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Series Part 2: How Can Alabama Address Its Medicaid Crisis?

By Henry C. Mabry

This is the second in a three-part series focusing on Alabama’s Medicaid issues.

State General Fund cannot keep up with Medicaid, as is

In any given year where the state General Fund grows two percent and Medicaid needs five percent of the state General Fund in the next year, then somebody is going to get gigged for the three percent–state budgeting is a zero sum game.  Three percent of the state General Fund may not sound like much, but for a $1.8 billion budget, that means cuts or new revenue every single year of more than $52 million, or $1 million a week in cuts or new taxes.  This would mean a tax increase of about $250 million after about four years just to keep up with Medicaid, and hundreds of millions of dollars in new money spending in the years following.

In order to keep the Alabama Medicaid Program in tact, the state program is required to serve various populations at a minimum level.  If the state gets to the point that it does not fund the basic requirements, then Alabama will be slapped by the federal government.  If the problem happened to persist, then the state could lose the program.  Would such ever happen?  Only the federal government knows the answer to that question; however, one way or the other the issue must be addressed.

Gov. Robert Bentley and the Alabama Legislature believe the future Medicaid funding issues have largely been resolved with the RCO legislation and subsequent federal waiver approval. In part, the new program anticipates containing future costs; however, the new program may fall short of its goals because of federal requirements, realistic expectations, and political reality, but this is another story for another day.

Added focus upon utilization needed

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The bottom line for future Medicaid spending comes down to utilization and structural funding.  The program ballooned in 2008 and thereafter thanks to the recession and the state’s beleaguered economy.  State Medicaid rolls grew from 700,000 to over one million which was a rather large pill to swallow.

Utilization is a key issue, and the RCO plan attempts to address some of that issue, but other approaches can help stem usage in the marketplace not addressed by the new program.  Every time a Medicaid recipient gets an unnecessary treatment or medication then costs rise rather than being saved.

Who is to judge what treatments and medications are given Medicaid recipients?  Obviously the answer comes down to the medical providers.  They are the experts.  Policy considerations, however, can be determined regarding treatment strategy, number of visits, number of prescriptions, and number of procedures for a given recipient all within the scope of appropriate levels of care as advised by the health care experts.  Other states place limitations upon utilization of services, and Alabama does have certain limitations, but other states have more limitations that have been authorized by the federal government.

This is not to say that services should be curtailed that will negatively affect health care delivery.  For instance, reducing pharmacy on the one hand might create more costly usage in another part of the system.  This is to say, though, that real, tangible cost containment measures are necessary for the survival of the overall program for the overall best interests of one million recipients.  It is a balancing act; however, other states have made strides, like Texas, and Alabama can, too.  What, after all, is the reason that Alabama has more emergency room visits, longer stays, and more pharmacy usage that elsewhere?  Is Alabama that much sicker than some of our closest states in proximity that are getting more federal money than we are?


Dr. Henry C. Mabry served as State Finance Director from 1999-2003. He currently heads Mabry & Co., and can be reached at [email protected]


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