Alabama Senate passes Medicaid reforms that could save $1.5 Billion over 10 Years

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May 20, 2015

MONTGOMERY, Ala. — The Alabama Senate on Tuesday 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 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.

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 number of people aged 75 and older is expected to double by 2028.

“This is projected to add 9,000 more seniors to the Medicaid long-term care roles,” said Senator Gerald Dial, who chairs the Senate Health & Human Services committee. “I am proud to support Senator Reed’s bill to save more than a billion dollars and allow for more home-based care.”

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.

The bill will now be considered by the House where it is being sponsored by Rep. April Weaver. It is not expected to meet significant resistance.