Medicaid and DHSS face big cuts in new Dunleavy 2020 budget

Governor Mike Dunleavy rolled out his 2020 budget proposal on Wednesday, placing a significant emphasis on cutting expenditures, maintaining Alaska’s reserves, protecting the PFD – all without introducing new taxes.

Dunleavy’s budget features a $1.6 billion dollar decrease from the placeholder budget submitted in December. The budget proposes reduced state and federal funding to a series of programs and departments including the Department of Health and Social Services (DHSS) and the state’s Medicaid program.

During a press conference, announcing the 2020 budget, OMB Director Donna Arduin described Medicaid, along with other programs facing significant cuts, as,  

“Programs with unsustainable spending that have come without corresponding positive results.”

Medicaid is looking at an overall budget cut of $714.1 million — $249.2 million from the state general fund and $465.5 million in federal funds. Overall, this represents a 31.5 percent cut compared to the FY2019 Management Plan in place today.

These numbers are drawn from a comparison of the new Dunleavy budget to spending levels previously approved by the legislature. Gov. Dunleavy compares his new budget to the “placeholder budget” prepared by Gov. Walker before he departed office. However, critics suggested those budget numbers had not been vetted properly.

To implement these cuts, the new Dunleavy budget states that DHSS will implement a series of cost containment and savings measurements such as provider rate and inflation changes, streamlining pharmacy payment and coverage initiatives, and reviewing eligibility determinations.

The budget also specifies that DHSS is seeking options to better leverage federal funds for Medicaid services, and to “mitigate the effect of demographic changes on general fund expenditures.”

When asked at the press conference if he might issue an order repealing Medicaid expansion, Dunleavy replied,

“In this budget, we don’t have anything that repeals Medicaid expansion. But going forward, there may be conversations that we’ll have with folks.”

Outside of Medicaid, DHSS is a whole is facing a 24 percent budget cut, representing a loss of $781,153,100 in total funds compared to FY2019. The majority of these cuts will come from Alaska’s Medicaid program, but the Division of Behavioral Health and the Division of Public Assistance are also facing significant cuts.

Balancing out some of these cuts are additional funds proposed for Public Health (an additional $7.7 million through federal and designated general fund increases) and for the Division of Alaska Pioneer Homes (nearly an additional $15 million through a variety of funds).

Details on Gov. Dunleavy’s full budget proposal is available here, and details related to all DHSS budget items are here.