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Reed: State Must Raise Medicaid Funding $85M or Lose Federal Matching Dollars

By Brandon Moseley
Alabama Political Reporter

Friday, July 29, Senate Majority Leader Greg Reed (R-Jasper) said that the State must radically increase funding for the troubled Alabama Medicaid program, or it will lose promised Federal matching dollars to implement the Regional Care Organizations (RCOs).

Sen. Reed said, “The Regional Care Organizations (RCO) reform, set up by legislation I sponsored in 2013, is projected to save the State hundreds of millions of dollars over the coming years. The Federal government has even recommended Alabama’s Medicaid RCO reform to other states as an innovative pilot program.”

The powerful Senate Majority Leader said, “Administrators at the Federal Centers for Medicare and Medicaid Services (CMS) have offered Alabama $748 million over the next five years to jumpstart the RCOs. But CMS has made it clear that the $748 million, and Alabama’s waiver to implement the RCO reform, depends on the State adequately funding Medicaid.”

Rather than simply budget Medicaid the $700 million a year it is already costing the taxpayers Reed insisted, “We must find a way to solve Medicaid’s $85 million budget shortfall, both to protect a program that nearly one million Alabamians rely on, and to move forward with these long-term reforms that will slow Medicaid’s exploding costs.”

Alabama historically has funded Medicaid at the lowest level of any of the fifty states. For years Republican and Democratic administrations have been pressuring Alabama to spend more on the jointly funded State and Federal entitlement program. When the Republicans took over the State Legislature in 2010 they wanted to transform Alabama Medicaid from a fee for service model where the state is the insurer and healthcare providers provide services to a managed care model where the State provides the money; but the healthcare industry manages the program. The complicated Medicare reform bill that passed while Sen. Reed chaired the Senate Health Committee and then state Representative Jim McClendon (R-Springville) chaired the House Health Committee created regional care organizations (RCOs) managed by consortiums of healthcare providers (essentially the big hospitals and friends). McClendon moved to the Senate in 2014.

The RCOs would institute managed care to keep the poor people who use Medicaid healthier thus there would be less expensive catastrophic care. The problem was that the Obama Administration had to sign off on such a radical change. The legislature and the Bentley administration agreed to Obama and CMS demands that they fully fund Medicaid for the first time. In exchange President Obama agreed to grant the conditional waiver and throw in $748 million over the next five years (the federal government doesn’t have that kind of money either but it will just create it through deficit spending).

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At the time this deal made sense to legislators because the legislature believed that a rising economy would lift more Alabamians out of poverty and off of the Medicaid rolls. None of that ever happened. Today Medicaid is the insurer of over 40 percent of Alabama’s children and pays for over 50 percent of the births of new Alabamians. The State has one of the lowest workforce participation rates in the country and none of this seems like to change anytime soon.

Many in the legislature favor postponing implementation of the RCO program for another year. That and dropping the bump up in doctors pay instituted by Obamacare would allow Medicaid to operate on the $700 million allocated to it by the State Legislature during the Regular Session.

Governor Bentley has called a Special Session of the Legislature to begin on August 15th. The Governor has said that the purpose of the Special Session is to pass lottery legislation for the Alabama voters to vote on November 8, when we vote on the President, the Congress, and other offices. If the public votes yes on having a lottery, which funds the general fund instead of education, it would still take some time for the Governor to appoint a lottery commission and for them to meet, set rules, hire venders, and then get the lottery tickets out to convenience stores and gas stations across Alabama. It seems unlikely that the lottery can fill that $85 million budget shortfall in the 2017 fiscal year which begins on October 1.

One temporary fix to solve the 2017 Medicaid budget issue that passed the House of Representatives, but died in a Senate committee on the last days of the 2016 regular legislative session, is to simply raid that money from the BP oil spill settlement money. The Governor and the legislature had promised that they would pay back the Alabama Trust Fund with that money which the legislature raided in the 2009, 2010, 2013, 2014, and 2015 budget years (much of it to prop up the increasingly expensive state Medicaid program that legislators have been unwilling to cut significantly).

That plan was killed because some South Alabama State Senators wanted to instead raid that money for more roadwork.

Gov. Bentley is in the process of raiding $50 million of that money to help build a $120 million luxury hotel and conference center just feet away from an ocean on a site where the previous Gulf State Park lodge was destroyed by a hurricane. If he had raided that money for Medicaid instead there would be no need for a Special Session.

Last September the legislature raised $82 million in taxes on nursing home beds, prescription drugs, and cigarettes and raided $82 million in use taxes from the education budget in order to prop up the State General Fund Budget and all of the last $437 million in raided Alabama Trust Fund budget money was spent. Governor Bentley had requested that the legislature raid another $80 million of use taxes from education to the general fund; but the legislature declined and instead gave the teachers a much bigger raise that what Bentley wanted to give.

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Brandon Moseley is a former reporter at the Alabama Political Reporter.

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