State of Alaska and hospital association settle lawsuit over Medicaid cuts

The Alaska Department of Health and Social Services will repay doctors who lost money as a result of Medicaid cuts this year, the state announced Wednesday afternoon.

The repayment plan is part of a legal settlement between the state and the Alaska State Hospital and Nursing Home Association, which had filed a lawsuit over an emergency order used to reduce payments to doctors and other health care providers. Under the settlement, those providers can submit claims for services rendered between July 1 and Sept. 30, while the state can press ahead with its plans for a permanent cut to payments.

The settlement means the state is less likely to reduce Medicaid spending this year as much as it previously forecast. It also means the state does not have to defend against what could have been a lengthy court fight.

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

Becky Hultberg, president of ASHNHA, called the settlement “very positive.”

“We appreciate the state’s good-faith efforts to resolve this lawsuit,” she said. “We will both avoid future court fights and we’ve reached a settlement that’s agreeable to both sides.”

Between the budget approved in 2018 and the one approved this year, the Alaska Legislature and Dunleavy cut $141 million from the state’s $2.1 billion Medicaid budget, according to figures from the nonpartisan Legislative Finance Division.


At the time, many of those cuts were based upon expected savings from a plan to be implemented by the Department of Health and Social Services. One of the biggest parts of that plan was a 5% cut to payments for services provided by most hospitals, clinics and other health care providers. Another part canceled an automatic inflation adjustment.

To implement those cuts, the state announced an emergency regulation that would take effect July 1.

ASHNHA in its lawsuit contended that the “emergency” was artificial, created by the administration to justify an immediate rate cut and avoid going through the usual, slower process. ASHNHA hired former Alaska attorney general Jahna Lindemuth to bring the suit.

Doctors opposed the cut to payments, saying that they might have to stop offering certain procedures or cease serving Medicaid patients because their payments no longer met expenses.

According to the latest available figures, 29.4% of the state’s population is on Medicaid.

If the state is unable to reach its expected Medicaid savings target because of the settlement or other factors, the Alaska Legislature will be asked to approve a supplemental budget to cover the gap.

The settlement shows that “public process matters,” Hultberg said. “This lawsuit was about ensuring that as the state makes decisions about public services through the regulatory process, that the public and other stakeholders have an opportunity to weigh in.

“And I do want to note, the state has achieved its ultimate objective, which was to reduce rates,” she said.

James Brooks

James Brooks was a Juneau-based reporter for the ADN from 2018 to May 2022.

Alex DeMarban

Alex DeMarban is a longtime Alaska journalist who covers business, the oil and gas industries and general assignments. Reach him at 907-257-4317 or alex@adn.com.