Senators grill administration on healthcare: ‘You are playing with people’s lives with this budget’

Gov. Mike Dunleavy announces his budget proposal on Feb. 13, 2019 (KTUU)
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JUNEAU, Alaska (KTUU) — During a Senate Finance Committee hearing Friday, senators from both sides of the aisle were scathing in their assessments of Gov. Mike Dunleavy’s plans for healthcare.

If the budget is passed, the Department of Health and Social Services would see a reduction of $781 million in state and federal funding, which translates to an approximately 25 percent drop in funds for the department.

Senate Republicans expressed frustration at the lack of specificity in the governor’s budget and skepticism at the likelihood that widespread cuts would be achievable before July 1, the start of the next fiscal year.

Sana Efird, an administrative services director with the Office of Management and Budget, told the committee that the administration wants “to provide the most sustainable Medicaid program to cover our low-income Alaskans, with the policy direction from the administration that we need to match revenues with expenditures.”

She said the administration is working with the federal government to implement cost containment measures and reforms. According to the most recent analysis by the Centers for Medicare and Medicaid Services (CMS), 210,276 Alaskans were enrolled in Medicaid or the Children’s Health Insurance Program.

States need to gain approval from CMS for many large-scale changes made to Medicaid. Efird said the administration was exploring the idea of applying for a Section 1115 waiver from CMS for unique and innovative ways of delivering healthcare.

Both Republican and Democratic senators were doubtful that the administration could gain approval for a waiver from CMS before July 1. It took nine months for Alaska to gain approval for a Section 1115 waiver on behavioral health in 2018.

“I think the administration has the cart before the horse in several cases, but this is a huge one,” said Sen. Lyman Hoffman, D-Bethel. “It seems that you would get the waiver first before the reduction.”

Hoffman said the administration is trying to balance the state’s budget with federal dollars and that the proposals may harm Alaskans: “You are playing with people’s lives with this budget,” Hoffman told the administration at the hearing.

If the proposed $271 million cut to Medicaid isn’t implemented before July 1, the administration says it would use the $172 million in the Statutory Budget Reserve as a “backstop.” The savings account requires a simple majority vote to spend from as opposed to the Constitutional Budget Reserve, which requires a three-quarters majority from both chambers.

The governor’s press secretary Matt Shuckerow said in a phone interview that the administration is looking at all sorts of proposals to improve the delivery of Medicaid services and make it more efficient.

He said the Department of Health and Social Services is working diligently with its federal partners to finalize the details of its plan that would then be made public. The governor is leaving “no stone unturned” in his efforts to drop costs, said Shuckerow.

While sympathetic to the administration’s goals of making reforms to Medicaid, Senate Republicans doubted their viability as laid out in the governor’s budget proposal.

“So we’re interested in real reductions, we’re not interested in reductions on a piece of paper that really don’t result in those reductions,” said Sen. Peter Micciche, R-Soldotna, who has long proposed reforming Medicaid. “Are you going to take real steps that are actually going to reduce spending?”

Efird said the administration would be working with the Legislature on suggestions to make reforms.

“In the event that these large reductions for FY20 do not go through, due to any number of factors,” Sen. Natasha von Imhof, R-Anchorage, asked, “What is your plan to make up for it? Where else are you going to balance the budget?”

Lacey Sanders, the budget director at OMB, again pointed to the proposed $172 million draw from the Statutory Budget Reserve if the cuts aren’t met.

Jeannie Monk, the senior vice president at the Alaska State Hospitals and Nursing Home Association (ASHNA), said it was her understanding that the administration would keep paying for its share of Medicaid while it waited for possible approval from CMS.

She said ASHNA still had “all the same questions” after Friday’s committee hearings from the administration about what would happen to Medicaid.

Monk said the administration would likely drop the reimbursement rates for physicians, which doesn't require legislative approval.

The state has the highest reimbursement rate in the country for Medicaid services.

Monk said cutting the reimbursement rates would put services in doubt, particularly in rural areas.

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