Alabama Officials Acting ‘Irresponsibly’ by Relying on Federal Government To Provide Funds to Cover Medicaid Costs

CMS's decision last week to pay Alabama $54 million in Medicaid payments through the end of the fiscal year "only just barely, and only temporarily ... staved off a Medicaid funding disaster," a Mobile Register editorial states. Without the money, the state likely would have been able to reimburse Medicaid providers at only 70% of the typical rate. The funding is the resolution of a "long dispute" between federal and state Medicaid officials over the state's use of the Medicaid upper payment limit, commonly known as the Medicaid loophole (Mobile Register, 8/30). Under the loophole, states pay local hospitals more than the actual cost of health services, receive inflated reimbursements from the federal government and require the hospitals to return the extra money to the state, which can use the funds for health- and non-health-related expenses. Although the waiver permitting Alabama to use the loophole expired in April, state Medicaid officials asked CMS to give the state more than $125 million in advance Medicaid payments to cover expense for the remainder of the current fiscal year. CMS approved $66 million in costs, but initially denied $60.8 million, a decision it reconsidered after the state resubmitted a request for the additional funds (Kaiser Daily Health Policy Report, 8/30). Even with the additional federal funds, Alabama's Medicaid program is only "partially afloat" and will be relying on the state's portion of the national tobacco settlement, funds that are not renewable and "soon will run out," the editorial notes. The editorial says that state officials have "acted irresponsibly" by not drafting contingency plans to fund Medicaid in case federal officials "refuse to budget any more than they already have." The Register concludes, "In the long run, the governor and the state Legislature should solve the problem themselves, rather than relying on leniency from Washington bureaucrats" (Mobile Register, 8/30).