No Medicaid expansion means dilemma for Ala. hospitals

March 31--An old problem lingers. A solution thought vanished reappears.

And the Alabama Legislature hasn't changed its mind.

The failure of the American Health Care Act (AHCA) last week -- at heart an attempt to repeal the Affordable Care Act (ACA) -- breathed new life into the expansion of Medicaid offered under the ACA. Some states that turned away from it, like Kansas and Virginia, are pursuing the expansion. For years, Alabama's hospitals have pressed officials to expand Medicaid to make up for potentially devastating cuts to uncompensated care funds.

But the state's General Fund budget chairs said this week they remain opposed to Medicaid expansion. Expansion would extend a limited program that chiefly covers children, elderly and the disabled to all able-bodied adults making up to 138 percent of the poverty line: $16,643 a year for individuals; $33,948 for a household of four.

"For me, it's a nonstarter," said Sen. Trip Pittman, R-Montrose, the chairman of the Senate Finance and Taxation General Fund committee and a longtime opponent of the Affordable Care Act. "I just don't think individual health care is sustainable. Ultimately I believe it's going to lead to the extinguishing of the opportunities in this country."

Both Pittman and House Ways and Means General Fund chairman Steve Clouse, R-Ozark, cited the extra cost of expanding Medicaid a major obstacle. While the federal government would pick up at least 90 percent of the cost of expansion, the state's General Fund budget has flat revenues. Legislators are unwilling or unable to raise taxes or create new revenues for the budget. As a result, the General Fund struggles to pay for the state's restricted program.

Legislators are using $105 million in one-time money from the state's share of BP's settlement over the 2010 oil spill to pay for Medicaid in the 2018 fiscal year, which begins Oct. 1. Legislators have set aside another $97 million to make up for the loss of that money in 2019, but might have to tap into it sooner should Congress shift more costs of the Children's Health Insurance Program (CHIP) to the states.

"I don't see (expansion) happening right now," Clouse said. "The unknowns are even greater now that this has happened now."

Gov. Robert Bentley has sent mixed signals about his views on Medicaid expansion through the years. In his first term he staunchly opposed it, but after winning re-election in 2014 he hinted he might be open to it. A special task force the governor convened recommended expansion in 2015. Yasamie August, a spokeswoman for the governor, did not address the issue directly in a statement Thursday.

"Governor Bentley remains optimistic there will be another bill that will repeal and replace the Affordable Health Care Act," August said. "The Governor is continuing to focus on Alabama's efforts to reform Medicaid by providing managed care through regional care organizations."

Problems for hospitals

The lack of expansion leaves state hospitals in a bind. The Affordable Care Act as passed required states to expand Medicaid. But the U.S. Supreme Court in 2012 ruled that states could opt out of that. Bentley and the Legislature have resisted expansion efforts.

The ACA came with cuts to funds that help Alabama hospitals offset the cost of treating uninsured individuals. Known as disproportionate share hospital (DSH) payments, the ACA reduced the funds under the assumption the Medicaid expansion would make up for those losses.

The AHCA restored the DSH cuts for Medicaid in non-expansion states, but not Medicare. Hospitals had hoped to negotiate that further if the bill made it to the Senate. But that ended last week when House leaders pulled the AHCA from the House floor before an expected vote.

That means the scheduled cuts will go into effect on Oct. 1, which could squeeze revenues at hospitals around the state. Danne Howard, executive vice president and chief policy officer for the Alabama Hospital Association, said earlier this week the DSH payments are "fundamental to keeping doors open."

"The cuts are still in place," she said, adding "we'll be working with our members in Congress to see if there's any other vehicle."

U.S. Reps. Martha Roby, R-Montgomery, and Terri Sewell, D-Montgomery, said in separate statements this week they were aware of the DSH payments issue.

"The status quo is simply unacceptable, and I am still committed to delivering on our promise to address the failures of Obamacare," a statement from Roby said. "Though it is early in the process, I certainly believe easing the burden on hospitals that handle a disproportionate share of indigent care should be a part of the solution."

Christopher MacKenzie, a spokesman for Sewell, said the representative would have voted against AHCA "as it would have resulted in less coverage at greater cost for her constituents."

Both Roby and Sewell have co-sponsored the Fair Medicare Hospital Payments Act, a bill introduced in the House by U.S. Rep. Diane Black, R-Tenn. that would increase Medicare payments to rural hospitals.

"Congresswoman Sewell will continue to stand up for her constituents and offer legislative ideas in the Ways and Means Committee that strengthen access to affordable care and protect and support our rural hospitals," MacKenzie's statement said.

Mind the gap

The statement also noted Sewell encouraged state legislators to expand Medicaid. Alabama imposes strict limits on Medicaid eligibility. Childless adults almost never qualify, and parents of children who do must make 18 percent of the poverty line or less to receive benefits. That's $2,923 a year for a household of two and $3,676 a year for a family of three.

Despite the limits, Medicaid covers more than 1 million Alabamians, about 22 percent of the population. Most are children, the disabled or the elderly.

The Affordable Care Act, which expected Medicaid expansion to cover the poor, targeted subsidies for individual health care plans offered through a federal marketplace to those making above the poverty line. According to the Kaiser Family Foundation, a Washington D.C.-based nonprofit that follows health care issues, about 199,000 Alabamians could receive insurance if the state expanded Medicaid.

Of those, 126,000 Alabamians fell into a "coverage gap" last year -- making too much money to qualify for Medicaid, but not enough to qualify for subsidies for ACA plans. Kaiser estimates three-quarters of those individuals are childless adults; 57 percent are people of color and 46 percent are women.

States that expanded Medicaid have also used it for other projects, including efforts to combat opioid addiction, a major problem in Alabama. The issue for legislators, generally, has been cost and coming up with the 10 percent match to allow Medicaid expansion in the future. Kaiser estimated in 2015 that expansion would increase state spending on Medicaid by 4 percent. Four percent of the state's $685.1 million General Fund spending on Medicaid in 2016 equals about $27.4 million in General Fund money. But legislators note the limited revenues that are in the budget are quickly absorbed by Medicaid and Corrections costs.

"I really don't see that support in the Legislature right now," said Rep. David Standridge, R-Hayden, the chairman of the House Rural Caucus. "Obviously we'll try to keep a close eye on rural hospitals."

Democrats, in a superminority in both chambers of the Legislature, have supported expansion for years. House Minority Leader Anthony Daniels, D-Huntsville, said they would be willing to look into items like work requirements or co-pays for those in the expansion to help fund the state's share. Indiana uses a similar model to fund its expansion.

"We must seriously consider Medicaid expansion, even if we have to look at a different type of model, like the Indiana model or things that work for our state," Daniels said. "That will be the conversation and focus for Democrats."

But Howard was not hopeful at seeing expansion anytime soon.

"I would like to think it could and would," she said. "The fact is I do not believe it will."

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