When President Barack Obama signed the Affordable Care Act into law in 2010 — to provide health care coverage to uninsured Americans and expand Medicaid — several states, including Alabama, found it a bitter pill to swallow.
That was then; this is now.
The “bitter pill” did not go down easy for many Alabamians. But, as a result of the Affordable Care Act, the state’s Medicaid program is being given what many experts agree is a much-needed head-to-toe checkup.
In October 2012, Gov. Robert Bentley established the Alabama Medicaid Advisory Commission to evaluate the financial stability of Alabama Medicaid and the care it provides to patients. In response to the commission’s report, the Legislature passed a bill in 2013 to launch Medicaid reform.
The state is currently revamping its Medicaid program to improve quality of health care services and reduce costs. Alabama operates under a “fee-for-service” model, which, under the new bill, will change to a managed care system.
Managed care will be handled in five districts in Alabama using Regional Care Organizations (RCOs). RCOs will contract with the Alabama Medicaid Agency to provide covered services in each of the five regions. There may be multiple RCOs in each district. The Alabama Medicaid Agency will specify what they cover and pay each RCO a set amount for each beneficiary.
Twelve groups have applied to be probationary applicants and must meet financial and other requirements and sign contracts to care for Medicaid beneficiaries starting by law no later than Oct. 1, 2016. It’s possible, though unlikely, some could start earlier.
Alabama Public Health Officer Don Williamson, a medical doctor, is in charge of the state’s Medicaid reform. Williamson says the transformation allows Alabama to move from a system where payment is based on visits and volume to one based on outcome and quality. The goal is to provide better health outcomes for clients and a more predictable funding demand for the state.
“We are making very good progress in our transformation efforts, ” Williamson says. “We have at least two applications from each region and will make decisions on granting probationary certification by the end of the year.”
Acting Alabama Medicaid Commissioner Stephanie Azar points out that before an RCO can receive final approval, the organization must meet all the requirements as outlined in state law. “Because this is a new initiative for Alabama, our legal team has spent considerable time researching and preparing rules around governance, collaboration, quality assurance and other requirements.”
Alabama is among the states that have applied to the federal government for a waiver to use federal funds earmarked for Medicaid expansion to pay private organizations to provide health care coverage, in Alabama’s case through a new capitated care system operated by RCOs.
The federal government provides this waiver option to give states the flexibility to design and improve their programs. Because Alabama lacks experience with managed care, its waiver will help hospitals transition to this new way of financing.
Researchers at the University of Michigan note that waivers are also important politically, allowing governors to “remain critical of the Affordable Care Act while pursuing Medicaid waivers they view as beneficial to their states.”
Each RCO will have a governing board comprised of 20 members. There are 12 risk-bearing members and eight non-risk bearing members for each RCO’s governing board. Risk-bearing participants, or owner investors, bear risk by contributing cash, capital or other assets to the RCO. They also bear risk by contracting with the RCO to treat Medicaid beneficiaries at a capitated rate per beneficiary or treat Medicaid beneficiaries even if the regional care organization does not reimburse the participant.
East Alabama Medical Center in Opelika is a risk-bearing member and was a participant in the first of three pilot programs Alabama conducted to lower cost and provide better care to Medicaid patients.
President and CEO Terry Andrus says the RCO is the first opportunity to let providers organize themselves to help reform health care. He identifies two reasons why EAMC became a risk-bearing participant.
“We are learning to manage a population — Medicaid in this instance — which I think will be the model for most care going forward. Secondly, with risk there’s reward. If we manage this population well, there could be profits for the entity. When you look at the RCOs, it’s a little scary for the hospitals, and you are taking some risk. It will be challenging, but we see it as a positive.”
Expanding Medicaid is hotly debated these days. As Jim Carnes, policy analyst for the Arise Citizens Policy Project observes, reform and expansion are on different sides of the coin. “The reform is changing the way we provide services for existing Medicaid participants, and expansion would bring more people into the program.”
Carnes says the income limit for Medicaid eligibility in Alabama is “extremely low, ” at 18 percent of the federal poverty level. Medicaid income limits are calculated on the basis of the federal poverty level, which varies by family size. Adults without disabilities and without minor children cannot qualify for current Alabama Medicaid coverage.
Medicaid expansion would make coverage available to all adults — parents or not — with incomes up to 138 percent of the federal poverty level, which is $15, 856 for an individual and $26, 951 for a family of three.
“Alabama’s Medicaid reforms are a bold move toward better health care for the most vulnerable of our citizens, ” adds Carnes, who served as the only consumer advocate on Bentley’s Medicaid Advisory Commission. “We can broaden the impact of reform by closing the coverage gap for low-income families.”
Nearly half of the states, including Alabama, have refused to expand Medicaid eligibility, which is estimated to leave roughly 5.7 million people uninsured. In Alabama, some 300, 000 people would be eligible under expansion.
Through the Affordable Care Act, the federal government offered to pay states 100 percent of Medicaid expansion costs for the first three years — 2014 to 2017 — and 90 percent thereafter. In order to take advantage of 100 percent of the costs for the first three years, states had to apply by January 1, 2014. These federal dollars are for benefits only and do not include administrative costs, which comprise about 3 percent of the Alabama Medicaid Agency’s budget.
As reported in studies developed by the University of Alabama and University of Alabama at Birmingham, expansion would create more than 30, 000 jobs, and business activity in Alabama would increase by $28 billion. It’s estimated that expansion would create a $900 million surplus for the state by 2020.
Despite these findings, Gov. Bentley has opposed expanding Medicaid.
“It’s not fiscally responsible to expand a broken system, ” Bentley said in a recent email reply. “However, I am working to make the current Medicaid system more effective and efficient for the people currently enrolled.”
The federal government, however, has also decided not to continue a broken system of compensating hospitals for treating the uninsured patients. Under the Affordable Care Act, regardless of whether a state expands Medicaid or not, the amount of money the federal government reimburses that state’s public hospitals — which provide a disproportionate share of services to the uninsured — decreases by about 75 percent. With the expansion of Medicaid, those uninsured will be largely covered. Without expansion, hospitals that have a big charity load are going to be between a rock and a hard place.
Glenn Sisk, CEO of Coosa Valley Medical Center and a vocal proponent of Medicaid expansion, says expansion both addresses a public health issue and provides economic benefits to providers. Sisk says the many Alabamians who would qualify for Medicaid under expansion in most cases are hard-working citizens not connected to a physician because of their lack of insurance.
“Their access to care is limited, and they find themselves utilizing their local hospital emergency department as a primary care physician’s office. Oftentimes, this translates to care being delayed, effective outcomes being put at risk and the cost of care rising exponentially. Expansion would dramatically improve these problems.”
Sisk adds that Alabama hospitals receive some of the lowest reimbursement of any state. Despite poor reimbursement, hospitals provide care in emergency departments regardless of the patient’s ability to pay, resulting in “hundreds of millions of uncompensated care dollars” stressing the health care infrastructure.
Seventeen Alabama hospitals have closed their doors since 2000, he says, with 10 of those closures coming in the last three years.
“This has contributed to job loss, setbacks to economic development and overall community morale declines in the communities where these closures have occurred. Once again, Medicaid expansion could help offset these acute issues.”
EAMC’s Andrus also supports expanding Medicaid eligibility. “I’m politically conservative, but the money is going to be spent anyway; the system will have to pay. With expansion, the uninsured would have a doctor instead of showing up in the emergency room.”
David Bronner, CEO of the Retirement Systems of Alabama, has taken Bentley to task for refusing to accept federal dollars to expand Medicaid. Bronner has chastised Bentley for his decision in several issues of The Advisor, the Retirement Systems of Alabama’s official newsletter sent monthly to its 330, 000 members.
Rachel Garfield, senior researcher at the Kaiser Family Foundation, a nonprofit agency focusing on national health, says most of the states opting not to expand are in the South.
“Alabamians living below the poverty line will not be insured as a result of Alabama not expanding Medicaid eligibility, ” Garfield says. “They’ll likely remain uninsured because they’re in the coverage gap. They can’t afford to purchase coverage on their own in the marketplace and are not eligible for subsidies.”
The Birmingham-based Alabama Policy Institute, a nonprofit organization for conservative policy ideas in the state, believes that Medicaid expansion is the wrong choice for Alabama. Vice President Katherine Robertson notes that the cost of Medicaid in Alabama consumes more than a third of the general fund and more than 1 million Alabamians are already enrolled in Medicaid, representing nearly 20 percent of the population.
“The federal government’s offer to cover the cost of expansion does nothing to address this problem, ” Robertson says. “Rather, while the state struggles to maintain funding for current enrollees, it will slowly begin picking up a percentage of the cost for new enrollees as well. Furthermore, the high administrative cost associated with Medicaid expansion is prohibitive unless the money is diverted from other state programs.”
Rosemary Blackmon, executive vice president and chief operating officer of the Alabama Hospital Association, says the AHA is hopeful about Medicaid expansion because of the “great strides” taking place with reform. She hopes that the reform actions will help Alabama lawmakers ultimately recognize the benefit of expansion and the federal dollars it could bring to the state.
Some states, Pennsylvania being one, initially refused expansion and are now changing their position. Bentley’s current position is that it’s not fiscally responsible to expand a broken system. Expansion advocates are waiting to see if he changes his mind once the program is fixed.
Jessica Armstrong is a freelance writer from Auburn. David Bundy is a freelance photographer from Vestavia Hills.
text by jessica armstrong • photos by david bundy