Medicaid is one of the areas of state government where Gov. Mike Dunleavy’s administration is looking to make the largest spending cuts. Administration officials released details of those changes for the first time Tuesday.
The administration wants to try several approaches to save money — but some of the cuts may not happen in time to save the state money over the next year.
Medicaid is one of the biggest areas of state spending, accounting for one in six dollars spent by state departments this year. So as Gov. Mike Dunleavy seeks to close a $1.6 billion budget gap, the administration looked to Medicaid, where it could cut a lot of costs: $249 million.
Department of Health and Social Services Commissioner-designee Adam Crum unveiled a plan on Tuesday to reach $95 million of those reductions.
“This $95 million is what we believe we can definitely achieve in (Fiscal Year) ’20, based upon just administrative stuff,” he said.
The state would also lose about $65 million in federal funding as a result of the proposal.
Effects of the reduction
The biggest reduction is to payments. The state is looking to pay many health care providers — doctors and hospitals — less to provide health care to the 29 percent of Alaskans covered by Medicaid. Community clinics, primary care providers, OB/GYNs and hospitals that provide critical access in largely rural areas would be protected from the cuts. But all other providers would receive 5-percent reductions. And there would be no payment increase for inflation.
Crum said the administration targeted the reductions to maintain Medicaid recipients’ access to health care.
“We made sure we protected them and held them harmless from this,” he said.
The proposal also would limit Medicaid recipients to 12 visits per year for physical, occupational and speech therapy.
The 5-percent reduction to payments could lead to providers no longer accepting Medicaid patients, according to the Alaska State Hospital and Nursing Home Association, or ASHNHA. And even hospitals that provide critical access could close, since they also receive funding from skilled nursing, which would receive a cut under the proposal.
ASHNHA President and CEO Becky Hultberg said the skilled nursing cut would put providers in a position where their costs will exceed their revenue.
“We appreciate that they didn’t directly cut critical access hospital inpatient and outpatient rates, but that’s not enough,” she said. “The skilled nursing facility cuts are a big, big problem.”
Hultberg said hospitals have been working with the state for years to reduce Medicaid spending. But she said the proposal seeks to cut too deeply, too quickly and without enough analysis.
“When we’re talking about people’s health, we’re talking about people’s lives,” she said. “And it is important to get this right, and not just do it quickly. Much is achievable with a glide path. And there is really no glide path here.”
The federal Centers for Medicare and Medicaid Services, or CMS, must approve the proposed changes.
More reductions proposed
The proposal is on top of a plan to eliminate $8 million in state funding — and $19 million in federal funds — for preventive dental care for adults. That’s raised concern among dentists.
Dr. David Logan, the executive director of the Alaska Dental Society, predicted this will lead to higher costs in the long run, as patients go to emergency rooms over and over again due to problems with their teeth and gums.
“They don’t do dentistry in emergency rooms,” he said. “They do antibiotics. They do pain medication — which means the problem will return and be all that much more complicated and expensive to treat in the future.”
Along with the $95 million reduction announced on Tuesday and the $8 million reduction to adult dental preventive services, another $16 million reduction was already planned, based on changes made to Medicaid in a law passed in 2016.
Including all the proposed reductions still leaves roughly $130 million of the cuts that Dunleavy included in his budget proposal for the future.
These additional cuts also will require CMS to approve them — but they will face a higher bar, since they will require waivers from CMS rules. And they’ll likely require changes to state law. Crum said these cuts will become clearer in the next few weeks.
The Dunleavy administration has provided few clues about how it plans to achieve this larger set of cuts. Officials have said they want to reduce the cost of care for the 48,000 Alaskans who became eligible for Medicaid as a result of Medicaid expansion. But they make up only a small share of state Medicaid spending.
Watch coverage of the Health & Social Services Subcommittee from Gavel Alaska: