Oops: State mistake leads to multimillion Medicaid error



Fifteen million dollars in billing errors by the Alaska Department of Health and Social Services to health care providers resulted in overpayments during the past six months — overpayments that were easily not noticed by providers but are now being clawed back by the State.

About 1,100 medical providers will be required to return anywhere between a few dollars to hundreds of thousands of dollars apiece due to an administrative error, according to Deputy Commissioner Jon Sherwood, who oversees the Medicaid program. His department has made no formal announcement of the massive error and Commissioner Valerie Davidson is not taking a visible leadership role in managing the crisis for health care providers who are on the hook.

The Anchorage Daily News expands on the impacts of this mistake.


Last year, DHSS decided to roll back to its 2015 allowable reimbursement rates to save the State money, after Medicaid costs grew out of control.

The Medicaid program cost the State $1.7 billion plus $45 million in supplemental funds appropriated to keep the program from running out of money through the end of Fiscal Year 2018.

The rollback never happened due to an administrative oversight. The full reimbursements kept going out, and many medical providers simply assumed the rollback had not yet taken place.

The State is now demanding that medical providers pay back 10.3 percent of what Medicaid paid them between Oct. 1, 2017 and June 11, 2018.

Medical providers who contacted Must Read Alaska said they are stunned and furious that the State has shown such ineptitude in handling Medicaid payments, not discovering the error until June, long after workers have been paid and other payments have been made with the money.

“Governor Walker expands Medicaid, then cuts reimbursements by 10 percent, then fails to execute his reduction in a timely manner, so now is going back retroactively to take money back,” said one medical executive, clearly exasperated.

DHSS has made no public announcement of the situation and has yet to inform each provider what the back-due payments will be and when those payments are expected.


  1. One wonders whether this debacle is the tip of a much bigger mismanagement/corruption problem.
    Was this “administrative oversight” made public only because it was too big to hide?
    Will “administrator(s)” be fired as a consequence?
    Will this debacle shed light on the cozy relationships among “providers” and government that creates and keeps artificially high medical-service costs in Alaska?
    It seems Governor-to-be Dunleavy has his work cut out for him.

  2. As I’ve said and written many times, the DHSS is where competence goes to die. It doesn’t matter if it is a Republican, Democrat, or Hermaphrodite administration. They have absolutely no management and no sense of money. Every year we had the disgusting spectacle sometime late in the Legislative Session of somebody from DHSS, usually the Administrative Services Director, sometimes a Deputy Commissioner, going before the Finance Committees and asking for ratification of sometimes millions in over-spending for which they had no appropriation and for good measure asking for a supplemental appropriation so they could get to the end of the fiscal year. If Alaska had an anti-deficiency act with any teeth, practically every fund manager in the department would go to jail.

  3. When Governor Walker expanded Medicaid he said we would save hundreds of millions. Instead it is costing us hundreds of millions. This and a hotel in Bethel are just the tip of the iceberg.

  4. Can you imagine if your employer took back part of your salary for the last eight months then expected you to pay it all back while earning 10.3% less? There are some Medicare providers like the children’s dentists who have the majority of their practice in Medicaid. Same with children’s mental health providers. The hardship will be extreme for some of them. This is definitely NOT a, “Those doctors can afford it” moment. Costs get passed along in any business model. We will all pay more for this. Badly done. In California the providers took the state to court when they tried this and the providers won. I hope the same outcome is to be found here.

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