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Medicaid Reform Bill Passes Senate

By Brandon Moseley
Alabama Political Reporter

On Thursday the Alabama Senate passed Senate Bill 340, which is a comprehensive reform of the Alabama Medicaid program, by a margin of 27 to 3.

Rep. Mac McCutcheon (R) from Capshaw said on Facebook, “A major victory in the Senate was the passage of Sen. Greg Reed’s Medicaid overhaul bill. He offered a substitute (SB 340) Thursday and it passed overwhelmingly with bipartisan support. This is certainly a credit to Sen. Reed’s leadership and diligence. The bill modifies the delivery model of healthcare to the more than 900,000 Alabamians who participate in the Medicaid program by dividing the state into regions and allowing doctors, hospitals, and other healthcare providers to set up Regional Care Organizations (RCO). It also provides incentives for the RCOs to improve patient care to reduce costs. Medicaid is a valuable service to many Alabamians, but has grown at an unsustainable rate.”

The new legislation is based on recommendations by the Alabama Medicaid Advisory Commission which was chaired by Alabama Health Officer and interim Alabama Medicaid Director Dr. Donald E. Williamson Dr. Williamson told a packed joint public hearing that the new law would divide Alabama into between six to eight Regional Care Organizations (RCOs). The RCOs would be given the responsibility for administering the Medicaid program in their areas. They would not be state agencies, but rather would be for profit or non-profit corporations which would administer the Medicaid program and would bear the risk for the program.

Currently Medicaid is set up on a Provider Fee For Service (PFFS) model where Medicaid beneficiaries purchase care from healthcare providers (doctors, hospitals, pharmacies, nursing homes, etc.) and they then bill the state. With a PFFS model the state is at risk for whatever services the clients charge and there is very little coordination of care between providers for a Medicaid beneficiary. The state can allocate money for Medicaid; but it has little real control on costs.

Dr. Williamson said, “We envision these being risk bearing entities. So must have capital.” The capital providers would control 60% of the board of the RCO. Dr. Williamson said, “We chose 60% because the people putting up the money should have control of the board.”

Much of the language comes from the Oregon Medicaid reform statute. Medicaid spends about $2.5 billion in health care benefits. That translates into about $300 to $500 million of business in each RCO. The legislation protect the legislature from an RCO failing and the state having no way to pay providers. Dr. Williamson said that the state has to be prepared in case an RCO fails. The state will have to commit to implementing this by October 2016. Dr. Williamson said the state will only proceed if this is cheaper than what we are doing now. Alabama Medicaid is projecting that the RCOs would save the state $20 to $70 million a year and have better outcomes.

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Williamson said that the RCOs may bleed into more than one region. “What we envision is probationary licenses.” The RCOs will have just over three years to go from probationary to full capitation. The state must audit the RCOs to make sure they have solvency. The proposed contract length is three years with two one year renewable options.

Medicaid providers must be willing to accept the payment and services set by the RCO. Dr. Williamson said the state’s timeline is aggressive because it needed to be aggressive. “By sept 30th we will have divided Medicaid into no more than 8 regions.” The RCOs will be in place in one year. By 2016 the RCOs must meet solvency standards must achieve capitation (i.e. the RCO has to have enough money in the bank to meet all the potential obligations.) Not meeting the timeline is grounds for termination.

Williamson said that everyone acknowledges that we have to do something about long term care; but this plan does not specifically address the details of long term care reform. The RCOs would handle the other Medicaid programs including, Medicaid services to poor families, Medicaid for poor children, and Medicaid benefits for poor seniors and the disabled.

Medicaid reform has been a goal of the Republican majority since coming into office after the historic 2010 election which gave Republicans unprecedented control of state government.  Alabama Medicaid is by far the most expensive item in the troubled Alabama General Fund and is almost entirely responsible for the raid of the Alabama Trust Fund last year.  The federal government dictates what services Alabama has to offer and to whom which gives the state very little control on how much the program costs each year.

Rep. McCutcheon said, “If passed in the House, the new delivery model will be phased in over the next few years. I am confident we will see positive and effective change to the program that will help ensure the continuation of this essential service.”

House Health Committee Chairman Jim McClendon (R) from Springville is carrying the bill in the House.

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Written By

Brandon Moseley is a senior reporter with over nine years at Alabama Political Reporter. During that time he has written 8,941 articles for APR. You can email him at [email protected] or follow him on Facebook. Brandon is a native of Moody, Alabama, a graduate of Auburn University, and a seventh generation Alabamian.

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