Alabama Embraces Reforms, Shames Neighboring States

Alabama is a deep red, Deep South state with a health policy that is taking on a decidedly blue tinge these days.

Last week alone, Republican Gov. Robert Bentley issued an executive order to move forward on an Alabama health insurance exchange and lashed out at the state’s Republican-controlled Legislature for attempting to scale back his proposed $247 million increase in Medicaid funding by a mere $7 million.

He sent the budget back with an executive amendment restoring half of the cut, and in a closed-door meeting with state Republicans, Bentley let his feelings be known.

Rep. Greg Wren — a Republican who served with the governor for eight years in the Alabama Legislature — said he’d never seen Bentley more passionate about an issue than he was at a meeting on Medicaid with the Republican caucus last week.

“He strongly asserted that this funding had to be restored to Medicaid,” said Wren, who has worked on health policy issues in the Legislature and with the National Conference of State Legislatures. “It was as strong and assertive as I’ve ever seen Gov. Bentley.”

When it comes to health policy, Alabama is a Republican-controlled state that pushes back against the grain in just about every way. It has a governor gunning to set up a health exchange, a Medicaid director skeptical of block grants and a rapidly expanding Children’s Health Insurance Program.

The state “is interested in moving forward on health reform [and was] interested in the exchange concept before the law was passed,” said Tricia Brooks, a senior fellow at the Georgetown University Health Policy Institute who recently spent time in Alabama working on CHIP. “In so many ways, they get lumped in with the other Southern states. But I think they appreciate when they are recognized for taking the lead and really doing the right thing on getting kids enrolled.”

That’s not to say Alabama is an Obama administration booster: Bentley has challenged the health overhaul in court and signed on to Republican Governors Association efforts to roll back health reform’s maintenance-of-effort requirements, which require states to continue enrolling any populations covered when the Patient Protection and Affordable Care Act passed last year.

But in interviews with POLITICO, those who work in and study the Alabama health policy world paint a nuanced picture: a state equally burdened and enabled by federal health policies, shirking growing costs but also anxious not to miss out on funds that could be drawn from Washington.

Alabama’s conflicted relationship with Medicaid and the health reform law is emblematic of a struggle playing out in states with poorer populations. Medicaid is, on one hand, anathema, eating up state budgets as medical costs and unemployment spike.

But for as much as Medicaid strains state budgets, it’s also a major contributor. In states with high rates of poverty, like Alabama — where poverty is the third-highest in the nation — the federal government provides as much as three-quarters of the entitlement program’s budget. For every dollar Alabama spends on Medicaid, Washington ponies up $2.80.

More recently, Republican-helmed states have found themselves in a similar tangle with the health reform law: While they strongly oppose the law, they also recognize that implementing the ACA is a necessary condition for millions in federal funds coming down the pike.

“The issue, with respect to restoring some funds in the Medicaid general fund budget, really has to do with the nature of matching funding,” said Michael Morrisey, director of the University of Alabama’s Lister Hill Center for Health Policy. “There’s just so much tied up in the implications of what that does to the federal match.”

So while neighboring states have pared back state appropriations for 2012 Medicaid budgets — Mississippi recently slashed its budget by 24 percent, according to an analysis by the Mississippi Economic Policy Center — Alabama will, if the Bentley administration gets its way, increase state Medicaid funding from $400 million in 2011 to $643 million in the coming year.

The $3.5 million Bentley wants restored will turn into $10 million in Medicaid funds when the state receives federal matching dollars, but even that budgetary boost hasn’t made it particularly popular in Montgomery.

“Some of our guys are concerned about where he’s pulling the money from to pump back into Medicaid [and] how that transfer affects some other agencies,” Wren said of his Republican colleagues. “There are some philosophical policy fights that are now beginning to pop their heads up.”

And that’s not the only tension when it comes to health policy in Alabama.

While Bentley has favored block grants — in a recent interview, he told Stateline he had “talked to [Health and Human Services] Secretary [Kathleen] Sebelius about that” — his Medicaid director remains skeptical of what it could mean for a state that has aggressively maximized enrollment.

“The idea of a block grant really will not save my program,” Alabama Medicaid Agency Director Bob Mullins told POLITICO in a recent interview. “I’ve already got a minimum program, and if that block grant says I have to maintain that minimum program [with less money], well, obviously, that’s not going to work very well.”

Mullins and Bentley share a long history. The two were classmates at the University of Alabama’s medical school in the 1960s. Mullins, a longtime family physician who initially turned down Bentley’s requests to serve in his administration, sees that the block grant could net the state additional flexibility but is cautious of the fallout.

Under the current matching-per-enrollee payment system, he said, “If I had 100,000 more people sign up in the next six months, I [would] get more federal drawdown.

“If you give me a block grant, I end up up a creek.”

With the block grant proposal unlikely to materialize into law — the Obama administration has already weighed in against it — Bentley seems most focused on moving forward a key portfolio of health issues that both expand the state’s entitlement programs and pave the way for the ACA.

He’s been adamant that the state set up its own health exchange, while governors in Louisiana and Florida have flat out refused to do so. To that extent, Bentley issued an executive order Thursday creating the Alabama Health Insurance Exchange Study Commission, calling the exchange a “paramount priority of his administration.”

Under Bentley’s authority, the state continues to pioneer enrollment strategies to maximize participation in CHIP.

Alabama is the only Southern state to cover children up to 300 percent of the federal poverty line and one of just 10 states to do so. It made a splash in recent years by winning a third of all Children’s Health Insurance Program Reauthorization Act enrollment bonus funds, about $281 million, in 2009 and 2010.

Bentley’s administration has not attempted to pare back the program or slow enrollment — a strategy many states employ in challenging times — and many CHIP bureaucrats stayed on to serve under the new governor after his predecessor, Bob Riley, left office.

“Unlike some of their neighbors, Alabama is really doing a great job at getting kids covered,” Brooks said. “They have expanded coverage by about 100,000 kids in the past couple of years.”