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Increased federal funding, decreased use gives Alabama Medicaid $178M carry forward

By MARY SELL, Alabama Daily News

Despite record-high enrollment, the Alabama Medicaid Agency expects to have a $178 million carry forward in state funding at the end of this fiscal year. 

That’s because of an increase in federal funding since the coronavirus pandemic began and a decrease in the utilization of Medicaid-funded health services as more people stayed home in 2020, Medicaid Commissioner Stephanie Azar told a panel of lawmakers recently.

That carry forward can be used in fiscal 2022.

“We all know we’re still in the throes of the pandemic,” Azar said. “The uncertainty of preparing the 2022 budget is real and difficult.” 

Lawmakers will begin in earnest their fiscal 2022 budget planning when the legislative session begins in February. The new budget year begins in October. Subtracting the carry forward, Azar said she’ll be asking for $769 million from the state’s General Fund in 2022. This year’s appropriation was $820 million. Medicaid is the General Fund’s biggest expense.

Separate from the carry forward, Azar is asking lawmakers to allow her to keep a “reserve fund” of about $74 million to cover future COVID-19 caused increases or a drop in federal funding. 

Committee member Sen. Jim McClendon, R-Springville, said having the money to apply to next year’s budget because of the additional federal funds is a positive for the state.

“I think the real question is, how long will this last?” McClendon said. 

Azar said it’s not yet known how long the additional federal funding will continue, making budgeting difficult. Hence, the proposed reserve fund.

McClendon later said he thought the reserve money was a good idea.

“We’re supposed to plan for the unknown, that’s not possible,” he said.

Prior to COVID-19, the federal government paid about 72% of Alabama Medicaid’s expenses. In response to the pandemic, that amount was increased to about 78%, Azar said. That 6.2% increase was nationwide, but it came with strings attached, she told lawmakers: A requirement that during the declared pandemic, states can’t terminate individuals from Medicaid if they were already enrolled in the program or became enrolled during the emergency period. The only way recipients can now come off of Medicaid is if they die, move out of state or voluntarily remove themselves.

“That usually doesn’t happen,” Azar said.

Medicaid enrollment is now at a record 1.126 million. Up from about 1.05 million prior to the pandemic. 

“It’s going up about 10,000 people per month,” Azar said. About 6,000 of those each month are children. Children have always been Alabama Medicaid’s largest consumer group. 

Alabama’s restrictions on Medicaid enrollment do not allow for able-bodied adults without children to be on the rolls, so COVID-caused spikes in unemployment don’t translate into large numbers of adults now receiving Medicaid. Azar stressed to lawmakers that the enrollment increases do not equate to Medicaid expansion to cover more poor Alabamians, something advocacy groups have been lobbying for for almost a decade. 

Azar also told lawmakers that despite the federal increase, some states have struggled with their Medicaid budgets, particularly states that pay for managed care — they’re paying a third party a set fee no matter how little patients used Medicaid services this year — and states with expanded Medicaid rolls and larger patient populations.

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