Alabama’s Medicaid Limbo

Legislators have become convinced of the net benefits of extending Medicaid, but they’re stuck on the horns of budget earmarking. Maybe the lottery issue, too.

Despite philosophical challenges to Medicaid expansion, “I think that it is something we can accomplish,” says Danne Howard, executive vice president of the Alabama Hospital Association.

If Ronald Reagan was still president and he proposed Medicaid expansion, the Alabama Legislature would be a lot more likely to entertain the idea, says Sen. Jim McClendon, R-Springville, chairman of the Senate Healthcare Committee.

But Reagan left the White House in 1989 and left this earth in 2004, and while some people say they see a slight shift in attitude in Montgomery toward Medicaid expansion, it appears there are a lot of hurdles to clear before it becomes reality.

To date, 36 states and Washington, D.C. have adopted Medicaid expansion and 14 states have not. Of the 14, half are in the Southeast.

Medicaid is a wide-ranging health insurance program for low-income individuals of all ages. Jointly funded by the state and federal government, it provides health coverage for diverse groups of Alabama residents, including pregnant women, parents and caretaker relatives, adults with no dependent children, disabled individuals and seniors.

A provision in the Affordable Care Act (ACA), or Obamacare, called for expanding Medicaid eligibility so it would cover more low-income Americans — people up to 64 years old and with incomes up to 138 percent of the federal poverty level.

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But the Supreme Court ruled that states could not be forced to expand their Medicaid programs, so it was left to each state to determine whether to participate or not.

Jim Carnes is policy director for Alabama Arise and has been at the forefront of the effort to expand Medicaid, which he says is an evolving story. He has a one-word answer for the state’s reluctance to expand Medicaid.

“Obama,” he says. “For a number of years, the reason Alabama did not expand Medicaid was strictly political. That has changed over the years. The Medicaid expansion has moved forward now in 36 states and those states’ Medicaid programs are doing very well with it. No state is trying to pull out. Everybody has shown improvements, new research is coming in all the time about health improvements resulting from Medicaid expansion and the positive economic impact of expansion. Rural hospitals in those states are significantly more stable than the ones in the non-expanded states. As that has happened and we have had distance from the Obama administration, that original objection has kind of subsided, and the conversation at the Alabama Statehouse has changed significantly as well.”

There are “roughly 300,000 people who would qualify for expanded Medicaid coverage, and most of those currently do not have any health insurance,” says Jim Carnes, policy director for Alabama Arise.

According to Carnes, Alabama has “roughly 300,000 people who would qualify for expanded Medicaid coverage, and most of those currently do not have any health insurance. Therefore, when they get sick, they often decide they can’t afford to go anywhere for medical care, so they just get worse. They try to ride it out and then they get worse and go to the emergency room, and we all pay for the services provided there. Those costs get spread across the whole health care system. It is not an efficient use of resources, and it is definitely not an effective use of health care, because we are letting people get worse before they get into care.

“Medicaid expansion is not the original door slammer that it was in the beginning,” Carnes says. “It has turned to ‘Well, it sounds good but how would we pay for it?’”

Sen. McClendon says he has not talked to any of his committee members about the cost of Medicaid expansion but offers the following:

“Fact number 1, and I have been over this with the hospital association and others: It is estimated year one is probably going to cost $150 million. Now the fact is, year two, the proponents say by that time we will be generating money by income tax, new jobs and new equipment, hospitals will be buying a new CAT scan or something to accommodate the increased volume.

“Here is the current issue with that theory. All of that revenue goes to the education trust fund. Not one penny of it, unless major changes are made, will go to the general fund and the general fund has the responsibility of paying the bills.” And that translates to a squabble over funding.

Citing a University of Alabama at Birmingham School of Public Health report, Carnes estimates the first-year cost at about $168 million, which he believes would be more than offset by a combination of increased federal spending and lowered costs of providing state-funded healthcare for the very same people.

Danne Howard, executive vice president of the Alabama Hospital Association, agrees with Carnes about a subtle shift in attitude in Montgomery but says there are issues.

“I think a lot of the conversation over the last couple of years has changed, and it has changed from an awful lot of ‘No, we just can’t do this, because we think the Affordable Care Act will be repealed.’ There was a lot of philosophical pushback that is not necessarily there today. Today it is more about the financing, how are we going to come up with the money for it,” she says.

“I think there are still a lot of philosophical challenges — what would an expansion plan look like, work requirements, work referral, but I think that a lot of our elected officials think that it is something that we can accomplish with an Alabama plan if we could figure out how to pay for it.”

Howard points out hospitals are required to treat people in an emergency situation regardless of ability to pay. “Physician offices, urgent care clinics and other places, they have the ability to turn people away or not treat or not do what they need to do if they don’t have insurance. A hospital may not do that. It is federally required,” she says, adding that uncompensated care has grown to the point that 75 percent of Alabama hospitals are operating in the red.

“If you narrow it down to just the rural hospitals, 88 percent of Alabama’s hospitals have negative operating margins, double digit operating margins,” she says.

According to Howard, rural hospitals have “a totally different dynamic. A lot of folks in rural areas are unhealthier — that has been proven in studies. There is a disproportionate number of un- and under-insured patients in rural areas.”

Last October, Alabama Medicaid Agency Commissioner Stephanie Azar announced that the agency was implementing a new statewide program, called the Alabama Coordinated Health Networks, or ACHN, to provide comprehensive care coordination for the state’s 750,000 Medicaid recipients.

ACHN doesn’t change Medicaid benefits, but coordinates them so recipients get better organized care, and Alabama Arise has supported the effort, Carnes says.

“But,” he adds, “it is not the savior of the rural hospitals. The thing that would most help rural hospitals would be to provide coverage to the uninsured, to the people who cannot afford private coverage and make too much money to receive Alabama Medicaid at its current eligibility limit.”

According to Carnes, Alabama Arise has a revenue plan that would bring about $800 million into the state coffers.

Like McClendon, Carnes anticipates a funding squabble between the education and general fund budgets. But he also anticipates a solution — an extra $800 million in revenue from ending the state deduction for federal income tax. With that, he says, “We could do two major things. We could end the state sales tax on groceries and we would have sufficient new revenue that by some transfers and some other mechanisms between the two budgets, we could pay for Medicaid expansion.”

Carnes says expanding Alabama’s Medicaid program may also help in the state’s efforts to avoid a U.S. Department of Justice lawsuit over prison conditions.

The Department of Justice earlier this year condemned Alabama prisons for unconstitutional levels of violence and inmate deaths, and threatened to file a lawsuit unless conditions are approved.

The Governor’s Study Group on Criminal Justice is looking for solutions to those prison problems, and gathering data on sentencing laws, recidivism and policies. Carnes believes  Medicaid expansion could help, saying untreated mental illnesses and substance use disorders are major contributors to Alabama’s prison problems. And Medicaid expansion would help tackle those problems, he says, by strengthening services that help people stay out of prison and help former inmates become productive members of the workforce.

Beyond financial issues, “The problem with Medicaid expansion and Medicaid in Alabama is attracting providers in rural areas, and it’s hard to do,” says Sen. Jim McClendon. AP Images

“All these are great ideas,” says McClendon, “but there’s folks that have problems with them. Medicaid expansion only makes sense to me. We would have more poor people covered by insurance. One of the arguments for expansion is that it could save rural hospitals. The problem there is the rural hospital model is probably totally out of date with modern health care. Let’s say you have chance to go into a rural hospital in Demopolis or you can be in Birmingham in a hospital in an hour and a half — what’s your choice?

“The problem with Medicaid expansion and Medicaid in Alabama is attracting providers in rural areas, and it’s hard to do.”

McClendon says he favors Medicaid expansion, and “I have thought about it and I have talked to a lot of folks.”

One possibility that always comes up is a state lottery. “We are talking about a lottery,” McClendon says. “I have done a lottery bill about the last three years, but always strike out. That could be one way of paying for it but the single biggest obstacle to a lottery in Alabama is the Poarch Creek Indians. They killed it the last time and they’ll kill it again.”

Bill Gerdes and Robert Fouts are freelance contributors to Business Alabama. Gerdes is based in Hoover and Fouts in Montgomery.

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