2018 legislative update: Medicaid work requirements, ALL Kids, prison mental health funding among top 2019 budget challenges in Alabama

Alabama Medicaid had good news for legislators last week, but it won’t last long. Lower-than-expected prescription drug costs will help Medicaid carry $53 million forward into 2019, meaning the agency will need less General Fund (GF) money next year than initially expected, Medicaid Commissioner Stephanie Azar said during state GF budget hearings Thursday. But that still won’t solve Medicaid’s need for stable, adequate long-term support.

Medicaid funding is just one of many GF challenges for Arise and other advocates this year. In a move that would create new barriers to health care for many low-income households, Alabama may seek to increase copays and impose work requirements for some Medicaid patients. The future of federal funding for ALL Kids, which provides health coverage for more than 85,000 children across the state, remains uncertain. Alabama also faces a federal court order to invest more in mental health care and other health services in state prisons.

Those issues and many others stand against the backdrop of a GF that struggles with a long-term structural deficit. That means GF revenue growth is not strong enough to keep pace with ordinary cost growth for Medicaid, mental health care, corrections and other services.

But lawmakers may be able to get through this year without addressing those deeper budgetary problems. The GF will carry forward $129 million into next year, enough to cover most of the requested increases for Medicaid, mental health care and corrections if Congress provides full federal funding for ALL Kids over the next two years.

The Legislature will have to finalize budgets for both the GF and the Education Trust Fund during a fast-moving 2018 regular session, which began Tuesday and is expected to end in March.

Temporary ‘good news’ won’t solve long-term Medicaid funding woes

Medicaid provides health coverage for one in five Alabamians – most of whom are children, seniors, pregnant women, or people with disabilities. The federal government provides about 70 percent of Medicaid funding in Alabama. The rest comes from the GF (11 percent) and other state sources like provider taxes on hospitals, nursing homes and pharmacies (19 percent).

Medicaid received $806 million from the GF last year, of which $105 million was one-time money from the state’s share of the BP oil spill settlement. Medicaid’s 2019 GF request is for $757 million. That would be 6 percent less than the agency’s total GF allocation last year, but 8 percent more than the amount that Medicaid received out of recurring GF revenues.

The end of Medicaid’s regional care organization (RCO) initiative in July 2017 also drew great legislative interest during the hearings. Azar discussed an “RCO pivot,” which will preserve several features of the RCO plan, with a broader scope and some structural changes. The basic idea of coordinating patient care to produce better health outcomes will continue to drive the reforms, Azar said. But new federal rules will allow Alabama to include more categories of patients in the new system.

Like the RCOs, the “pivot” plan will build on existing care management initiatives known as “health homes,” Azar said. Health homes seek to cut costs and keep patients healthier by using primary care doctors to coordinate enrollees’ health care. Alabama Medicaid has operated health homes since three regional pilot projects launched in 2010.

Arise is committed to ensuring strong consumer oversight and community engagement in whatever shape the new Medicaid reforms take. In a written proposal to Medicaid last fall, Arise emphasized that our statutory responsibility to provide consumer representatives for RCO advisory committees and governing boards gave Arise and our partners at the Disabilities Leadership Coalition of Alabama both a wealth of experiential learning over the last three years and a team of trained appointees eager to participate in the transition.

Azar reaffirmed her support for consumer involvement after the budget hearing, but advocates must keep up the pressure to ensure that principle becomes reality. To that end, Arise and our allies will provide comments on the draft Medicaid reform plan when it is unveiled in coming weeks.

Medicaid work requirement, copay proposals would hurt low-income Alabamians

Arise will seek to minimize the harm from proposals to increase Medicaid copays and impose work requirements on some Medicaid beneficiaries. Azar mentioned the possibility of increasing Medicaid copays but offered few details, other than noting that federal law would limit them to no more than 5 percent of a household’s annual income. She also said it remains unclear whether it would cost the state more to implement such a program than it would raise in return.

Azar’s discussion of work requirements was much more robust. Alabama soon will request a federal waiver to impose a work requirement for Medicaid beneficiaries in the “Parent and Other Caretaker Relative” category, Azar said. That group includes about 75,000 of the more than 1 million Alabamians with Medicaid coverage. Caretaker responsibilities, disabilities and other factors preclude many of them from working outside the home.

On an encouraging note, Azar highlighted the importance of an “exclusion list” of circumstances that would exempt many members of this group from the requirement. The scope of such a list will be a primary focus of Arise’s advocacy.

The White House has welcomed states to impose or increase work requirements and other “personal responsibility” measures for Medicaid patients, and Alabama is moving in that direction. For the vast majority of people served by Alabama Medicaid – children, seniors, and people with disabilities – the expectation of employment is not appropriate.

Most states requesting work requirements so far have expanded Medicaid to cover low-income adults without disabilities, which Alabama has not done, Azar pointed out to lawmakers Thursday. Research shows that Medicaid work requirements would limit access to the health care that many beneficiaries need to stay in the workforce while doing little to increase employment among low-income families.

ALL Kids’ future still in limbo as Congress drags feet on federal CHIP funding

Congress’ failure to provide long-term federal funding for the Children’s Health Insurance Program (CHIP) is another threat to affordable health care in Alabama. That inaction jeopardizes ALL Kids coverage for more than 85,000 Alabama children whose low- and moderate-income families earn too much to qualify for Medicaid.

ALL Kids’ future has been uncertain since long-term federal CHIP funding expired on Sept. 30, 2017. As available funding dwindled, ALL Kids in December announced that the program would end Feb. 1 without additional money. Congress approved temporary CHIP funding in December, which forestalled that move. But if the uncertainty continues, ALL Kids officials said Thursday, they will mail letters this month announcing that the program will freeze enrollment in February and terminate in March.

Under the Affordable Care Act, states have been receiving an enhanced federal match for their CHIPs, which in Alabama amounted to 100 percent federal funding. It remains unclear how Congress will handle this funding formula in a long-term funding plan. The Department of Public Health has requested an extra $53.6 million from the GF next year in case Congress requires Alabama to resume providing state matching money for ALL Kids.

For Medicaid, the loss of CHIP funding would mean that an additional 87,000 children whose Medicaid coverage is paid for by ALL Kids – but cannot legally be terminated – will move to the Medicaid budget. That would increase the state’s cost to cover those children.

Alabama was the first state to win approval for its CHIP when Congress created the program in the late 1990s. It has played a huge role in reducing the state’s rate of uninsured children from 20 percent then to just 2.4 percent today. Arise and other advocates urge Congress to honor this historic commitment by moving forward with a five-year plan for full CHIP funding without further delay.

Federal lawsuit to force more state investment in mental health care in prisons

Mental health care in Alabama prisons is “horrendously inadequate,” a federal judge ruled last summer. That led to an order for the state to solve the chronic understaffing in its prison system, particularly among corrections officers and mental health professionals. Corrections Commissioner Jeff Dunn has requested an additional $80 million in GF support over the next two years to address those issues.

Staffing in Alabama’s prison system is at only half of its expected level, Dunn told lawmakers Thursday. In some facilities, that number is as low as 30 percent, he said. Sentencing reforms have helped reduce the state’s prison overcrowding from 190 percent of designed capacity to 160 percent in recent years, but Alabama still has the nation’s “highest overcrowding percentage,” Dunn said.

State education funding up but still lower than a decade ago

Alabama’s education funding will be up again next year, but it still will be well below its inflation-adjusted level from 2008, before the Great Recession. The Education Trust Fund (ETF) funding cap for 2019 will be $6.6 billion. That’s $216 million, or 3.4 percent, higher than this year’s allocations. The Rolling Reserve Act sets the cap annually based on a moving average of the previous 15 years of ETF revenues. Gov. Kay Ivey’s proposed ETF and GF budgets include cost-of-living raises for both education employees and state employees.

By Jim Carnes, policy director, and Chris Sanders, communications director. Posted Jan. 9, 2018.

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