DHSS and Medicaid highlights in House’s recently passed operating budget

On Thursday, the Alaska House of Representatives passed their operating budget (HB 39) off the floor on a 24-14 vote. The budget includes significant cuts across a broad range of departments and programs, but stops short of many of the cuts proposed by Governor Dunleavy earlier this year.

The $10.29 billion operating budget includes $4.3 billion in unrestricted general fund spending, $2.7 billion in federal funds, and $2.39 billion in other state funds. Overall, this represents about a $200 million reduction compared to what will be spent this fiscal year.

The newly approved budget is a major departure from Governor Dunleavy’s February proposal, which called for a $1.6 billion reduction in the state budget.


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In terms of health spending, the operating budget includes a $72.9 million cut in unrestricted general funds to the Department of Health and Social Services (DHSS). The majority of this cut comes from Medicaid Services, where the House approved a $58 million reduction.

Dunleavy’s proposal originally sought a $336.6 million cut to DHSS, with a $249 million cut to Medicaid services.

The House Finance Committee approved the $58 million Medicaid reduction after receiving specific budget recommendations from the House Health & Social Services Committee.

The recommendations break the $58 million down into specific cost containment strategies including: withholding inflation-based adjustments to Medicaid payments, pharmacy adjustments, and reducing the timely filing allowance.

The Co-Chairs of the committee also stated that they do not support rate reductions, but if they are pursued, they urge the Department to hold-harmless behavioral health service providers and skilled nursing facilities.

“Alaska is in the midst of a behavioral health crisis and it is paramount that the residents of Alaska have as much access to those services as possible,” the letter reads.

HB 39 also specifies the intent for long-term care facilities to be exempt from Medicaid provider rate reductions and for DSHS to maintain full funding for adult preventative dental services.

The bill also states that money appropriated may not be used for abortions unless considered a mandatory service under Title XIX of the Social Security Act. While the budget was in the House Finance Committee, lawmakers voted 9-2 on an amendment to cut $334,700 for abortion services provided through Medicaid services.

Other general funding cuts within DHSS include: $7.3 million from Alaska Pioneer Homes, $932,000 from the Behavioral Health Division, and $2.2 million from the Public Assistance Division.

The budget, however, allocates additional funds for Children’s Services ($1.3 million), Juvenile Justice ($1.7 million), and Public Health ($1.3 million).

“We recognize that we have a deficit and must make substantial cuts to keep downward pressure on spending,” House Speaker Bryce Edgmon said in a press release announcing passage of the budget bill. “At the same time, this budget demonstrates our commitment to fund core services and reject measures that would solve our fiscal problems on the backs of Alaska’s most vulnerable.”

“Ideas presented by Democrats, Republicans, and Independents – from the House majority and minority – are in the budget that passed, and each of the governor’s proposed reductions received a vote through the process we followed this year,” added Rep. Neal Foster, who co-chairs the Finance Committee. “No one got everything they wanted, but we reached a strong compromise and look forward to working with the Senate and the administration to finalize the budget.”

The operating budget now heads to the Senate Finance Committee for consideration. The Senate is currently working on its version of the budget.

Should the budget pass out of both chambers, it still faces the possibility of line-item vetoes from the governor.

Last night, Gov. Dunleavy tweeted,