Lottery Special Session Uncertain

The General Fund is in trouble and must be fixed before a rapidly approaching deadline.

But a shortfall that’s squeezing health care weeks before the 2017 budget goes into effect is a new and unwelcome development.

It’s one forcing doctors around the state to lay employees off, creating longer waiting times, and threatening to become much worse if legislators can't find a solution.

“That affects people, whether they’re on Medicaid or not,” said Linda Lee, president of the Alabama Chapter of the American Academy of Pediatrics, which represents pediatricians. “The impacts that are happening will be felt by all the patients who come to those practices.”

To address the problem, Gov. Robert Bentley will lay two options before legislators when they convene for a special session Monday. The governor plans to ask the Legislature to consider an amendment allowing a statewide lottery, with proceeds going to Medicaid. Because that money won't be available until 2018 at the earliest, Bentley should ask the Legislature to approve an agreement on distributing the state's share of the settlement 2010 Gulf oil spill, which could free tens of millions of dollars for Medicaid.

In appearances around the state, Bentley has said the health of hundreds of thousands of children – who make up the majority of Medicaid recipients – depends on finding a solution.

“All of this boils down to children, it boils down to the disabled, the elderly and the pregnant women that are Medicaid right now, the (one) million people in the state,” Bentley said at a press conference Aug. 3. “The lottery is just a means to an end.”

The question is whether legislators embrace that approach. Most last week rated the lottery’s chances of passage as no better than a coin flip.

“I wouldn’t vote for it,” said Sen. Trip Pittman, R-Montrose, the chairman of the Senate’s General Fund committee. “I think it’s a poor way to fund government, and it doesn’t solve our problems.”

Senate President Pro Tem Del Marsh, R-Anniston, said Friday he "honestly didn't know" what the lottery's prospects were.

"At end of day, it’s getting 21 votes in the Senate," he said. "Right now, I don’t know that anyone can claim they have 21 votes."

But no one seems to deny the problem with Medicaid, or the need to address it.

“I have heard a number of practices specifically tell me A) they have already laid people off or B) they will be doing so in the near future,” said Mark Jackson, executive director of the Medical Association of the State of Alabama, which represents 7,000 physicians statewide.

Opening the Constitution

The Alabama Constitution bans lotteries and gambling. Any measure approved by the Legislature will be a constitutional amendment requiring the approval of three-fifths of both chambers, and then approval by the state’s voters. To get on the November ballot, legislators will have to approve a lottery by Aug. 24.The governor had not issued the formal call for the session as of Friday afternoon. Yasamie August, a spokeswoman for Bentley, said in emails Friday they were working on the language related to BP. August said the call would come on Monday. Legislators plan to meet Monday afternoon.

Bentley’s proposal, if approved, would authorize the Legislature to create a lottery with all proceeds going to the state’s beleaguered General Fund, where Medicaid funding originates. The state could set up its own lottery or join a multistate game, like Powerball.

For the most part, the General Fund’s revenue streams post flat growth year to year, and can't keep up with growing expenses. That affects Medicaid, which in June covered 1 million Alabamians, over 20 percent of the state’s population. While the federal government picks up more than two-thirds the program, Alabama must put up matching dollars to pull that money down.

The Legislature allocated $700 million for the program in the General Fund budget approved over Bentley's veto last spring. That was $85 million less than the agency said it needs to maintain its current level of services and implement regional care organizations (RCOs), aimed at moving Medicaid into a managed care model that supporters hope will slow cost growth in the program.

To address the shortfall, Medicaid cut physician reimbursements earlier this month. Bentley said he wants to reverse that as soon as possible, but layoffs have already begun in some practices, and physicians’ groups warn that waiting times will likely increase for all patients.

“The most obvious thing is the reduction in pay,” Jackson said. “The least obvious is the uncertainty, (and) not knowing what to expect down the road. It puts a tremendous strain on the practice and a tremendous strain on the employees at the practice.”

The cuts hit the state’s pediatricians particularly hard. The Alabama Medicaid Agency says more than 52 percent of Medicaid recipients – 542,697 people -- are 17 years old or younger. Pediatric offices rely on Medicaid to keep their doors open.  Some pediatricians have already laid off employees, Lee said, and they may not be coming back, even if the cuts are reversed.

"The more devastating effects are going to be felt in the rural areas," she said. "That’s where you may have only one doctor taking care of kids. If they stop taking Medicaid, (patients) have to travel further. And they’re already at a disadvantage when it comes to transportation."

Both Bentley and Medicaid officials have warned that other cuts may come. But Bentley said Aug. 3 that the Centers for Medicare and Medicaid Services (CMS), the federal agency that administers Medicaid, have warned the state that any further cuts would jeopardize up to $748 million the state could get from the federal government to implement the RCOs and improve the state’s performance on benchmarks like infant mortality.

The governor estimates his lottery bill would bring about $225 million into state coffers. If voters approved the amendment, the Legislature would work out the details in a future session.

Sen. Jim McClendon, R-Springville, who will sponsor Bentley's bill in the Senate, plans to file a second bill that would not only set up a lottery but allow virtual lottery terminals – resembling slot machines but considered Class II, non-casino gaming in some jurisdictions – at the state’s four pari-mutuel locations: VictoryLand in Macon County; GreeneTrack in Greene County; the Mobile Greyhound Park and the Birmingham Race Course.

McClendon’s legislation, also a constitutional amendment, would also allow the governor to negotiate a gaming compact with Poarch Band of Creek Indians, who own the Birmingham and Mobile facilities and also operate casinos in Atmore, Montgomery, and Wetumpka.

McClendon says his proposal would bring in $427 million, with about $127 million coming from the lottery machines.

For the most part, the state’s gambling industry has maintained public silence on the proposals. Attempts to reach VictoryLand owner Milton McGregor and GreeneTrack CEO Luther Winn last week were unsuccessful. Bentley and McClendon said in separate press conferences earlier this month they expect pushback from the Poarch Band against McClendon’s plan. Marsh said Friday he had heard nothing, "not from the existing tracks nor from the Indians" about the plans.

Sharon Delmar, a spokeswoman for the Poarch Band, said in a statement last week the tribe “supported the governor’s efforts to find a solution to the funding crisis.”

“We believe a lottery that is highly regulated can play a role in easing the shortfall, but there are a myriad of considerations and details that must be addressed before any such plan can be structured and implemented,” the statement said.

Support for gambling generally falls down party lines, with Democrats in support and Republicans – who control a supermajority in both chambers – usually opposed. Sen. Bobby Singleton, D-Greensboro, whose district includes GreeneTrack, said last week he preferred McClendon’s bill and believed the casinos could get the lottery machines in place quickly.

“I’m for whatever will give us most money to solve the Medicaid funding issue,” he said.

But Bentley and other legislators say gambling would kill any lottery proposal put forward.

“You can’t get the votes,” said Sen. Cam Ward, R-Alabaster. “(McClendon’s) worked hard because he realizes you can’t get any Democratic votes without casino votes. But you put casino gambling in, you lose a lot of Republicans.”

The lottery itself will be a tough sell. Some legislators want to see at least some proceeds go to the state’s Education Trust Fund (ETF); McClendon said his plan would put the first $100 million of revenues toward education. House Minority Leader Craig Ford, D-Gadsden, plans to introduce a lottery bill that would put the proceeds toward scholarships for college.

Others oppose the lottery on moral grounds or see it as at best a stopgap solution: Lottery revenues tend to post flat growth, and a lottery on its own may not be able to keep up with growing expenses in the General Fund.

Legislators give the chances of lottery passage mixed chances at best, particularly with the Aug. 24 deadline looming.

“I don’t see this thing getting any traction,” said Rep. Reed Ingram, R-Pike Road. “I’d give it a 98 percent failure rate.”

Rep. John Knight, D-Montgomery, said both he and members of the House Black Caucus would study the bills put before them.

“It’s got to generate money on a consistent basis,” he said. “It has to be something that makes sense. It has to be something fair for everybody.”

It may be a measure of the lottery bill’s chances that legislators see a settlement of the state’s claims against energy company BP over the 2010 Gulf oil spill as more likely. The bill, sponsored by House Ways and Means General Fund chairman Steve Clouse, R-Ozark, passed the House in the spring but never came to a vote in the Senate. Clouse will refile the bill for the special session, and it could be in committee Tuesday.

The issue last spring was not the Medicaid part of settlement – the bill would use most of an estimated $639 million to pay off outstanding debts and free up $70 million for Medicaid – but the allocation of money for road projects. The version that passed the House included $191 million for road projects for Mobile and Baldwin counties, hit hardest by the oil spill. North Alabama senators attempted to amend the bill to increase the debt repayment and give a smaller share of road funds to all 67 counties in the state.

Nothing had changed on the bill, Clouse said Friday, except the situation in Medicaid and the absence of other remedies.

“I don’t think it’s necessarily changed so much as the realism has set in that this is the only thing that’s going to pass,” Clouse said.

Pittman, whose district is in Baldwin County, fought north Alabama efforts to change the bill in the last session, said he would support Clouse’s proposal. If the Legislature can’t pass a lottery bill before Aug. 24, legislators could continue meeting until mid-September to come up with a solution.

“If the votes aren’t there for a lottery, you move for other solutions, you circle back and try come up with other solutions,” he said.

The state's health care providers will watch.

“Year in and year out, this is constantly happening,” Lee said. “Every year is a guessing game as to whether there will be enough funding. I think the Legislature is going to have to come up with sustainable funding, or those impacts will remain there.”

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