Special Session Allows Medicaid Reform to Move Forward

On Wednesday, the Alabama Legislature concluded a special session focused on Medicaid called by Governor Robert Bentley. The state’s Medicaid program has faced enormous fiscal challenges over the past few years: Medicaid’s costs have skyrocketed over the past decade as the number of recipients has increased in a sluggish economy, while state tax revenues for the General Fund budget (the budget for all non-education state spending) have mostly flat-lined.

Indeed, going into the special session, Medicaid faced a $85 million shortfall between what administrators had requested for the coming fiscal year and what the Legislature had been able to budget. The $85 million deficit led Medicaid to cut physician reimbursements in August, and the department warned cuts in other service reimbursements would soon follow. I spoke with medical group directors and hospital administrators across the state who warned that Medicaid’s cuts would lead to higher health care costs for all Alabamians, as people who were previously on Medicaid would begin using the ER for routine services.  

After much debate in the special session, the Legislature chose to use the state’s BP settlement for three purposes: pay off debt, increase Medicaid’s funding, and jump-start critical infrastructure projects in Mobile and Baldwin counties, an area that sustained enormous economic loss as a result of the 2010 Deepwater Horizon oil spill. All told, Medicaid will receive an increase of $190 million over the next two years from the BP settlement. That increase should stave off cuts for the next two years.

Most importantly, the Legislature’s plan enables long-term reform of Medicaid to move forward. There is no doubt that Medicaid – the largest expense line by far in the state’s General Fund – must be reformed for our state to be financially stable. In 2010, Medicaid cost the state $314 million. By 2015, Medicaid’s costs had spiked to $685 million, consuming 37% of the General Fund.

In 2013, conservatives in the Legislature passed a series of reforms designed to bend down Medicaid’s long-term cost curve. Under this plan, groups of local health care providers called Regional Care Organizations (RCOs) would each be given annual budgets to care for Medicaid patients in their geographic region. Essentially, part of Medicaid’s budget would be block-granted to the RCOs, which would assume responsibility for the delivery of care.

Poised to begin this coming year, the RCOs are projected by independent actuarial studies to save the state millions of dollars. Federal administrators at the Centers for Medicare and Medicaid Services (CMS) have praised Alabama’s RCO innovation and recommended it to other states. CMS has even set aside over $700 million in additional federal money to help jump-start the program, with the proviso that Alabama must continue to adequately fund the state portion of the program’s costs.

The outcome of the special session for Medicaid, then, is this: impending cuts to Medicaid have been averted, and more importantly, long-term reform of the program via the RCOs can move forward. By any definition, the special session was a success for stabilizing Medicaid, and that is a win for the entire state.

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Republican Senator Cam Ward represents District 14 in the Alabama State Senate, which includes all or parts of Shelby, Bibb, Chilton, Hale, and Jefferson counties. He serves as Chairman of the Senate Judiciary Committee. Follow him on Twitter: @SenCamWard

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