Alaska to begin soliciting funding ideas as state races to spend $272 million on rural health care

The Alaska Department of Health is racing to award $272 million by October through a newly created federal program meant to transform health care delivery in rural parts of the U.S.

Alaska received the largest-per-capita award late last year in the first phase of a five-year program that is intended to dole out $50 billion divided among all 50 states. The program was created in July by congressional Republicans, with support from Alaska’s congressional delegation, as part of a bill that also cut federal spending on Medicaid by hundreds of billions of dollars annually.

The Department of Health said this week that it will begin soliciting letters of interest in the program on Tuesday. It must award all $272 million it received by October, and the funding must be spent within a calendar year — by October 2027 — or else unspent funds could get clawed back by the federal government and the state could receive less funding in subsequent years of the program, Alaska health officials said.

A submission window for letters of interest will open on Tuesday and continue through March 11. The letters will be reviewed by the Alaska Community Foundation, which has been contracted by the Department of Health to oversee the funding application process.

Funding will begin going out in April, said Alex McKay, president of the Alaska Community Foundation, in a presentation earlier this week.

The tight timeline has the department racing to identify projects eligible for funding that meet restrictions enacted by the federal government, including a prohibition on construction of new health care facilities.

“It’s very truncated,” state Health Commissioner Heidi Hedberg said of this year’s funding cycle.

“We could have our funding award lowered in the subsequent years because of overcommitment by any one agency,” said Hedberg.

In a hearing before Alaska House and Senate committees on the project, members of a newly formed advisory council laid out their concerns, including over the prospect of efficiently allocating the $272 million within less than eight months and making sure all of it is spent within less than 20 months.

“We have this massive opportunity in front of us in terms of dollars, but it’s full of challenges that we have to all be realistic about,” said Jared Kosin, director of the Alaska Hospital and Healthcare Association.

Alaska Native Tribal Health Consortium Vice President Monique Martin and Alaska Primary Care Association Chief Executive Nancy Merriman also spoke with lawmakers in the Thursday hearing.

All three said they had provided input to the Department of Health as it crafted its application to federal authorities. They said the advisory council had subsequently been updated to include representatives from the Mental Health Trust and the Alaska Municipal League.

Department of Health spokesperson Megan Darrow declined to confirm the current makeup of the council on Friday and said its membership would be finalized “within the coming weeks.”

‘A poor approach’

The quick turnaround and limits imposed by federal officials on how the funding can be used led Alaska health officials to say earlier this week that the first year of the program would focus on projects in which there was a high degree of confidence the money could be spent quickly.

Kosin said that was a flaw in the way the Centers for Medicare and Medicaid Services, the federal agency overseeing the program, designed its execution.

“Regardless of how you feel about all of it, it was a poor approach,” he said. “With that said, it’s a big opportunity, and we need to seize it.”

Sen. Forrest Dunbar, an Anchorage Democrat who chairs the Senate Health and Social Services Committee, said it wouldn’t be difficult to “waste” the $272 million allocated to the state.

“It’s hard to spend it smartly,” he said.

Some lawmakers raised questions about the fact that decision-making on where the money is spent is currently vested in the executive branch. Lawmakers earlier this year authorized the Department of Health to spend up to $200 million of the rural health funding, with few strings attached.

“We’re being told, ‘Don’t worry, you don’t have any say in this,’ when actually, we believe we do,” Senate Majority Leader Cathy Giessel, an Anchorage Republican, said earlier this week.

Giessel said Thursday that she and Rep. Genevieve Mina, an Anchorage Democrat, will also serve on the Department of Health’s advisory council, representing the Legislature.

Kosin agreed the Legislature should be involved in the program “to ensure that transparency exists.”

“It would be ludicrous for you guys not to be involved,” Kosin told lawmakers. “It’s too much money and too much at stake to not have involvement.”

Kosin, Martin and Merriman underscored the many questions that remain unanswered on how the funding can be spent, even as the state prepares to award it.

Federal officials have prohibited the construction of new facilities, but say that renovations are allowed. That has left health care providers asking what qualifies as a renovation project, rather than a construction project.

Federal rules also prohibit using the funds to cover services currently paid for through Medicaid, causing health care providers to wonder if projects that provide Medicaid-eligible services — but in a more efficient way than what currently exists — could be included.

Funding for telecommunications, such as broadband and internet service installation, is also prohibited. Providers wonder how innovative technologies can be used in rural Alaska communities that lack reliable internet service.

The limitations have left would-be recipients envisioning esoteric ideas for improving health care delivery, even as they concede that such ideas will not address the underlying causes of Alaska’s highest-in-the-nation health care costs.

Martin cited ideas like delivering medications to remote communities using drones; updating the tribal health care system’s electronic health record system; and replacing old hospital beds.

Kosin said to drive down health care costs effectively would require “addressing social determinants of health, socioeconomic factors.”

“That’s really where you need to go,” Kosin said.

Alaska health department officials have repeatedly warned that the funds cannot be used to stand up new services that will require additional state spending after the five-year life of the program.

Kosin said that facility construction, which is prohibited, would have been a good use of the funds, since it would have allowed health care providers to expand the services they offer with one-time investments that don’t require future state support.

“To me, the fact that this money can’t fully potentially be used for that one-time, up-front costs kind of disadvantages some of the things that I would like to see strategically happen,” said Kosin.

Lawmakers said that in the context of Alaska’s health care needs, the funding is not necessarily enough to transform health care in a state that already spends roughly $3 billion annually on Medicaid, and where the construction of new facilities is measured in the hundreds of millions of dollars per building.

The Department of Health has listed schools as a possible recipient of funding. Rep. Andrew Gray, an Anchorage Democrat, pointed out that deferred maintenance needs in rural Alaska schools amount to billions of dollars.

“If I wanted to transform the health of rural school kids, maybe fixing the roofs so they’re not leaking, maybe making it so the toilets flush and maybe getting rid of the mold would transform their health,” said Gray. “I think we could eat up this money very fast through that sort of interpretation.”