Historic Cost-Saving Medicaid Reform Heads to Governor

By Greg Reed

The Alabama House unanimously passed sweeping legislation today to reform the state Medicaid program. Under the current system, long-term care is paid for using fee-for-service reimbursement. Senate Majority Leader Greg Reed’s (R-Jasper) and Rep. April Weaver’s (R- Brierfield) legislation – part of the Senate Republican Caucus agenda – will establish integrated care networks (ICNs) to contract with Medicaid to provide long-term care services under a capitated system. It also allows increases the nursing home-care to home-based care ratio from 75/25 to 50/50. The bill already passed the Senate, and now goes to the Governor for his signature.

Reed’s bill will slow the rise in Medicaid costs and save taxpayers as much as $1.5 billion over the first ten years, assuming a three-percent annual growth in the program. Optumas, a national actuarial consulting company that provides advice to state Medicaid programs, calculated the projected savings.

Medicaid is the largest expenditure in the state’s General Fund budget, which is facing a deficit of $200 million. For the current fiscal year, Medicaid consumes 37% of the budget, according to the non-partisan Legislative Fiscal Office. The Department of Corrections, the second-largest expenditure, takes up 21% of the General Fund budget. According to the Alabama Policy Institute, the state’s Medicaid expenditures increased by 53% between 2001 and 2013.

“Our state has an obligation to provide crucial long-term care services for the elderly eligible for Medicaid coverage, while at the same time finding ways to protect taxpayers from cost increases,” said Senator Reed. “My bill will cut hundreds of millions from the budget long-term and help us better care for patients.”

In 2012, the legislature passed another Medicaid reform by Senator Reed to establish regional care organizations (RCOs), where each is given a set dollar amount to cover the cost of all Medicaid care within their established coverage area. The integrated care networks for long-term care will operate under the same premise and should be in operation by October 1, 2018. Beneficiaries will be prohibited from participating in both an RCO and ICN to further reduce costs to taxpayers.

“The population of Alabamians age 70 and older is expected to rise quickly over the next ten years. In fact, close to 10,000 seniors are projected to join the Medicaid rolls by 2028,” remarked April Weaver, Chairwoman of the House Health Committee. “This legislation will improve the quality of long-term care, while gradually bending the cost curve down to reduce costs for Medicaid.”

Alabama Medicaid will actively supervise the ICNs’ activities to ensure solvency and quality assurance. The bill also establishes a citizens’ advisory committee for each integrated care network, which is tasked with advising the ICN on ways to be more efficient in providing quality care to Medicaid beneficiaries.

“Moving to integrated care networks provides an opportunity to reform our long-term care system in a way that assures high quality care at lower cost in a community setting,” said Dr. Don Williamson, State Health Officer and chair of the Medicaid Transition Task Force.