Senate committee hears update on Alaska’s Medicaid 1115 behavioral health waiver

Deputy Commissioner Emily Ricci and Division of Behavioral Health Director Tracy Dompling told the Senate Health & Social Services Committee on Jan. 30 that Alaska’s Medicaid 1115 demonstration—now the Behavioral Health Reform Waiver—was renewed and remains a primary vehicle for expanding behavioral health services and drawing federal funds.

The waiver, which the department described as a federal demonstration authority under Social Security Act §1115, was renewed on March 26, 2024, and will run through Dec. 31, 2028. The Department of Health officials said the waiver has brought services into Medicaid that previously relied on grants and has increased both provider participation and total behavioral health spending.

The 1115 authority allows the U.S. Department of Health and Human Services to approve time-limited demonstrations that depart from the state plan to test policies. "The 1115 waiver really refers to a section of the Social Security Act that gives the Secretary of Health and Human Services an opportunity to allow states the flexibility to cover different services or to cover different individuals," Emily Ricci said. She and other presenters emphasized that 1115 demonstrations must be budget neutral to the federal government, are typically approved for up to five years, and require independent evaluation and significant federal negotiation and public and tribal consultation.

Why it matters: Alaska Medicaid covers nearly 30% of the state’s population, the department said, so changes to Medicaid financing and benefits directly affect a large share of residents and the state’s health-care delivery system. The waiver has been a mechanism to shift some programs from short-term grants to sustainable Medicaid funding.

Key facts and timeline

- The waiver began after legislation in 2016 (SB 74) directed the department to pursue a demonstration to modernize behavioral health services. The substance use disorder (SUD) component received CMS approval in November 2018 and implementation began July 2019; the behavioral health component was approved in September 2019 and began implementation in May 2020.

- The department used emergency regulations to accelerate implementation. The original demonstration had an end date of Dec. 31, 2023; the renewal approved March 26, 2024 extends the demonstration through Dec. 31, 2028.

- From fiscal years 2018–2024 the department reported roughly a $120 million increase in behavioral health spending (a 48% increase), with FY24 behavioral-health-related spending shown on the department slide as approximately $388 million (this figure includes roughly $51 million in grant funding; the department estimated Medicaid dollars in that total at about $333 million). By comparison the department said the overall Medicaid budget is about $2.8 billion (state and federal combined).

Program growth and rates

The department said enrollment of independent practitioners in Medicaid rose about 41.6% from FY23 to FY24. It also cited rate adjustments: a 4.5% increase to certain 1115 service base rates in FY23, additional rebasing of clinic and rehabilitation services in earlier years, and a further 4.5% increase to some 1115 services plus a 3.8% clinic rebasing that took effect in January (presenters attributed some year-to-year changes to one-time American Rescue Plan Act grant flows as well as ongoing rate work).

Planned work and amendment priorities

Officials described the waiver as both a place to test new services and, where appropriate, a pathway to move successful services into the Medicaid state plan. The department signaled several areas it is actively exploring for amendments or future demonstrations: health-related needs (for example nutrition supports and transportation), reentry services for people leaving incarceration (including possible up-to-90-day pre-release supports), innovative payment models such as value-based payments and population health payments, and refining the crisis services continuum to enable lower-level crisis stabilization and make mobile crisis response feasible for smaller communities.

Tracy Dompling said the department is working with contractors and the provider community to identify practical changes—both operational and policy-level—that would increase provider participation across Alaska and make services easier to stand up in rural communities. "Providers and communities were saying it was really hard to stand up some of those services, and they shared with us the why," she said, adding the department will use its evaluation process to decide which services might move from the waiver into the state plan.

Constraints and oversight

Presenters repeatedly noted that 1115 demonstrations are subject to federal negotiation and to budget-neutrality tests administered by federal actuaries, and that measures and reporting are required throughout a demonstration. Ricci described budget-neutrality review as complex and actuarial: federal and state contractors negotiate assumptions about what the population would cost without the waiver and compare that to projected costs under the demonstration.

What’s next: The department said it will continue stakeholder engagement, contract with evaluators and policy drafters, and pursue amendments where analysis and federal negotiations indicate they are feasible. Committee members asked for continued reporting on utilization, costs and the crisis continuum as the waiver matures and as the department considers moving services into the state plan.