Alabama’s 2024 Regular Legislative Session was anticipated to address the crucial topic of Medicaid expansion. Surprisingly, the session concluded without any progress made on the matter. Despite the implementation of Medicaid expansion by the federal Patient Protection and Affordable Care Act (Obamacare) in 2010, Alabama stands among the ten states that have chosen not to adopt it.
The Alabama Legislature made the correct decision by choosing not to pursue Medicaid expansion this session. While proponents of expansion argue that the state could potentially receive hundreds of millions of dollars in “free” federal funds, it’s important to recognize that each dollar comes with matching requirements and conditions. Furthermore, the implications of expansion on society and the economy should not be overlooked.
Some groups are urging Governor Kay Ivey to take action on Medicaid expansion, despite the legislature’s lack of decision on the matter this year. It is believed that the Governor has the power to expand Medicaid through an Executive Order, but funding for the expansion would still need to be appropriated by the legislature. Another proposal being considered is a public-private partnership option, which would increase health insurance enrollment and have a similar effect to Medicaid expansion.
A spokesperson for Governor Ivey recently stated that Ivey’s stance on the matter has not changed. They emphasized that she continues to have concerns regarding the long-term financial implications of the proposal.
In a recent letter to the Governor, a proponent group advocating for increased healthcare enrollment asserted that such a measure would have multiple positive effects. They argued that it would not only boost the state’s stagnant labor participation rate but also result in enhanced worker productivity and overall economic growth. Furthermore, the group highlighted that increased healthcare enrollment would alleviate the financial burdens faced by rural hospitals.
Expanding, on the other hand, lacks any evidence to support its potential for achieving any of these objectives.
The expansion would have a significant impact on the state’s General Fund budget. According to estimates, the costs of expansion would average $225 million annually over the first six years. The annual costs are projected to increase from $208 million in the first year to over $243 million by the sixth year. It is important to note that this funding would be allocated for new General Fund spending.
Expanding Medicaid would indeed bring federal funds to the state, but those funds would solely be allocated to the state’s Medicaid agency. This could potentially result in a deficit for other General Fund agencies. To bridge this gap, the state would have to either reduce budgets for non-Medicaid agencies or more likely resort to implementing direct tax increases or tax hikes imposed by healthcare providers. The $225 million required for expansion accounts for over 8% of the General Fund spending in fiscal year 2023.
Over the next decade, the federal Medicaid program is expected to experience a significant increase in annual spending, with the Congressional Budget Office projecting a nearly 63% rise. If state spending follows a similar trajectory, the expansion of Medicaid could potentially burden Alabama taxpayers with an annual cost of around $350 million within ten years. According to a 2023 report from the Paragon Health Institute, expansion costs have consistently exceeded initial estimates by an average of 33% nationwide.
Alabama’s labor participation rate should also be taken into consideration as it may be affected by the potential impacts. As of the end of April, the state’s labor participation rate stood at 57.5%, showing a slight improvement compared to the previous month but still ranking among the lowest in the country.
Expanding Medicaid in Alabama does not seem to have any evidence of encouraging more people to actively seek employment. On the contrary, it is likely to have the opposite effect. Although some states, including Alabama, have attempted to implement work requirements for Medicaid benefits, the Biden Administration has rejected these attempts. Without robust work requirements, Medicaid expansion could potentially discourage individuals in Alabama from pursuing full-time employment. For those who are currently working primarily for the sake of obtaining health benefits, the expansion could act as a deterrent, discouraging them from continuing their employment.
Alabama’s 2024 legislative session focused on a plan to enhance workforce development programs and boost the state’s labor force participation rate. One of the integral components of this plan is the “Working for Alabama” package, which aims to address the increasing expenses of childcare and housing while also providing incentives for workers to stay in or re-enter the workforce. However, the potential implementation of Medicaid expansion could disrupt these efforts before they can demonstrate their effectiveness.
There is little evidence to suggest that Medicaid expansion would actually save hospitals, especially those in rural areas. According to a study conducted in 2023 by the Foundation for Government Accountability, nearly 50 hospitals closed in states that had expanded Medicaid between 2014 and 2022, resulting in a loss of 5,400 beds. Out of those closures, almost 500 beds were lost in rural areas. In comparison, only five percent of hospitals that closed in non-expansion states cited a lack of Medicaid expansion as the reason. Instead of focusing on Medicaid expansion, a more effective approach to ensuring the financial stability of healthcare providers in Alabama and improving access to care for citizens would be to loosen or repeal the state’s burdensome certificate of need requirements.
The state should prioritize common sense healthcare policy reforms to improve healthcare access and affordability, rather than expanding Medicaid. Although there may be perceived short-term benefits to Medicaid expansion, the long-term costs outweigh them. API fully supports Governor Ivey’s cautious approach in not tying Alabama to the federal albatross and encourages her to resist external pressure for expansion.
