Proposed Medicaid cut raises concern for health centers, hospitals

Medicaid is one of the most expensive parts of the state budget. And Gov. Michael Dunleavy is proposing a huge cut to the program — $249 million.

It’s part of his effort to dramatically reduce what the state spends on government. So far, there aren’t many specifics on the changes the administration would make to Medicaid. But providers and patient advocates are worried the cuts could cost thousands of jobs and put Alaskans’ health at risk.

Policy Director Mike Barnhill of the Office of Management and Budget answers a reporter’s question about the most recent version of Gov. Michael Dunleavy’s state operating budget in the governor’s cabinet room in the Capitol in Juneau on Feb. 13. He was at a budget briefing held for the press. (Photo by Skip Gray/360 North)

State budget policy director Mike Barnhill said a primary way the administration will reduce Medicaid spending is to cut the amount the program pays doctors and other providers.

“Alaska reimburses providers under the Medicaid program at a higher rate than any other state in the country,” he said. “And so we’re taking a closer look at that.”

According to Kaiser Family Foundation statistics, Alaska’s Medicaid reimbursements are more than twice the national average, and 46 percent higher than any other state.

But that doesn’t mean it will be easy to make cuts, according to Cheryl Kilgore, CEO of the Interior Community Health Center in Fairbanks. The center provides medical, dental and behavioral health care to Alaskans with low incomes.

“The more you drive down what you’re paying for that primary care, which by the way isn’t where the big costs are, the more you’re going to potentially have providers within that system say I can’t afford to do this,” she said.

Kilgore expects the organization to reduce staff if the cuts go through.

“You cut the Medicaid reimbursement to us, we’re going to have to lay off staff — there’s absolutely no doubt about it,” she said.

Kilgore foresees a cascade of negative effects if the cuts go through. For example, the center will be less likely to help patients with screenings that could catch conditions before more expensive treatment is required.

The state’s largest association of healthcare providers — the Alaska State Hospital and Nursing Home Association — is also concerned. The day Dunleavy released his amended budget, ASHNHA CEO Becky Hultberg said the Medicaid cut would have dramatic effects if it occurs.

“The magnitude of these cuts are so great that they will have a catastrophic impact on the health care system,” she said.

Hultberg said she’ll reach out to lawmakers to help them understand the potential impacts.

“This could mean hospital closures,” she said. “This could mean physicians move out of state. I mean, this could mean that services for all Alaskans look dramatically different than they do today.”

Dunleavy spokesman Matt Shuckerow said the budget isn’t just about making cuts, but achieving a budget that will remain balanced in a sustainable way. He anticipated there are areas where the state will be able to increase the efficiency of the care it delivers. For example, making changes to Medicaid-funded travel .

“The governor’s focus is trying to find an efficient way that we can provide certain health care to individuals across the state, but we can do it in an efficient manner,” Shuckerow said. “What we have seen is basically on this budget and where we are financially is we are out of time and we’re out of money. And with our $1.6 billion deficit, there’s a lot of tough choices.”

Shuckerow said he knows the cuts will be face a lot of opposition. But he said interest groups, like the hospital association, have a narrower interest than Dunleavy.

“They represent the hospital lobby and this is about bottom lines and perhaps that’s their focus now, rather than the overall longevity of where we are in the state in our fiscal standing,” he said. “So, you know, with all due respect to those folks, everyone has an interest here. The governor’s interest in making sure that we solve our fiscal crisis.”

The next step is for the Legislature to weigh in. House Health and Social Services Committee co-chairwoman Ivy Spohnholz, a Democrat from Anchorage, is concerned that the spending plan will undermine an economic strength.

“Health care’s one of the few parts of our economy that’s actually been booming, in spite of a recession over the last few years, and so, some of these cuts would undermine our growth,” she said. “The cuts proposed in the Medicaid budget alone could result in 8,000 to 10,000 jobs being lost across the state.”

The Senate subcommittee reviewing the Department of Health and Social Services budget is scheduled to meet on Monday.

Andrew Kitchenman is the state government and politics reporter for Alaska Public Media and KTOO in Juneau. Reach him at

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