Alabama on the fence about taking money for Medicaid

Gigi Douban Sep 18, 2012

Alabama on the fence about taking money for Medicaid

Gigi Douban Sep 18, 2012

Kai Ryssdal: We’re gonna take a minute now and talk about health care policy; the financing of health care, to be specific. One of the key parts of Obamacare is an expansion of Medicaid, the government insurance program for the poor. Under the health care law, it’s gonna get a whole lot bigger than it already is. Millions more people will become eligible — millions of people who’ll largely be paid for by the Feds.

At least five governors have already said ‘No, thanks’ — to both the money and the expansion.  

Some, like Alabama Governor Robert Bentley, are taking months to make up their minds.

From Birmingham, Gigi Douban explains why. 

Gigi Doubon: To understand why anyone would turn this money down, you kind of have to know how Medicaid works in a state budget. And that’s no simple task. Don Williamson oversees Alabama’s Medicaid office. Recently, he showed me just one of the charts he’s trying to decipher.

Don Williamson: This is the funding chart, for how the money flows in hospitals. And it looks like a Rube Goldberg-developed mouse trap. It is extraordinarily complicated and it has words like ‘UPL-based payment’ on it.

Williamson is one of those calm, deliberate types. He skips lunch most days, and he seems a little worn down. Understandable, considering that after months on the job, he’s still trying to get his head around the intricacies of Medicaid.

Here’s, generally, how it works in Alabama. Whatever Medicaid costs the state, the Feds kick in 68 percent. Different states have different federal matches. So, in wealthier states, it might be as low as 50 percent. To come up with the rest, states pull in money from all kinds of sources. In Alabama, it comes from things like taxes health care providers’ pay and rebates from drug manufacturers who provide Medicaid drugs.

The math gets fuzzy really quickly.

Williamson: You’re not using simple dollars. I mean, you’re not using money that the legislature gave you and said, ‘This is all you need to run your program.’

If that doesn’t make it hard enough to manage costs, here’s another problem: the state has no incentive to bring costs down, because the more sick people there are in hospitals and other facilities, the more money the state brings in. Take nursing homes. They’re providers, so they pay taxes to the state for every Medicaid patient there.

That means it helps the state Medicaid fund to have more people in nursing homes.

Williamson: So, if you suddenly reduced average occupancy from 87 percent to 84 percent, you may not have the effect of saving money. You may have the effect of costing the agency money, because of a reduction in the provider taxes.

Williamson says it’s the same with hospital admissions. The more there are, the more Medicaid money flows to the state. So, you’d think Alabama would be all over health care reform because remember, the feds are going to cover 100 percent of the cost to expand Medicaid at first.

But then it drops to 90 percent. For Alabama, that could mean an extra $500 to $700 million out of the budget.

Williamson: It’s hard to imagine right now where Alabama would get the money to fund a Medicaid expansion.

Usually when states scrape the barrel, they look to areas that eat up the biggest chunks of the budget — like education and transportation. And prisons.

About 22 percent of Alabama’s budget goes to correctional facilities. Should be able to grab some cash there. Yet, most of the prisons here are over-capacity.

This women’s work release program near downtown Birmingham is close to capacity, and like a lot of other agency’s drawing from the state’s general fund, it’s already underfunded and understaffed. Brian Corbett is a spokesman for the Department of Corrections.

Brian Corbett: We’re already operating on a bare bones budget and a bare bones staff. For public safety reasons, especially with the number of inmates we have state-wide, we certainly can’t afford to be losing staff.

OK, that rules out jails. And education has already been stripped bare.

But some experts say expanding Medicaid doesn’t have to decimate a state budget. Rachel Garfield is senior researcher with the Kaiser Commission on Medicaid and the Uninsured. In fact, she says, it’s not a huge jump compared to what states are already spending.

Rachel Garfield: What seems like a large dollar amount, in the context for what is baseline state budget for Medicaid, it’s a relatively small share. There’s a common saying that a lot of people who work in Medicaid policy say, which is that there’s not one Medicaid program, there are 50 Medicaid programs. And if you understand one of them, you understand one of them. Because each is unique.

But no matter how you cut it, a bigger Medicaid program means an influx of federal dollars; it also means more jobs and tax revenue. All those new patients have to go somewhere, says Don Williamson of Alabama’s Medicaid program. He says in Alabama, that could bring more than $10 billion into the state over several years. And, he says, that boost just might be enough to pay for an expansion.

In Birmingham, I’m Gigi Douban for Marketplace.

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