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ASHNHA’s Statement on Governor’s $700 Million in Medicaid Cuts

Mar 21, 2019 | Government, Healthcare

ANCHORAGE—The Alaska State Hospital and Nursing Home Association (ASHNHA) reacted to the Department of Health & Social Services’ plan to reduce the Medicaid budget by $700 million over two years, beginning with a $187 million cut in FY2020.

“We now have more information about the Department of Health & Social Services’ plan to cut Medicaid,” said Becky Hultberg, ASHNHA president and CEO. “This plan is not well thought out, realistic, or achievable. It is simply a blunt instrument developed in response to the mathematical exercise required by the Office of Management & Budget.

We have great respect for the hardworking team at the Department. They have done their best to manage these cuts. The underlying policy and budget direction from OMB, however, does not consider impacts on the health of Alaskans, the vulnerable among us, the wellbeing of our communities, or the vibrancy of our economy. It is not thoughtful or innovative but adopts outdated tactics that have failed to reduce the growth of health care costs in other states. 

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Crafting a budget requires consideration of both human and fiscal impacts. These cuts have been made without adequate analysis or the input of key stakeholders. The Administration can’t articulate the impacts, because they simply don’t know. With careful planning and a glidepath, meaningful change is achievable. This plan provides neither.”

Details of the plan and its impacts:

Action

Potential Impact

Acute care hospital rates will be cut 5% and inflationary adjustments will be suspended. 

Individual hospitals will have to determine how to address the cuts. Options include absorbing the cut, cutting back or eliminating services, reducing support for community programs, or raising rates for other payers. Hospitals with a high percent of Medicaid patients will face challenges absorbing the cuts.

Skilled nursing facility (SNF) rates will be changed from a cost-based rate to an acuity-based rate, for a total reduction of $5 million. There is no analysis of how the new payment methodology will impact SNFs.

Skilled nursing facilities are more than 85% Medicaid. Medicaid does not pay at cost currently, and this budget contemplates a reduction in Medicaid funding. It is impossible to maintain operations when most of your customers don’t pay the full cost of care. Potential impacts could be that SNFs close.

Critical Access Hospital[1] (CAH) rates were not cut, but many are co-located with skilled nursing facilities and those rates were cut.

Most CAHs are co-located skilled nursing facilities. This creates economies of scope, without which the hospital would not be viable. Cutting SNF rates will significantly harm the viability of CAHs.

Physician rates will be reduced 5%. This is on top of rate reductions in past years. Primary care is exempt, but it is not clear how primary care is defined.

Some physicians will choose to stop taking Medicaid patients.

All other provider rates are reduced 5%.

There is no assessment of the impact of this change on different provider types, some of which may be sole providers in their communities or small businesses. Analysis is critical before moving forward with these cuts.

Administrative program changes.

DHSS estimates $49 million in general fund savings from administrative efficiencies. Absent additional information about how the department will achieve this savings, this number seems very aggressive.

Elimination of adult dental.

Eliminating adult dental will result in an increase in emergency department use for dental problems that could have been prevented or treated in a less costly care setting.   

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