August 22, 2019

Alaska Gov. Mike Dunleavy (R) on Monday vetoed $50 million in state Medicaid spending, $27 million in adult dental benefits, and more from the state Legislature's fiscal year (FY) 2020 operating budget, which hospitals in the state say will significantly cut Medicaid payments. 

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Background

The Alaska Legislature convened a special session to pass a new FY 2020 operating budget and restore some of the more than $400 million in General Fund spending cuts Dunleavy eliminated from the budget in June. Dunleavy made those budget vetoes the same day his administration published an emergency rule that included a 5% Medicaid payment cut to most of the state's hospitals and other Medicaid providers and blocked an annual inflation increase.

The Alaska State Hospital and Nursing Home Association filed a lawsuit last month to block the Medicaid payment cuts, arguing that the Dunleavy administration violated federal and state rules by not seeking public comment and assessing the impact of the cuts before issuing emergency rules.

Second round of budget vetoes

In the latest round of budget line-item vetoes, Dunleavy cut:

  • $50 million from the state Department of Health and Social Services Medicaid spending;
  • $27 million in adult dental benefits;
  • $7.4 million in public assistance funding, including those for the Supplemental Nutrition Assistance Program; and
  • $6.1 million in behavioral health treatment and recovery grants.

Dunleavy said in total the budget line-item vetoes reduce state spending by $650 million 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. "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."

According to Modern Healthcare, the Dunleavy administration has hired a consultant to help identify ways to allocate the Medicaid cut.

Hospital group, others push back against cuts

Becky Hultberg, CEO of the Alaska State Hospital and Nursing Home Association, said that combined with previous cuts the new Medicaid spending cuts will reduce the state's Medicaid spending by about 22%, which she said means the state would also receive at least $127 million less in Medicaid matching funds from the federal government.

Hultberg said the funding cuts would hurt both patients and providers, though she noted it would take a few months to know the true effects. "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."

Modern Healthcare reports that Dunleavy's budget cuts have fueled a campaign to recall him from office. The effort collected nearly 30,000 signatures in two weeks, which Modern Healthcare reports meets the state requirements to move forward (Meyer, Modern Healthcare, 8/20; Quinn, KTVA, 8/20; Kitchenman, KTOO/Alaska Public Media, 7/18).

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