Citing a "significantly underfunded" budget for the new fiscal year, the Alaska Department of Health and Social Services has told Medicaid providers they won't be seeing the usual rate increases for inflation.
In a public notice posted Monday morning, DHSS filed emergency regulations to freeze rates that customarily rise a percentage point or two every year.
Starting July 1 -- the first day of fiscal year 2016 -- Alaska's Medicaid program will see a drop of $51.9 million in state funds. Since the federal government matches state expenditures, the total loss of funding for the Medicaid program will be around $100 million.
"Where we are is not where we thought we would be as a state," Health and Social Services Commissioner Valerie Davidson said of Alaska's gaping $3.5 billion deficit. "We are all having to tighten our belts."
Medicaid is one of the largest expenditures in the state budget at around $1.5 billion annually, with the state and federal government each paying roughly half. The program serves more than 120,000 Alaskans.
Gov. Bill Walker's proposed budget for the new fiscal year included a $20 million cut to Medicaid, and the Legislature cut an additional $31.9 million, Davidson said.
By holding off on the inflation-based rate increases, the state will see a savings of $8 million in its general fund.
"This is just one of the strategies that we're going to employ," Davidson said of the savings.
The state has already identified another $20 million in cuts drawn from its Medicaid reform efforts but still needs to figure out where the remaining $23.9 million will come from. The state is "still going through and looking at what our options are," Davidson said.
For Mat-Su Services for Children and Adults Inc., the rate freeze will necessitate a close look at the budget for fiscal year 2016. "We knew it was coming," said John Cannon, executive director of the organization, which provides services for Alaskans with disabilities.
"Clearly our costs are going up, so we're worried," Cannon said.
He said the nonprofit was "waiting for matters like this to shake out" before deciding on possible changes to its budget. There would be no immediate reduction in staff or services, Cannon said.
The Medicaid payment rate increases 1.6 to 2.6 percent each year, Davidson said. While the freeze is "one of the least painful ways" to cut the budget, "people are definitely going to feel it," she said.