has not identified how it will allocate the new $50 million Medicaid cut, and has hired a consultant to help it find ways to do so. The governor also is considering 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.

In addition, his administration is exploring covering Medicaid enrollees though private plans, which critics say would be more expensive.

Dunleavy previously said he wanted to review the state’s Medicaid expansion, but he hasn’t mentioned that recently.

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

Alaska has been suffering from an economic recession for several years due to a downturn in oil revenue, leading to reduced state government revenue and budget deficits. On Monday, Dunleavy boasted that his cuts in Medicaid and other programs reduced state spending by $650 million overall and eliminated one-third of the budget deficit.

“Alaskans need to understand that we can no longer afford to spend at our current rates,” he said in announcing his line-item vetoes. “We must begin making the long-term changes to put ourselves on a path to a more sustainable future, and we can no longer pretend the problem will fix itself.”

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

His budget cuts and other actions have triggered a campaign to recall Dunleavy from office. That effort has collected nearly 30,000 signatures in two weeks, more than enough to meet state requirements to continue.

Hultberg said the Medicaid cuts will hurt providers and patients, though the impact won’t be clear for several months. It’s likely that eliminating adult dental benefits, for instance, will lead to increased use of hospital emergency departments by patients experiencing dental pain.

She blasted the governor for making the cuts without first identifying how they would be allocated, predicting the Legislature will have to pass supplemental funding in the fall.

“This is an incredibly irresponsible way to govern, taking the cut without doing the planning,” she said. “There is great potential for harm. But some of these cuts will be impossible to achieve, and a Medicaid supplemental will almost certainly be required.”