Alaska is about to run out of money for Medicaid

This is a developing story and may be updated. Here’s what we know right now:

With the budget still at an impasse, the Department of Health and Social Services is on track to run out of money for Medicaid before the start of the new fiscal year on July 1.

The state had been asking the Legislature for a supplemental $15 million in state funding and the authority to receive an additional $75 million in federal funding to cover an anticipated shortfall in the current year, but hasn’t received it. That money is currently contained in the operating budget, which is still hung up on division over the dividend.

It means that Alaska’s Medicaid providers—from large hospitals to smaller providers—could go the final three weeks of June without being reimbursed for any eligible claims. The state alerted providers about the issue in a letter this week, which blindsided to the state’s health care providers who had been under the impression that things were covered. Prior to the letter, legislators and health care providers had not received warning about the possibility that payments would be cut off.

“As the Department of Health and Social Services approaches the end of the state fiscal year, again we are challenged by a budget shortfall,” explains the letter from Division of Health Care Services Director Renee Gayhart. “In order to manage this projected deficit between the authorized budget for the current fiscal year ending June 30, 2019 and claims received from enrolled providers, the department has modified the weekly provider payment schedule.”

The letter goes onto explain that payments to providers will be delayed until the new budget goes into effect. According to the letter, federal regulations allow this delay if 90 percent of the claims are paid within 30 days and 99 percent of claims are paid within 90 days. The letter makes no mention of the request to the Legislature for supplemental funding to cover the gap, nor does it explain current status of the operating budget.

The news came as a surprise to Alaska State Hospital and Nursing Home Association CEO and President Becky Hultberg, who said the organization had been told multiple times that things were covered for the rest of the year.

“As of two weeks ago they were assuring us that they would be able to make it through the fiscal year so this come with pretty much no notice,” she said. “I guess that was under the assumption that they would get the supplemental quickly. They didn’t.”

Hultberg says she’s under the impression that if the supplemental funding is approved, then the payments would resume. She said she was concerned that the issue wasn’t raised earlier to give the Legislature an opportunity to approve funding.

What it means

In the meantime, though, Hultberg said the decision to cut off payments all providers big and small would be unprecedented and could cause disruptions for people on Medicaid.

“In past years, when the department has experienced a budget shortfall, payments have been suspended for large hospitals,” she said. “At that time there was a recognition that big facilities could sustain those disruptions but small facilities couldn’t. Based on what we know right now is all provider types are affected. That’s a significant concern because some small providers may not be able to sustain operations without Medicaid payments.”

Even though law requires health care providers to continue serving Medicaid patients, Hultberg said the cash-flow problems could mean big trouble for smaller hospitals and small providers that don’t have the reserves to cover payroll and other costs. That, she said, could translate into problems for Medicaid patients.

“There are potential implications to access for patients,” she said. “Large hospitals are going to keep operating. A few small hospitals may run into cash-flow problems, we’re going to try to work with the department. I don’t anticipate any hospitals closing their doors because of this but some will have financial issues. I can’t speak to all provider types, but it is likely that some small providers could struggle to make payroll. It’s really impossible to forecast exactly what services may be disrupted but it’s easy to suggest that there may be impacts on access to some health care services.”

Hultberg says she’s hopeful that the supplemental money will come together before the end of the fiscal year and the payments can continue.

“If the payment suspension continues to the end of the fiscal year all of the things I said are absolutely accurate, but the context is important that if a budget passes this may not happen,” she said.

The letter