State caves on Medicaid 'emergency,' agrees to pay back some cuts to providers

Gov. Mike Dunleavy created a Medicaid emergency three months ago with his rule-by-veto approach to government, reducing the amount set aside for Medicaid without offering a plan.

With the Dunleavy emergency, there was no time for an orderly process to enact and justify new regulations cutting payments to Medicaid providers, the state claimed.

While the health department revealed its emergency plan at 4 p.m. on June 28, the same day as the Dunleavy vetoes, the health department claims it knew nothing about the governor’s Medicaid veto and was reacting only to a legislative cut in Medicaid.

If the health department did not know about the veto, that is evidence of incompetence within the administration. If the health department did know about the veto, claiming otherwise in a deposition is evidence of incompetence.

In any event, the Dunleavy emergency became the department’s rationale to reduce payments to many Medicaid providers by about 7 percent starting July 1. The emergency action meant there was no notice and no public hearings about the reduction.

A lawsuit by the state hospital and nursing home association followed, with Medicaid providers saying the emergency was phony. An Anchorage judge agreed with the hospital group in a ruling Aug. 30.

In a settlement of the lawsuit this week, the state reversed the 7 percent cut for the first quarter of the fiscal year—effectively agreeing that the emergency was bogus.

The state did not make any formal admission. But refunding the money is tantamount to a reversal.

In addition to enacting the emergency regulations that are now abandoned, the state also proposed making the cuts permanent, which has happened.

The impact of the settlement is that the 7 percent cuts for many providers took effect Oct. 1 instead of July 1.

Providers that were shortchanged on payments for services from July to September will be entitled to refunds under the settlement. They can also continue the normal process to challenge the justification for the permanent reductions.

Overall, the governor has said he wants to cut state and federal Medicaid spending by more than $700 million over a couple of years, but he has been unable to define the level of reduced services that idea would require or which Alaska health care institutions might survive the bloodletting.

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