Bill to fund Medicaid expansion brings praise, skepticism

March 01-- Mar. 1--The main financial obstacle for Alabama in expanding Medicaid is paying for the first year, and a bill by U.S. Sen. Doug Jones would solve that problem, the head of Huntsville Hospital Health System said Thursday.

"The first year is the hard year. That's where the state's got to come up with a pretty big chunk of money," said David Spillers, CEO of a system that includes Decatur Morgan Hospital, Athens-Limestone Hospital and Lawrence Medical Center. After that first year, Spillers said, economic activity from the federal dollars paying for the bulk of the expansion would generate sufficient state tax revenue to make the state's match affordable.

Jones' bill, filed Wednesday, would reset the clock on federal funding for Alabama and the 13 other states that have not expanded Medicaid under the Affordable Care Act. The ACA provided federal funding for 100 percent of the cost of expanded Medicaid programs through 2014, with the percentage of funding gradually dropping to 90 percent. Thus, if Alabama were to now decide to expand Medicaid, it would be faced with paying 10 percent of the cost of the expansion.

The bill filed by Jones, D-Birmingham, would provide full federal funding of expanded Medicaid programs for the first three years, with federal funding gradually dropping to 90 percent after the sixth year.

Both Jones and Spillers point to a recent University of Alabama at Birmingham study indicating the federal dollars from expanding Medicaid would generate economic activity that would produce enough tax revenue for the state to offset most of the ongoing cost of maintaining the expanded program.

"The biggest hurdle based on the UAB study is that first year," before the predicted tax revenue finds its way to state coffers, Spillers said. "Once that tax revenue starts coming in, there's a huge benefit to the state. If we could get relief on those first two or three years, then the state should have no problem at all funding its portion."

The UAB study, published this year by economist David Becker, pegged the state's first-year cost of expanding Medicaid at $168 million, with ongoing net annual costs of about $23 million. The higher first-year cost was based on the assumption that the state would pay 10 percent of the cost, and that state and local tax revenue generated from the influx of federal dollars would not be realized in the first year.

Jones said his bill would allow the state to delay footing the bill until after expansion-triggered revenue flows into the state's budget.

Balanced against the ongoing $23 million cost, according to the UAB study, would be an annual statewide economic impact of $2.7 billion.

State Sen. Arthur Orr, R-Decatur, said Medicaid expansion is not financially possible under current law because the state can't cover the 10 percent state match. He said the latest estimate from the Legislative Fiscal Office is that the 10 percent amount equates to between $127 million and $158 million for an expansion beginning in fiscal 2020.

"That's $100-plus million that we don't have on hand," Orr said.

He said he has not looked at whether Medicaid expansion is feasible if Jones' bill passes.

"I don't know if the bill will pass. I'd be more interested if we were talking about realities, not speculation," Orr said.

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He said he's skeptical of economic impact projections suggesting the expansion would generate enough taxes for the state to offset the bulk of the ongoing expense.

"Even if the bill were to pass, three years or so thereafter you're going to have to have a plan to pay the 10 percent," Orr said. "That will still be $150 million we'd have to come up with. That's been the rub for us."

After the first three years of 100 percent federal funding of the expansion, Jones' bill would drop annually to 95 percent, 94 percent, 93 percent and then, in the seventh year and thereafter, 90 percent.

Jones on Thursday said the economic benefit of expanding Medicaid is compelling.

"We've left about $14 billion of our own taxpayer money on the table so far," he said, referring to federal dollars that would have been spent in the state had Alabama expanded Medicaid in 2011. "We can't afford to keep doing that at the expense of our rural health providers and the Alabamians who badly need access to coverage."

Jones said past opposition to the Affordable Care Act and its Medicaid expansion provisions -- signed into law under former President Barack Obama -- was largely political, and the recent expansion in several Republican-governed states suggests that's changing.

"President Obama's not in office anymore. Let's just get over that. He served his two terms; he's gone," Jones said. "This is about the future of Alabama's health-care industry, especially in rural areas. If anyone in any political party is concerned about the health of Alabama's economy and concerned about the health of its citizens, then they should do what they can to expand Medicaid and get this money coming in."

Spillers said hospitals, including some in north Alabama, are struggling under the burden of patients that lack insurance and don't qualify for Medicaid. Medicaid expansion would provide coverage to adults with family incomes up to 138 percent of the poverty level, or $34,338 for a family of four. People with incomes above that amount can obtain subsidized coverage through the Affordable Care Act's insurance exchanges.

"There are hospitals in north Alabama that are part of our system that would not have any resources to fund infrastructure and construction if we weren't helping them to do that," Spillers said. "If they were independent hospitals, they would be dying a slow death because they couldn't capitalize themselves.

"That's what's happening to the smaller, independent hospitals around the state. If you can't replace equipment that wears out because you have not been running in the black, then eventually you have a hospital people won't go to. That's what's happening to many of them now."

Lawrence Medical Center is managed by Huntsville Hospital Health Systems, but receives no financial support from the system.

"They do not run consistently in the black," Spillers said. "Break even is about the best they can do, and that's with generous tax support from the county. If they ever need a major facility replacement or have multiple expensive pieces of equipment or HVAC equipment go out, they'll struggle to find the money."

-- eric@decaturdaily.com or 256-340-2435. Twitter @DD_Fleischauer.

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