Superior Court Judge questions “emergency” used to allow Medicaid rate cuts

An Anchorage Superior Court Judge ruled on Friday that the Alaska Department of Health and Social Services (DHSS) may have unlawfully used emergency regulations to cut Medicaid reimbursement rates earlier this year.


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At the end of July, Gov. Mike Dunleavy cut $77 million in Medicaid dollars through a series of line-item vetoes. That same day, DHSS announced reimbursement rate cuts for providers providing Medicaid services through emergency regulations. The impact was a 5% rate cut for providers that went into effect on July 1 – three days after the cuts were announced.

DHSS also announced its intent to make the rate cuts permanent.

The Alaska State Hospital and Nursing Home Association (ASHNHA) then filed a lawsuit on July 12 claiming DHSS violated state and federal law by making these changes through emergency regulations. The lawsuit argues that there was no emergency, noting that the “Finding of Emergency” signed by DHSS Commissioner Adam Crum claims that the reason for using emergency regulations is that the Medicaid program will be significantly underfunded in 2020.

“Given the simultaneous nature of Governor Dunleavy’s line-item vetoes and Commissioner Crum’s “Finding of Emergency” it appears that the underfunding causing this emergency is not an “emergency” at all. This underfunding is an occurrence entirely of the Dunleavy Administration’s own deliberate creation,” reads the lawsuit.

The lawsuit says that these cuts will cause a reduction in medical services available to certain communities, and may result in the closure of some provider facilities.

ASHNHA asked the court to invalidate and stay the enforcement of the regulations, and issue an order declaring that DHSS be “prohibited from imposing rate reductions via emergency regulation and that rates can be changed through the standard regulation process,” which involves seeking approval from CMS.

In her order, Superior Court Judge Jennifer Henderson stated her inclination to grant ASHNHA’s motion for preliminary injunction.

“The Court is inclined to find that ASHNHA has raised, at the very least, serious and substantial questions regarding DHSS’ finding of emergency. Therefore, the Court is likely to enjoin enactment or enforcement of the emergency regulations, if not the permanent regulations,” reads the ruling.

The ruling points to the timeline of the state budget as a key reason the funding shortage likely doesn’t qualify as an emergency.

“The state budget and DHSS’ response to it have none of the hallmarks of an actual emergency. The reductions to Medicaid in this year’s budget were reasonably foreseeable and, in fact, actually predicted and planned for by DHSS. DHSS had at least six months’ notice before the state finalized the budget, a process the state completes every year. While this year’s budgeting process may have been unusual, the reductions to Medicaid were not surprising.”

The court gave both DHSS and ASHNHA the opportunity to file additional briefings based off the court’s inclination and legal rulings, prior to the final ruling. Both parties have until Friday to submit the additional evidence or briefing.