Alaska must meet requirements of new federal health funding or risk losing it, Murkowski warns

State officials said they expect some money from Alaska’s new $272 million federal health care “transformation” grant to start rolling out in January. The Department of Health will be working with Alaska groups to fine-tune proposals that have been submitted for the money.

Some of the funds will likely head to the Matanuska-Susitna Borough. David Wilson, policy director for the Mat-Su Health Foundation, said no decision has been made yet on applying for the money, but “we plan to attend the convening (an information session) in early January to get more information.”

Meanwhile, Alaska U.S. Sen. Lisa Murkowski is urging state officials and legislators to be diligent in carrying out state requirements that go with the new federal funding, which is expected to total $1.36 billion to Alaska over five years. Requirements include some state funding, although a local “match” customary for federal funds is not required.

If the state doesn’t step up to do its part it may give the federal administration an excuse to pause or cancel funds, Murkowksi warned following the announcement of the new funds.

One part of the federal program that was also in the state’s application for the money could be controversial in the Legislature. It is a commitment to join multi-state professional licensing compacts be joined in health care fields. Gov. Mike Duleavy has pushed joining multi-state compacts in fields like nursing but progress has been slow because the state’s licensing system is complex and cumbersome, and the initiative to join the nursing multi-state compact has been blocked in the Legislature by a nursing union.

In a press conference state health commissioner Heidi Hedberg said the state’s application for the federal money has priorities that include maternal, child health and preventative care, improved access to medical care, a strengthened health care workforce, financial sustainability and updated technology and information systems.

Also included will be experimentation with different health care payment systems intended to provide incentives for more efficiency and lower costs in delivery of care. Most health care in Alaska is based on “pay for service” procedures where providers are compensated for the number of procedures they do rather than on the quality of outcomes, and whether treatments improve the patient’s condition.

These have been experimented with before but with uncertain outcomes in reducing costs. Some Alaska health care providers have also expressed disappointment that the new federal program will not help medical providers with major capital costs, such as for new hospitals or expansions.

The federal program, called the Rural Health Transformation Fund, was conceived during negotiations on H.R. 1., or President Donald Trump’s “Big Beautiful” tax and spending bill passed by Congress last summer. The fund provides $50 billion nationwide over five years from federal FY 2026 to FY 2031. It includes a $100 million per-state base allocation each year, which all states will get. States with special needs, like Alaska, will get more, and Alaska will receive $272 million annually for five years, to total $1.36 billion.

Alaska’s two U.S. senators led an extended effort to secure the program in H.R. 1 and earlier in efforts to protect Alaska from cuts to health care programs by the Trump administration.

“This is the biggest investment in rural health care in American history, and certainly the largest investment in Alaska’s health care system from the federal government in our state’s history,” Sullivan said in a statement. “The nearly $1.4 billion from the federal government—is a generational opportunity to transform our health care system. It gives our communities, state officials, and the Legislature the opportunity and freedom to design a health care system that reflects Alaska’s unique needs.”

“This is the opposite of the one-size-fits-all approach we too often see from Washington, DC. This funding will help keep care closer to home, reduce the need for costly and disruptive travel, strengthen rural clinics, and stabilize our health care workforce,” the senator said.

Sullivan provided a timeline of work by the state’s two senators on the Rural Health Transformation Program.

• During the first few months of 2025, Senate Republicans began working with the Trump administration on their legislative priorities to be included in a budget reconciliation bill, which was passed as H.R. 1.

• Among many other important priorities for Alaska, Sullivan initially secured a 25 percent increase in Alaska’s federal payment for Medicaid in the bill to better reflect the state’s high cost of living and high cost of health care delivery. According to the Congressional Budget Office, the change would have permanently generated more than an additional $200 million in increased annual federal Medicaid dollars for Alaska.

• During the final stages of debate on the bill, the Senate Minority Leader Chuck Schumer and other Senate Democrats challenged the FMAP provision by arguing to the parliamentarian of the Senate that it violated budget reconciliation rules. Following this review, the parliamentarian advised that the provision violated the requirements of the “Byrd Rule,” resulting in its removal.

• While this was disappointing Sullivan and Murkowski switched to another solution—shaping the formula for the Rural Health Transformation Fund to better address Alaska’s unique needs, doubling the fund’s overall size to $50 billion, and moving up the program’s start date to 2026.

• On July 1, 2025, the Senate passed the budget reconciliation bill. On July 4, 2025, the legislation was signed into law.