THE STATE



GOVERNOR BILL WALKER

 

March 3, 2017

The Honorable Senator Peter Micciche
Chair, Senate HSS Finance Subcommittee
Alaska State Legislature

State Capitol, Room 508

Juneau, AK 99801

Dear Senator Micciche:

The projections for growth in the Medicaid program are for $45.0 million in additional
undesignated general funds if the department takes no additional action. The department has
prepared the following in response to your request for detail on additional cost containment
efforts to three categorical areas being implemented for the FY2018 Operating Budget.

Administrative action to contain Medicaid costs will begin effective Julyl 2017 and will be in
addition to what the department is already doing on a regular and ongoing basis. The
department estimates these efforts to result in a total reduction of $30.2 million in undesignated
general funds.

0 Rate reductions to professional services fees are estimated to save approximately $8.0
million by reducing the rate from the Medicare rate plus 30 percent to the Medicare rate
plus 15 percent. The impacts will be to physicians, advanced nurse practitioners and
therapists (speech, language and hearing); and a rate reduction of 5 percent to hospital
inpatient and outpatient services will result in approximately $6.2 million.

0 Rate freeze resulting in no rebasing to facilities starting in July 1, 2017 will result in
approximately $0.6 million in savings for the FY2018 and potentially larger reductions in
years following.

0 Service reductions are estimated to save approximately $15.4 million. By reviewing
Heathcare Common Procedure Coding System codes added by the Centers for
Medicare and Medicaid Services since January 2015, it is estimated that approximately
$12.8 million could be saved by using codes that are more focused to the needs of the
patient and don?t reimburse for unnecessary services. Through reducing the waiver day
habilitation hours from 15 hours per week to 8 hours per week an estimated savings of
$2.6 million could be reached.

The potential savings resulting from this added effort are estimates and most likely will result in
some shifting between these categories as implementation takes place. Because these are actual
reductions in service levels the impacts will be realized directly to those served in these

populations. The department believes this is the limit that can be met and still withstand
potential litigation under federal law that requires adequate access to care and Americans with
Disabilities Act requirements to provide care in the most integrated setting.

We anticipate the department will need a supplemental of $15.0 million in FY2018 to address the
remaining need due to overall program growth in Medicaid. However, given the uncertainty of
the policy level changes taking place at the federal level, the department is waiting to request
additional funding through the supplemental process to allow for additional time to fully analyze
the potential impact of any federal Medicaid proposals being taken up by Congress.

Sincerely,



Shawnda O?Brien
Assistant Commissioner

cc: Amanda Ryder, Fiscal Analyst, Legislative Finance
Neil Steininger, Of?ce of Management and Budget
Darwin Peterson, Legislative Director, Govemor?s Of?ce
Valerie Davidson, Commissioner
Jay Butler, Chief Medical Of?cer
Jon Sherwood, Deputy Commissioner
Karen Forrest, Deputy Commissioner
Melissa Ordner, Budget Manager
Anthony Newman, Legislative Liaison
Sarah Woods, Deputy Legislative Liaison
Randall Burns, Director, Division of Behavioral Health
Margaret Brodie, Director, Division of Health Care Services
Duane Mayes, Director, Senior and Disabilities Services