Alabama legislature approves Medicaid reform that could save $1.5 billion

MONTGOMERY, Ala. — The Alabama House on Thursday unanimously passed major reforms to the state’s Medicaid program that are estimated to save the state $1.5 billion over the next 10 years. The bill now goes to the governor’s desk to be signed into law.

Medicaid currently comprises 37 percent of the state’s ailing general fund budget, the largest portion. According to the Alabama Policy Institute, the state’s Medicaid expenditures increased by 53% between 2001 and 2013, and as the state’s senior population increases, costs are expected to grow even further.

The bill passed Thursday seeks to place a check on that growth by reforming the way Medicaid patients receive care.

The savings, calculated by a national actuarial consulting company, assume a 3 percent growth every year in the program, and will come from new Integrated Care Networks (ICNs) contracting with Medicaid to provide long-term care under a capitated system.

Capitation means the providers will be given a set dollar amount to treat each patient in their care.

The bill would also allow the nursing home-care to home-based care ratio to increase from 75/25 to 50/50. The ICNs must be in place by October 1st, 2018.

“Our state has an obligation to provide crucial long-term care services for the elderly eligible for Medicaid coverage, while at the same time finding ways to protect taxpayers from cost increases,” said the bill’s sponsor Senator Greg Reed. “My bill will help us better care for patients and cut spending.”

This is Senator Reed’s second major Medicaid reform in the last several years. In 2012 a bill he sponsored to establish Regional Care Organizations across the state operating under a similar premise to the ICNs.

“Moving to integrated care networks provides an opportunity to reform our long-term care system in a way that assures high quality care at lower cost in a community setting,” said Dr. Don Williamson, State Health Officer and chair of the Medicaid Transition Task Force.

Savings in long-term care services such as nursing homes and in-home assistance will become particularly important as baby boomers begin to retire and require more healthcare.

“The population of Alabamians age 70 and older is expected to rise quickly over the next ten years,” said April Weaver, Chairwoman of the House Health Committee. “In fact, close to 10,000 seniors are projected to join the Medicaid rolls by 2028. This legislation will improve the quality of long-term care, while gradually bending the cost curve down to reduce costs for Medicaid.”

While these savings won’t be realized immediately and don’t solve the current budget crisis, they could go a long way toward making the federally-mandated program more sustainable in the long term.