This year, the legislature is holding firm over funding Medicaid, which provides health benefits to about 22 percent of Alabamians, more than half of whom are children.
The budget wrangling began when Medicaid Commissioner Stephanie Azar stated that Medicaid needed an additional $100 million to maintain current services and fund the transition to the potentially more cost-effective regional care organizations (RCOs). The legislature passed only a $15 million increase, and the Governor, as threatened, vetoed the state’s entire $1.8 billion budget. The legislators overturned his veto.
Last year, to cover some of the needed increase in Medicaid’s budget, legislators pulled monies from several places, including the Education Trust Fund. That option holds zero support this year. Now Alabama Medicaid will have to revise their benefit offerings to compensate for the $85 million shortfall.
The legislature’s decision has already impacted healthcare in rural areas. In Ozark, which had no full-time pediatricians, Dale Medical Center worked with Dothan Pediatric Services to open a satellite location. They have been seeing 40 to 60 patients a day since January and had purchased land to erect a permanent office. When the legislature overturned Governor Bentley’s veto, the pediatricians halted their plans.
With half its patient base relying on Medicaid, Dothan Pediatric worried about the financial risk of expanding. “And now that group is not even sure that they will be able to continue serving patients in Ozark and other satellite communities if they are going to get so little to cover their costs,” says Rosemary Blackmon with the Alabama Hospital Association.
The state’s Medicaid budget takes effect on October 1st, though legislators continue to meet on the issue in joint hearings. Besides the 571,500 children receiving healthcare in Alabama, Medicaid covers pregnant women, the disabled, and the indigent elderly. The working parent of a Medicaid-covered child can receive caregiver benefits if they earn $2867 or less per year for a family of two.
The $85 million shortfall could mean these recipients will lose optional services as defined by the Centers for Medicare and Medicaid Services (CMS), such as outpatient dialysis. “Now those people will have to drive to a hospital for dialysis multiple times a week,” Blackmon says. In rural areas, that could mean 50 miles or more, along with the increased costs to Medicaid of patients having to be admitted. “It’s not a very efficient way to handle this,” she adds.
Adults could also lose coverage for prescription medications. “That means they’ll go awhile without medicines and show up in the hospital emergency room a whole lot sicker,” Jones says. “It’s going to be more costly to the system.”
The major impact to rural areas would come from the retraction of the primary care physician’s reimbursement increase of about 28 percent. That loss would drop their pay back to 2005 levels. And Alabama Medicaid says it may cut payments an additional 21 percent over that, depending on the shortfall come Oct 1st.
“We’re already not replacing physicians when they leave,” Jones says. “It’s hard to recruit physicians to rural areas.” Recently, one of Fayette’s five local doctors told Jones that the reimbursement cut could be the thing that makes him retire early. “That would mean a 20 percent cut in doctors for our area,” he says.
Of the eight hospitals closed in Alabama in the last five years, five were rural. “Rural hospitals have been struggling for a long time,” Jones says.
“All of these things snowball,” Blackmon says. “If you lose physicians in a community, then you often lose pharmacies, home health agencies, and other providers who depend on physician orders. Then hospitals lose access to these services and end up with more patients in their emergency departments and fewer admissions because patients will seek healthcare in other areas where they can find physicians. With the median margin for Alabama’s rural hospitals being a negative two percent, this snowball could be devastating.”
“The scary part is once you lose healthcare infrastructure like that— a hospital, home health care, a pharmacy — it’s real difficult to recruit new ones to those rural areas,” Blackmon says.
Last year, the legislature came up with a fix for the shortfall but not until a few weeks before the start of the fiscal year. Jones hopes that with a million Alabamians utilizing its services, legislators will realize the impact the program plays in communities beyond helping those it covers.
“When a hospital or pharmacy closes, the insured also lose out,” Jones says, along with the businesses reliant on that money stream. Statewide, Medicaid pumps $6 billion into the healthcare sector, according to the Alabama Hospital Association. Jones says the legislators “need to recognize that hospitals are the economic engine for many of these rural communities.”