Medicaid seeks more funding; hopes to make RCOs reality

Jan. 30--The good news for legislators: They voted last summer to cover much of the Alabama Medicaid Agency's requested increase for fiscal year 2018.

The bad news: That money is gone in fiscal year 2019.

The uncertainties: All in Washington.

Commissioner Stephanie Azar told budget committee members Monday the agency -- a keystone of the state's health care sector -- will request a total of $869 million in state funding for the next fiscal year, which starts Oct. 1. The increase will, among other items, cover inflation and Medicare Part B services.

"One thing that is not unique to Alabama is that health care costs continue to rise," Azar told the committee.

Legislators -- who will have to weigh Medicaid's request against those of other agencies funded in the General Fund budget -- last summer voted to give $105 million from the state's share of BP settlement over the 2010 Gulf oil spill to the Medicaid program. The agency received $720 million in General Fund money this year, though legislators managed to bring the total funding to $785 million after the special session. Because of the BP money allocated for 2018, the agency will only seek a $44 million increase in General Fund dollars.

But, as Azar and legislators noted, that $105 million will be gone in 2019. The state also faces an Oct. 1 deadline to implement regional care organizations (RCOs) or lose up to $748 million in federal dollars that could be available. At the same time, the state will have to find a way to sustain the RCOs, which aim to move the program from fee-for-service to payment based on outcomes.

"We're going to have to increase revenue or we'll have a serious trainwreck on our hands," Azar said.

Medicaid covers over 1 million Alabamians, more than half under the age of 17. The program also plays a key role in keeping hospitals and doctors' offices open, especially pediatric offices. The numbers are high despite tight restrictions on eligibility. Childless adults almost never qualify, and those with children must make 18 percent of the poverty level -- $3,629 a year for a household of three -- to receive benefits.

State enrollment grew after the Great Recession but has been flat or declining over the last few years. The federal government pays more than two-thirds of the cost of the state program, but the state match has grown as medical costs have climbed.

The RCOs aim to manage cost growth in the program in part by stressing preventive care and establishing health care benchmarks. The state would receive more federal money if it reaches certain goals, such as cutting the state's infant mortality rate. The Legislature approved the RCO program in 2013, but the state delayed implementation amid last year's funding crisis.

The major question for the RCO program is long-term funding. Azar and legislators both appeared to agree that if the state cannot find a sustainable source of revenue, the program should end. Finding new revenue for the perpetually-troubled General Fund budget has been a futile exercise for years: Legislators, for the most part, have been unwilling or unable to create new taxes for the budget, or raise or transfer existing ones.

"So much of the $105 million is one-time money that we have to use in the '18 budget," said Sen. Trip Pitman, R-Montrose, chairman of the Senate Finance and Taxation General Fund committee. "We won't use it in the '19 budget."

The other uncertainties lay in Washington, where Republicans could make major changes to health care laws and funding Alabama relies on. Congressional Republicans have made moves to repeal the Affordable Care Act, which over 166,000 Alabamians had signed up for through the end of December. There has also been talk about turning Medicaid into a block grant program, which could cut the amount of money available to the state.

State lawmakers have voiced uneasiness about that possibility, and Azar said that if Alabama was not at the table in discussions of a block grant program, "things could go very, very wrong." After her presentation, Azar said enrollment was one area of concern, particularly a block grant that may not take catastrophic events into consideration.

"If we have a tornado or something that causes those numbers to go up, we will not get any additional dollars for that increased enrollment," she said. "And then it would be all on our General Fund, which would be very problematic."

House Ways and Means General Fund chairman Steve Clouse, R-Ozark, said he did not expect a serious discussion of new revenue this year, but said there could be discussions later about putting a gambling initiative on the ballot for the state elections in 2018. A committee is also working on proposals to overhaul the state's budget process.

"I would think we're going to have to have a replacement for the whole General Fund," Clouse said.

Monday's meeting was the first budget hearing for state agencies in advance of the 2017 legislative session, which begins Feb. 7.

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