As congressional Republicans passed a bill that will add new red tape to federal safety net programs, a statewide audit has found that Alaska's Department of Health is routinely failing to abide by existing federal laws governing benefits, including Medicaid and the Supplemental Nutrition Assistance Program.

The review conducted by the state legislative auditor and released Monday is the latest indication that the agency responsible for overseeing benefits programs in Alaska is beset by challenges stemming from understaffing.

The audit shows problems in the Division of Public Assistance "are more profound, maybe, then anyone even realized," said state Rep. Zack Fields, D-Anchorage, who sits on the legislative budget and audit committee.

"When you pair that with the devastating policies of the federal reconciliation bill, I think the reality is that a lot of Alaskans are going to go hungry. Their SNAP benefits and Medicaid are going to be cut off. This agency cannot handle its most basic functions," he said.

Under existing law, the federal government picks up much of the tab for eligible SNAP and Medicaid recipients. It is up to the state, however, to administer the programs by ensuring that the benefits go to those who qualify by law.

In Alaska, the recent statewide audit revealed that many of the Medicaid and SNAP cases are not reviewed and processed correctly. Department of Health spokesperson Megan Darrow said in an email that's because the audit was conducted beginning in between July 2023 and June 2024, coinciding with a period between 2022 and 2023 that was "one of the division's most challenging periods of time."

More recent data indicates that the division is still struggling — two years later.

According to a monthly court-mandated report released Tuesday, only 20% of SNAP recertifications were processed on time between December and May, and 60% of initial SNAP applications were processed on time.

As of last month, there were 3,836 SNAP applicants who were waiting longer than required under federal law for their applications to be processed.

The statewide audit included an examination of 42 randomly selected SNAP recipients, which found that 37 of them — or 88% — were receiving benefits that were "incorrect or unsupported." More than half of the recipients' applications had not been processed within federally required timelines.

Out of 60 recipients of Temporary Assistance for Needy Families, or TANF, 15 — or 25% — lacked adequate documentation of income verification.

In the Children's Health Insurance Program, 40 out of 60 randomly selected cases had timing issues, meaning they either hadn't been reviewed for eligibility within the most recent 12 months or had not received an eligibility determination within the required 45 days.

In the Medicaid program, 24 of 60 cases had timing issues, and 22 cases had eligibility determination issues, such as insufficient documentation to show that the recipient met income requirements.

One randomly selected Medicaid recipient was approved in 2015 and "has been rolling forward ever since with no review and no documentation to support the case as an ongoing Medicaid-eligible case," according to the audit report.

Problems in the Medicaid program translate to more than $764 million in "likely questioned costs," the legislative auditor found.

'Rewarding errors'

As congressional Republicans back changes to SNAP and Medicaid, problems in the administration of the programs in Alaska left the state's U.S. senators fighting their colleagues to create exemptions for their state, particularly for a new provision that would penalize the states with high SNAP error rates.

Alaska has the highest SNAP error rate in the nation. In 2023, Alaska's error rate was 60%. In 2024, it improved to 24% — still far above second-place Georgia, which had a 15% error rate. The average error rate was close to 11%.

The bill adopted by Congress is set to require states with payment error rates at or above 6% to pay a portion of benefit costs, ranging from 5% to 15% of costs, depending on the state's payment error rate. In Alaska, 15% of program costs amounts to roughly $38 million a year, according to a legislative analysis. Across the country, that provision of the bill was set to transfer $40 billion in federal costs to states in the coming decade.

With U.S. Sen. Lisa Murkowski's vote seen as crucial for the passage of the bill, Senate Republicans agreed to demands from the Alaska delegation to create a carve-out for the state, meaning Alaska wouldn't have to pay the SNAP penalty until 2028 at the earliest.

But some congressional Democrats pointed to potential problems created by the exception designed for Alaska, including that it had the effect of benefiting the states with the highest error rates. To adhere to Senate rules, the exemption applied to states with an error rate that exceeds 13%.

"Insanity reigns. Rewarding errors," U.S. Sen. Amy Klobuchar, D-Minnesota, wrote in a social media post.

Murkowski described her vote on the budget reconciliation bill as agonizing but celebrated her success in creating a carve-out for Alaska. She called on Alaska Gov. Mike Dunleavy and lawmakers to make sure that the problems in the administration of the programs were resolved within the next two years, before penalties went into effect for the state.

"I think that there were some decisions made with staffing by the governor that really kind of knocked us behind, and we're paying for that now with a very high error rate, and it's causing penalties," Murkowski told Alaska reporters on Tuesday.

Asked about Murkowski's comments, a Dunleavy spokesperson referred questions to the state Department of Health. Health Commissioner Heidi Hedberg said the failure to adhere to federal laws was a result of the COVID-19 pandemic.

"The backlog was primarily the result of transitioning out of pandemic-era operations. The elevated SNAP error rate was driven by a focus on getting benefits to Alaskans quickly during an extraordinary period, which at times meant prioritizing access over strict compliance," Hedberg said in an email.

The recent audit and court-mandated reports show that the division is still not meeting federal requirements, nearly two years after pandemic-era operations expired.

"We're past the point that you can reasonably blame the pandemic," said Fields. "When you look at the weight of the evidence, most of it is the fault of the governor for intentionally de-staffing the agency."

Attorneys representing benefits recipients say the division has not taken steps to address the root cause of problems — which is the insufficient number of eligibility technicians in the Division of Public Assistance.

The backstory

Dunleavy was elected governor in 2018 on a platform of slashing state spending in order to cover a structural deficit without increasing taxation. In 2020, amid the pandemic, the federal government relaxed numerous requirements for benefits programs, including by eliminating the need for interviews as part of the SNAP eligibility process. This significantly reduced the workload in the Division of Public Assistance. So in 2021, seeing a window for savings, Dunleavy cut more than one-quarter of staff charged with eligibility determinations, saving roughly $8 million in state funds.

Within a few months, the federal government reinstated the eligibility requirements it had lifted, including for SNAP and Medicaid. But Alaska was missing much of the workforce it had relied on to meet complex federal laws. Backlogs ensued. Alaskans went hungry. Without the staff needed to conduct SNAP interviews, the state resorted to knowingly violating federal law, keeping Alaskans on their benefits without speaking with recipients as required. That resulted in a nearly 60% SNAP error rate in 2023, and eventually in a $12 million federal fine.

Dunleavy initially appeared intent on tackling the backlog, with millions of dollars in new funding adopted in 2023 for IT system upgrades and 30 temporary staff positions — far less than the more than 100 permanent positions he had cut the year before.

The division failed to fill many of the temporary staff positions (in Alaska, eligibility technicians start at a salary of just over $50,000, according to a recent statewide salary study — a salary that falls below a living wage for an adult with dependents in the state). The division resorted to offering hiring bonuses for eligibility technicians. Still, the amount the state is set to spend on eligibility technicians' compensation in the coming fiscal year is $3 million less than what it spent in 2021. When accounting for inflation, that figure is closer to $10 million less than what was spent in 2021.

When asked about staffing impacts, Hedberg said "state revenue determines the overall budget, and every department is working within tight fiscal constraints."

Hedberg said the division "continues to make strategic hires and process improvements to strengthen program integrity and meet federal standards."

With new requirements on the horizon, those improvements may not be enough, state lawmakers said.

"When we're in a situation where people are waiting months and months for SNAP and Medicaid, and the Division of Public Assistance has vacancies and they've been struggling to retain workers," said Rep. Genevieve Mina, D-Anchorage, "I really question how ... the division will bear with the additional bureaucracy."

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