Alabama Medicaid burden rising more slowly than most states, study shows

During Alabama's latest budget crisis, lawmakers often have pointed to out-of-control Medicaid costs as one of the leading culprits.

A report released Wednesday by the Pew Charitable Trusts, however, suggests that costs relative to state revenues have been much more manageable in Alabama than most other states over the past decade.

Pew examined the percentage of each state's total revenue going to Medicaid, a joint federal-state health insurance program for the poor and disabled. The report subtracts out the federal funds that help pay for the program and looks only at the state revenue. It includes revenue from all state sources except government-owned liquor stores, utilities and insurance trust funds.

In 2000, Alabama spent 9 percent of its revenue on the program, below the 50-state average of 12.2 percent. Between that year and 2013, that percentage grew in every state except North Dakota, which has benefitted from a massive oil boom that has sent state tax revenue soaring.

The share of state funds spent on Medicaid in 2013 was 11.7 percent, or $2.70 more for every $100 in state revenue than the state spent in 2000. That increase lagged behind the national average of 4.7 percentage points. Medicaid costs grew faster in all but a dozen states.

Barb Rosewicz, research director for Pew's state fiscal health project, said Alabama's Medicaid burden has increased.

"But didn't increase as much as other states, including some of its neighbors," she said. "The spending growth was relatively small compared to other states."

The study did not include changes under the Affordable Care Act, under which some states – but not Alabama – have chosen to expand eligibility. But Rosewicz said those changes would not have made much difference in this analysis because the study looks only at state spending, and the federal government pays for Medicaid expansion in the first three years.

The share of state revenue spent on Medicaid can rise for different reasons. For instance, Maine's share tax dollars devoted to Medicaid rose 10.7 percentage points because of slower-than-average growth in tax revenue. California's increase in state dollars directed to Medicaid was a similar 9.7 percentage points between 2000 and 2013. But Rosewicz said it was mainly due to a very different reason – increases in Medicaid spending.

In Alabama, increases in health spending are magnified partially by the way the state budgets. 


Unlike most states, it has separate spending for education and other government services. So while spending on Medicaid has fluctuated between 8.6 percent and 11.9 percent of state spending, it claims a much higher share of the General Fund.

At $685 million, Medicaid consumes about 38 percent of the General Fund. Gov. Robert Bentley has asked for an increase of about $110 million over this year's funding.

A number of factors keep Medicaid spending relatively low:

The state limits eligibility and offers few optional services beyond what the federal government requires. It is one of the reasons why Alabama, despite being among the nation's poorest states, had an average percentage of residents enrolled in Medicaid in 2010 – about 21 percent.
The program is low-cost, as measured against enrollment. The $5,102 that Alabama spent per enrollee in 2012 was less than all but five states.
The state qualifies for more federal funding than most states. Under the law, the federal government pays for at least half of the Medicaid program. States with high-poverty rates get more aid. Alabama's 68.62 percent federal share was among the 10 highest in the country in 2012.
State Health Officer Don Williamson told lawmakers earlier this month a 3 percent cut could jeopardize the integrity of the entire program.

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