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Alaska Legislature

With Alaska’s budget delayed, state may halt payments to doctors, clinics and hospitals

JUNEAU — The state of Alaska is warning hospitals, clinics and other health care facilities that it may halt Medicaid payments if lawmakers do not pass a supplemental budget and state operating budget by June 14.

In a letter dated May 28, health care services director Renee Gayhart says the Alaska Legislature’s failure to pass a supplemental operating budget on time means payments due in the final weeks of the fiscal year would be delayed until after the new fiscal year begins July 1.

“Over the final three weeks of the fiscal year, the department will delay issuance of payments for some claims to 30 days as allowed under federal regulations,” Gayhart wrote.

In a Friday letter to lawmakers, Becky Hultberg of the Alaska State Hospital and Nursing Home Association called the stop-payment order a “significant emerging issue.”

This isn’t the first time the state has had problems making ends meet at the end of the fiscal year, but this year’s issue is more significant than when letters went out to health care providers in 2016 and 2018, Gayhart said by phone Monday.

In those years, the state had run out of money in the accounts used to pay for Medicaid, but it could still pass federal dollars onward. This year, it can’t even do that, Gayhart said.

“This year is different. We have to suspend the payments across the board,” she said.

The state’s Medicaid division requires Legislative authority to accept federal cash, but it’s at the limits of that allowance. The supplemental budget would allow the state to accept $75 million more in federal Medicaid money while spending $15 million of state money.

The silver lining of this year’s dark cloud is that the gap between the end of the fiscal year and the start of the next year is only three weeks, not six.

If lawmakers can finish work on the state operating budget and capital budget by June 14 — the last day of the current special session — payments will not be cut off.

“Should they pass it, then we’ll just do business as usual,” she said.

For patients, she said, services should not be affected even if a budget does not pass by that deadline.

“A hospital or provider should continue with services as always. We will be paying the claims as soon as we can, so they shouldn’t be delaying any services to individuals,” she said.

Sen. David Wilson, R-Wasilla and chairman of the Senate Health and Social Services Committee, said even if the Legislature does not act in time, health care facilities will receive back payments when a budget is passed.

“Bills will be paid. By law, we have to pay our debts with Medicaid,” he said.

This year’s problem is a familiar one.

Because Medicaid is an entitlement program, the state is required to reimburse doctors and others for anyone who is treated, even if the number of people treated is greater than budgeted. The federal government pays most of the cost, but the state also shoulders part of the bill.

The Alaska Legislature has repeatedly passed bills to reduce Medicaid costs, but the inflation of health care costs — driven by factors outside state borders — has negated those efforts. Each time the Legislature has budgeted less for Medicaid, it has been required the next year to approve supplemental money to cover a gap.

This year, as happened in 2016 and 2018, the Legislature and governor failed to enact a supplemental budget on time. That means the state won’t have the money on hand to pay the bills that are due.

“It’s unfortunate that the discussion about the Permanent Fund dividend amount is getting in the way of the Legislature’s ability to pass a budget in a timely manner,” said Rep. Ivy Spohnholz, D-Anchorage and the chair of the House Health and Social Services Committee, about the budget deadlock.

Previously, the state prioritized paying small clinics and facilities believed to have less cash on hand. That isn’t possible this year.

“While most hospitals can sustain this payment disruption, several small hospitals and nursing homes could struggle with cash flow issues. Other small providers and provider types, especially those with a high Medicaid volume, could struggle to make payroll and sustain operations,” Hultberg warned.

Furthermore, Medicaid isn’t the only state service struggling without a supplemental budget. In a May 23 letter, Gov. Mike Dunleavy warned legislators that the Alaska Psychiatric Institute, Department of Public Safety and Department of Corrections also have critical needs that are going unmet.


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