JUNEAU — Unless the Alaska Legislature approves $120 million in additional funding for Medicaid, the state’s largest health care program will run out of money in late March or early April, state officials said Wednesday.
This is the fourth time since 2016 that the state has alerted legislators to a significant shortfall in Medicaid funding. Leaders of the House and Senate finance committees said they can address the problem in time.
“We can make those deadlines. We’re fine. I’m not concerned about that,” said Sen. Bert Stedman, R-Sitka, the co-chairman of the Senate Finance Committee.
Wednesday’s warning arrived as Gov. Mike Dunleavy’s administration proposed adding $262.5 million to the budget approved last year. If lawmakers accept that plan as written, it would negate most of the $351 million cut from the tax-funded and investment-funded portion of the budget last year.
The biggest piece of the proposed addition is $128 million in state funds for Medicaid, including adult dental coverage.
Neal Steininger, director of the state Office of Management and Budget, said the administration set an “ambitious savings goal of $166.7 million” last year.
As the Department of Health and Social Services explained last year, its intent was to cut services, find cheaper ways to deliver Medicaid and make the program more efficient. Medicaid provides health care to 35% of Alaskans, according to state figures.
Legislators proposed fewer cuts, believing the administration needed more time to implement the full plan, but Dunleavy disagreed and vetoed additional money.
In the end, the department was able to cut spending only $38.4 million, about $128 million less than planned, meaning the administration now needs to come back to lawmakers and ask for funding to be restored.
“While there is that $128 million increase, that does reflect significant savings and a significant successful effort,” Steininger said.
Medicaid is a joint federal-state program, and in exchange for paying 65% of the cost, the federal government imposes certain requirements. State officials said they were unable to obtain federal approval for most of their plans, negating the planned savings. In addition, the number of Alaskans on Medicaid has been growing steadily.
That means there’s not enough money to cover expenses through June 30, the end of the state’s fiscal year.
“We have learned, I think, a very valuable lesson,” said Rep. Jennifer Johnston, R-Anchorage and co-chair of the House Finance Committee.
“It’s (a program) we can’t cut our way out of. It’s one we need to negotiate with our federal partners,” she said.
Medicaid is an entitlement program, meaning patients are entitled to treatment regardless of the amount budgeted. If the money runs out, the state stops paying, but doctors still must care for patients.
The state issued warnings to providers in 2016, 2018 and 2019 that tie-ups in the Legislature could stall funding. Payments were delayed in the first two years, stressing the finances of smaller clinics without significant cash reserves.
“It can be really catastrophic, especially for facilities located in rural areas. Those facilities have such small amounts of cash on hand, they can’t afford to absorb shortfalls,” said Jared Kosin, president and CEO of the Alaska State Hospital and Nursing Home Association.
If payments were interrupted, those clinics would have to decide between paying contractors, making payroll and other tough choices, he said.
Speaking later in the day Wednesday, legislators said they expect Medicaid spending and other time-sensitive items to be put into a “fast-track” budget bill that can be passed by lawmakers and signed by the governor before the deadline.
Johnston and fellow House Finance co-chair Neal Foster, D-Nome, each said they believe the fast-track bill can be done on time.
So did House Minority Leader Lance Pruitt, R-Anchorage. The support of the House minority will be necessary to approve all of the governor’s proposed supplemental spending, if not a smaller fast-track version.
“I’m pretty sure the Legislature will pass something. I can’t tell you what the vote will be, but I’m pretty sure the Legislature will find a way,” he said.