The Alabama House of Representatives may have found a budgetary hail mary in using settlement money from the BP oil spill to move the state closer to meeting the required commitment to Medicaid that’s challenged legislators for years.

A joint federal and state program, Medicaid assists hundreds of thousands of low-income and disabled Alabamians with medical costs every year and is regularly the largest earmark in the state’s budget.
However, the state’s appropriation from the General Fund is less than half of what the federal government puts into the program — money contingent on federal regulations governing the program.

In 2015, the state contributed $685 million, but the federal government’s 68 percent was around $4.1 billion. Now, officials with Alabama’s Medicaid Agency are saying that number has to increase to meet service needs in 2017.

Gov. Robert Bentley’s recommended budget included a $785 million appropriation for Medicaid, but the budget legislators passed in early April only earmarked $700 million for the program — a $15 million increase from last year, eating up a third of the General Fund budget.

This week, AMA officials are giving their third presentation to a joint legislative study group formed to review Medicaid. At the same time, lawmakers are finalizing-last minute changes to their plans for the BP funding in hopes of filling the $85 million hole in the 11th hour of the regular session.

BP funding shift could avert special session
After passing the Senate with broad support, a constitutional amendment that would have sent half of the state’s $1 billion BP settlement to various road projects got a major facelift in the House of Representatives.

(Photo/Courtesy of Bill Hightower) State Sen. Bill Hightower

(Photo/Courtesy of Bill Hightower) State Sen. Bill Hightower

According to the bill’s sponsor, Sen. Bill Hightower (R-Mobile), SB 267 was supposed to split the settlement 60-40, leaving 60 percent in the state’s General Fund and moving roughly $260 million to the Gulf Coast.

While the House changes reduce the amount coming to Mobile and Baldwin counties to around $191 million, the appropriation still covers planned improvements to U.S. Highway 98 and the extension of the Baldwin Beach Express.

The remainder of the money, instead of going to road projects in other areas of the state, will repay $448 million to the Alabama Trust Fund for transfers to and from the General Fund over the last six or seven years.

Championed by House Budget Chair Rep. Steve Clouse (R-Ozark), the changes also free up around $55 million earmarked for Medicaid. While Hightower said the bill was very different from the version that left the Senate, he was pleased additional funding was included for the Gulf Coast counties.

“My bill, with a constitution amendment, probably would have done fine, but the state treasury became involved and made the case that money needed to go to the Montgomery coffers to settle these internal debts,” Hightower said. “There are legislators who believe we should get none of the funding. They believe we’ve been made whole already, and that’s ridiculous.”

While in Montgomery, Hightower called the bill a good compromise, though he told Lagniappe he has concerns with a one-time influx of BP money being used to satisfy daily operating expenses of the government.

“A lot of legislators want to solve the immediate issue without dealing with the fundamental problem,” Hightower said. “That is, the budget process in Montgomery is not what it should be.”

The other issue, he said, is time. With the session ending May 5, the measure could be returning to the Senate floor for final approval this week. However, Hightower said he doesn’t think it’s going to have the same level of support as the version passed April 5.

“If it doesn’t pass in its present form and help with the budget gap in Medicaid, we may need to have a special session to resolve that problem,” he said. “A special session is going to cost taxpayers more money, but it could enable us to take another run at getting more of the money [to the Gulf Coast].”

The cost and benefits of Medicaid
While lawmakers continue to raise concerns about people misusing the system, Alabama Medicaid Commissioner Stephanie M. Azar describes Medicaid as a “barebones” agency serving mostly children, young mothers, the blind and disabled.

Currently, more than half of Alabama’s 1,050,117 Medicaid-eligible patients are children living beneath the federal poverty line of $2,957 a month for a family of four. Of the 126,000 eligible patients in Mobile County, 58 percent are under the age of 19.

Dr. Marsha Raulerson, who runs a private pediatric clinic in Brewton, told Lagniappe cuts to Medicaid can have an effect on everyone in rural areas, including those who privately fund their own health care.

“Right now I’m seeing only about 400 patients, and I don’t get a salary. I get enough to pay my nurse and to keep my office going,” Raulerson said. “Seventy percent of them are Medicaid. If I get cut any more, I won’t be able to pay my bills, much less get a salary.”

In the second Medicaid hearing April 27, Alabama Hospital Association Executive Director Dr. Don Williamson said deep cuts could have the same effect on rural hospitals — 64 percent of which are already operating with negative margins.

Hospitals already pay a provider tax to the state, which goes back into the Medicaid program along with quarterly reimbursements to hospitals for unmatched claims. Together, those taxes contributed $645 million to the Medicaid program last year.

Waiting on those reimbursements can strain hospitals, especially those with low numbers of private-pay patients, and Williamson also told legislators last week reductions to Medicaid in other areas could likely mean more patients going to the emergency room in those same hospitals.

According to Raulerson, the cost of treating Medicaid patients and the wait time for reimbursements has already had an effect on the number of specialists — such as ear, nose and throat doctors, dermatologists and pediatricians — accepting Medicaid. As a result, Raulerson said her office routinely refers patients to the Children’s Hospital facilities in Birmingham and here in Mobile.

“For about three years, I didn’t break even because of my high number of Medicaid patients. It’s not a cash cow,” Raulerson said. “With any kind of government program now, you have all kinds of forms that you have to electronically transmit. It’s an expensive process just to collect for what you’ve already done.”

State Sen. Trip Pittman

State Sen. Trip Pittman

As a pediatrician, Raulerson has long advocated for Medicaid funding, but she also serves on the board of directors for Alabama Children First — a nonprofit currently pushing the #iammedicaid campaign.
While cuts to the program’s funding could have big effects on some families receiving assistance from Medicaid, Raulerson said most of her patients “have no idea.”

Sen. Trip Pittman (R-Fairhope), who chairs the General Fund budget committee, said any participatory form of government requires people to understand and be involved, adding he hopes the ongoing hearings can spread the word about the challenges of funding Medicaid.

“Hopefully, all this information will help people better understand there is a need for additional money in the current year and going forward if there aren’t any changes on the federal level,” Pittman said. “Congress writes the rules, the Centers for Medicare and Medicaid Services [CMS] enforces them and the state doesn’t even get a challenge flag.”

“Alabama’s got what it’s got”
While Alabama’s Medicaid costs seem high compared to other states, they’re the third lowest in the country. According to Azar, “Alabama has one of the least expensive programs in terms of cost per member,” which means it can be difficult to make cuts around what’s required by CMS in order to receive federal funding.

Alabama Medicaid Commissioner Stephanie M. Azar. (governor.alabama.gov)

Alabama Medicaid Commissioner Stephanie M. Azar. (governor.alabama.gov)

Previously, Azar has said Medicaid assistance for adult prescription drugs, outpatient dialysis and a planned increase in reimbursement for physicians participating in the program would likely be the first areas cut, but the additional BP funding could change some of that.

“We are very appreciative of the Legislature’s willingness to consider allocating additional funds to Medicaid to move us closer to the $785 million we need to continue our current operation and move forward with our reform plans,” Azar told Lagniappe. “However, there are two days remaining in the legislative session and the final amount that will be available to Medicaid is not yet known. Once the final number is known, the governor and I will evaluate Medicaid’s budget and determine next steps.”

While no definite decision has been made as to which areas might see cuts in 2017, Pittman said none of the choices are easy.

“You have to deal with money you have, and it forces you to make tough decisions. It forces you to prioritize,” he said. Without “enough votes for a lottery or gambling” in the Legislature, Pittman said, the only way for the state to increase revenue would be to “raise taxes on the individual working people” that are already “maxed out” when it comes to new taxes. He added that even if the state generated the revenue it needs today, the challenges of funding Medicaid wouldn’t go away.

“I think people might be willing to pay more money if they felt [Medicaid] was modified to be more sustainable, but it’s difficult when you have cost increases and you don’t have the ability to manage the costs,” Pittman said. “There has to be some focus at the federal level on the cost of these programs and the way they’re implemented in order to save some money.”

Pittman spoke specifically about the program’s eligibility requirements, which are set and enforced at the federal level to determine who qualifies for benefits. In recent years, the cost per patient has stayed level at around $5,000 to $6,000, but the number of new patients has skyrocketed with 300,000 new patients enrolling in Medicaid since 2008. Yet, Azar said, the state has “little ability to control enrollment” in the current system.

Congressman Bradley Byrne

Congressman Bradley Byrne

Having served in the Legislature previously, U.S. Rep. Bradley Byrne is no stranger to the state’s Medicaid woes, but while he called the current situation a “very tough problem for the state,” he said it’s not a new one.

“We were discussing it when I was in the Legislature over 10 years ago. We kicked the can down the road then, despite some of us insisting that we deal with it,” Byrne said. “At some point, it gets to be too big to deal with easily.”

Leaving a program like Medicaid unfunded can be difficult politically and practically, according to Byrne, who said Alabama now has “lots of rural and inner-city hospitals that are very dependent on Medicaid recipients.”

Though he agreed with Pittman that a permanent solution might have to come from the federal level, Byrne said that would be impossible under President Barack Obama because he would likely veto such a measure and there isn’t enough support to override it.

Byrne said the situation might be more plausible after November’s presidential election, as at least some of the remaining GOP candidates have shown support for block granting Medicaid functions to the states.

“[It] means instead of being an administrator of a federally run program, each state would get an allotment of money to run its own program,” Byrne said.

While he’s willing to work with state legislators, Byrne said, the problem couldn’t be solved on the federal level until there’s a president who “will work with Congress.” In the meantime, he said, “Alabama’s got what it’s got.”

“The state chose to be part of the Medicaid program as it is, and the rules and regulations are what they are,” Bryne said. “I can tell you the Medicaid agency in Washington is not going to treat Alabama differently than they treat other states, and I think the office in Montgomery knows that. They’re going to have to comply or get out of the program entirely, and I don’t think that’s a viable option.”

Update:

As the 2016 regular session came to a close on Wednesday, members of the Senate were unable to agree on a use for the BP settlement. While some wanted a larger allocation to state debt, others were in favor of using the funds for more road projects on the Gulf Coast and throughout the state.

Ultimately, the bill died and the gap Medicaid funding remains.