Recent Changes in Health Policy for Low-Income People in Alabama

• Published in: Policy File 2002
• Main Authors: Ormond, Barbara A, Wigton, Alyssa
• Format: Report
• Language: English
• Subjects: Budgets/Expenditures; Children & youth/Families & family life; Health care policy; Poverty; Tobacco; Urban Institute

Alabama is characterized by political and fiscal conservatism, and has historically taken a minimalist approach to public health and welfare programs. Under Governor Siegelman, there has been renewed attention to health, but the cost of expanding public programs means that progress is likely to come in small increments. The ability to generate revenues is the biggest constraint the state currently faces. Alabama has a regressive tax structure with a heavy reliance on sales taxes and very low property taxes. The state is currently facing serious budget pressures. The slowing economy over the last year led to mid-year budget cuts in some programs, notably education, although health programs were spared. Medicaid has been shielded somewhat from these budget pressures. For every 30 cents spent by the state, the federal government contributes 70 cents; state officials are reluctant to cut a program that brings in so much outside revenue. The local share of the program has been largely funded through aggressive Upper Payment Limit and Disproportionate Share Hospital programs so that the true local share of the program is likely well below 30 percent. Despite this creative financing, in the past, Medicaid has suffered nearly annual budget crises, often leading to moratoriums on provider payment. In the last couple of years, however, Medicaid has found a cushion in the tobacco fund. Alabama has dedicated most of its tobacco settlement revenues to health care and established a Medicaid Trust Fund against future budget crises. Problems, however, remain for Alabama's Medicaid program. The economic slowdown is seen as likely to continue. Medicaid enrollment is rising and, should economic conditions deteriorate further, there could be an increase in the number of people eligible for Medicaid. Without fundamental reform to the structure of its tax system, Alabama's ability to increase revenues will remain very limited. Finally, the UPL and DSH programs that have been critical to financing the Medicaid local share are under scrutiny by the federal Office of the Inspector General. For a Medicaid program that is perennially near financial crisis, the Inspector General's rulings on DSH and UPL and the phase-out of these programs, in addition to the uncertain future of the PHP arrangement, represent the most important current threats to the program.