Finding a Balance to Save Medicaid & Protect Taxpayers

By Steve Livingston

When I ran in 2014, I promised to keep you updated on the political debates in Montgomery. Today, I want to spend a few minutes explaining why funding Medicaid, the federally mandated insurance program for low-income pregnant women, senior citizens, children, and the disabled, is the central challenge for state lawmakers.

Last week, the Legislature passed a $1.8 billion budget for the state General Fund. Keep in mind that Alabama is one of only a few states in the country with two budgets: the General Fund allocates all non-education state spending, which includes state troopers, prisons, Medicaid, Public Health, DHR, and our National Guard units; the Education Trust Fund is the budget for Alabama’s K-12 schools, community colleges, and universities.

Thankfully, the Education budget is in fine shape. Republicans have worked hard over the past five years to build up Education’s fiscal reserves. Proration – forcing schools to make drastic cuts in the middle of a school year because of budget miscalculations in Montgomery – hasn’t occurred since conservatives took over the Statehouse in 2010. This fiscal year there is a surplus in the Education budget and I am pushing for part of that surplus to go towards a pay raise for our hard-working educators.

Unfortunately, the picture in the General Fund budget is a bit more challenging. Costs for many programs – especially Medicaid and prisons – have risen faster than tax revenues.

Medicaid and prisons consumed forty-one percent of the General Fund budget in 2004. According to the non-partisan Legislative Fiscal Office, this year the two programs will eat up sixty percent of non-education state spending, with Medicaid alone accounting for forty percent or $700 million.

What is driving Medicaid’s costs up? A number of factors contribute, including a high number of disabled persons. Alabama has the highest percentage of disabled persons in the country – thirty-one percent of adults identified as disabled, nearly all of whom are on Medicaid. Combine that with a rising number of senior citizens and you start to understand why our state’s Medicaid costs have spiked from $314 million in 2010 to $700 million for the current fiscal year. And the governor wants another $85 million more for the program.

Thankfully, the Legislature passed an important reform in 2013 to move Medicaid to a managed-care model, administered by local health care providers. Independent experts estimated Alabama would save tens of millions over the next decade from this reform, but the state needed federal approval before we could overhaul how the Medicaid program is run. Just last month, federal officials announced they approved Alabama’s reform, with the caveat that we must continue to fully fund the state’s Medicaid portion before the new program could get off the ground.

All right, so that is a lot of numbers. There is no doubt Medicaid is a complicated program!

Here is the main reason you should care about the rise of Medicaid expenditures: if the state doesn’t cover Medicaid’s costs, health care providers in rural Alabama and hospitals everywhere will be in deep trouble, since Medicaid recipients are a majority of their patient population. Further, the switch to the managed care reform, poised to save the state millions over the next decade, will be in jeopardy.

On the other hand, the state simply doesn’t have the money in the General Fund to continue covering Medicaid’s rising expenses, absent new taxes, a lottery, another transfer from the Education budget, or an unexpected source of one-time money. This year, the Legislature’s budget could only afford to give Medicaid $700 million, an increase of $15 million over last year, but well short of the $785 the state agency requested.

The Governor has said he will veto the Legislature’s budget. If so, then I hope Governor Bentley will present a clear plan of action for where the additional $85 million will come from. I can say with confidence that the people of Alabama and its legislators are in no mood to consider tax increases to cover Medicaid’s rising costs.

As always, please contact my Senate office with any questions or concerns you may have: (334) 242-7890 or [email protected]

Senator Steve Livingston represents District 8 in the Alabama State Senate, which is comprised of all or parts of Madison, Jackson, and DeKalb counties. He is the owner and operator of Dicus Oil Company in Hollywood, Ala.