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Senate Committee Passes Plan to Use Rolling Reserve Funds to Bailout Medicaid

By Susan Britt and Brandon Moseley
Alabama Political Reporter

On Tuesday, the Senate Finance and Taxation – General Fund Committee passed its version of a state operating budget for next year that would give Medicaid $418 million from the Alabama General Fund. State Health Officer Don Williamson says that the program actually needs $602 million to provide the minimal level of services required by the federal government to continue providing federal funds to the Alabama Medicaid program. The General Fund Budget that was passed by the Alabama House of Representatives cut Alabama Medicaid’s budget request by well over $100 million. The Senate General Fund Committee has adopted a plan to provide full funding for Medicaid. The plan is based on one first proposed by Senator Roger Bedford (D) from Russellville and Representative Craig Ford (D) from Gadsden.

The plan that was passed by the Senate General Fund Committee on Tuesday would leave the decision on whether to fully fund Alabama Medicaid with the voters of Alabama. Alabama Representative Jay Love (R) from Montgomery told ‘The Alabama Political Reporter’ that if the amendment passes in the November 6th election Medicaid would receive another $184 million from the Education Trust Fund (ETF). The ETF would transfer similar payment to the General Fund in the fiscal year 2014 and 2015 budgets as well.

Rep. Love (R) said that in exchange for bailing out Alabama Medicaid, the voters would have to forgive $437 million that the ETF owes the state’s Rainy Day Fund. In 2009 with the economy crashing, the state raided the Rainy Day Fund to temporarily fully fund the ETF. By law the state has to pay that money back to the Rainy Day Fund, which is taken from the Alabama Trust Fund. Currently the ETF has to make regular payments to the Rolling Reserve Fund to pay back that $437 million by the end of 2014.

House Minority Leader Craig Ford (D) from Gadsden told ‘The Alabama Political Reporter’ that the compromise today was “based on the Bedford/Ford Bill. We have been working with the Speaker of the House on the Bedford/Ford and we came to an agreement and the Senate decided to run with it which is fine. We don’t care what they call it, we are just happy they are fully funding Medicaid.

The Alabama Trust Fund (ATF) was set up in the 1970s to invest royalties the state makes off of offshore oil and gas exploration. The principal is supposed to remain untouched while the interest off of the principal is used by the General Fund, Forever Wild (which uses the money to buy land), and for road work by cities and counties. The Rainy Day Fund allows the state to touch the principal of the ATF during an emergency, but the state currently has to pay the ATF back within 5 years when that happens

Rep. Love said that currently there is an appropriation of an estimated $475 million for Medicaid. Rep. Love estimates that the Alabama Trust Fund currently has a balance of $2.7 billion, but is owed the $437 million which was used to temporarily fund the ETF in the recent recession.

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Health Officer Williamson (who is overseeing Alabama Medicaid on an interim basis after Medicaid Commissioner Mullins resigned) told ‘The Birmingham News’, “The amount of money Medicaid gets (in the operating budget) will determine whether Alabama maintains a Medicaid program going forward.” Williamson is concerned that a $400 million Alabama appropriation to Medicaid would be insufficient to satisfy federal government demands that Alabama maintain a minimal program standard (set of course by the federal government). If the Obama administration ruled that Alabama did not meet the federal standards necessary to participate in Medicaid, they could (in theory) refuse to appropriate federal money to Alabama Medicaid. At stake according to Williamson is ~$1.77 billion in federal matching funds, plus another $4 billion in federal Medicaid grants that the state receives from the federal government. In Williamson’s ‘doomsday scenario’ Alabama would be left with a $400 million++ indigent care fund and $billions in federal funds that now go to Alabama doctors, hospitals, pharmacies, dentists, hospices, and nursing homes would disappear.

Rep. Ford said, “Medicaid shouldn’t be a partisan issue. Medicaid is something that has to be addressed. We don’t want to leave federal dollars on the table.”

Most of Alabama Medicaid’s funds are paid out to Medicaid providers. Providers are the doctors, hospitals, dentists, pharmacies, and nursing homes which accept Alabama Medicaid as full payment for bills owed. Over 900,000 low income Alabamians receive some form of Medicaid benefits. Alabama Medicaid pays 2/3s of the nursing home bills in Alabama as most seniors neglect to ever purchase any Long Term Care Insurance. Alabama Medicaid pays for the delivery of over half of the babies that are born in Alabama. Pregnancy coverage is becoming much more difficult to get from private insurers in Alabama. Alabama Medicaid maintains health insurance on over 40% of the children living in Alabama.

Critics of Alabama Medicaid charge that it should contract out its services to managed Medicaid companies rather than continuing to maintain a costly state run Fee For Services System where doctors and hospitals provide services to Medicaid clients and then the state pays the bills as they come in. Most states are incorporating more managed care into their Medicaid programs.

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