Concern over the future viability of Alabama’s Medicaid program arose when, on April 10, 2012, the House of Representatives approved a 2013 General Fund budget that would have reduced Medicaid spending from $575.4 million this fiscal year to $400 million, a reduction of over 30%. On May 8, 2012, the Senate Finance and Taxation General Fund Committee approved and forwarded to the Senate the budget approved by the House, after increasing it to $418.7 million and including a proviso that Medicaid would receive $184 million more if voters in November approved a constitutional amendment to transfer that amount each year for three years from state education tax collections.
Governor Robert Bentley publicly stated that he could not accept a budget allocating only $400 million for Medicaid, and would veto any such budget. According to Donald E. Williamson, M.D., Alabama’s State Health Officer, the Medicaid program needs $602 million to operate a minimal program next year. Williamson has said that without proper funding, the state might lose federal funds for Medicaid, and could be sued in federal court. Primary care physicians could leave the Medicaid network in droves due to diminishing reimbursements. Programs like outpatient dialysis and adult drug benefits would be eliminated, and hospitals would close. Governor Bentley publicly stated that without a minimum $602 million in funding for Medicaid, “our entire health system goes under,”1 and Dr. Williamson described the crises as “...the most dire threat to the health care system that I’ve seen in 20 years.”2
On May 10, 2011, the crisis shifted from Medicaid to the Department of Corrections (“DOC”), when the Senate approved the General Fund budget after adding an amendment applying budget cuts to the Department of Corrections instead of Medicaid. The Senate bill proposed to cut the DOC’s budget by $180 million. The DOC predicted that if such cuts were enacted, approximately 18,000 of the 25,500 prisoners (violent and non-violent) in state facilities would be set free.
However, on May 15, 2012, during the last hour of the last day of the regular legislative session, the legislature approved a General Fund budget of $1.67 billion, which does not contain draconian cuts to either Medicaid or DOC, although it is $66.7 million lower than this fiscal year’s budget. The budget depends upon funds which would be transferred into the General Fund if voters approved a constitutional amendment in September that would authorize transfer of $145.8 million to the General Fund from the Alabama Trust Fund each year over the next three fiscal years. Full funding also depends on a proposal expected in an upcoming special session to transfer 25% of the state’s use tax into the General Fund, along with funding for the Children’s Health Insurance Program (“CHIP”) and Children’s Youth Services. If these funding measures are not approved, the legislature will have to address how to bridge the gap between the budget and available funding in a special session.
One means of raising revenues that has been proposed in three bills that were introduced this session is increasing user fees on cigarettes by $1 per pack. Joe Hubbard (D-Montgomery), who sponsored one such bill, argues that “Cigarette-related illnesses cost Alabama taxpayers $238 million in Medicaid expenditures annually. The extra dollar on each pack of cigarettes...would pay for the cost incurred by cigarette users. In addition, the federal government provides a 2.7-to-1 match for each dollar this bill raises for Medicaid, bringing a total boost to the budget of over $880 million, nearly double the current projected Medicaid shortfall.”3 Governor Bentley has expressed his intent to veto any bill containing a cigarette tax, in accordance with his campaign promise not to raise taxes.
The bill containing the General Fund budget will now be presented to Governor Bentley for his signature.
1 Birmingham News Editorial Board, OUR VIEW: Proposed General Fund Budget Is Broken, Unless Gov. Robert Bentley Goes Back on Irresponsible No-New-Taxes Pledge, Al.com, May 6, 2012.
2 David White, Alabama Medicaid Funding Loss Would Strip Billions in U.S. Grants, Al.com, May 7, 2012.
3 Joe Hubbard, Leaders Must Chart Course, Montgomery Advertiser, April 26, 2012.
Robin F. Bromberg is an associate in the litigation section at Balch & Bingham LLP in Birmingham, Alabama.
