The $85 Million Medicaid Deficit will NOT be Fixed by a Lottery

Posted on Aug 22, 2016 By Mary Pool

Attorney Mary PoolAs most Alabamians know, on Friday, the Alabama Senate passed Governor Bentley’s lottery bill.  It is now up to the House to decide if the people of Alabama will be able to vote upon Governor Bentley’s lottery.  A vote for Governor Bentley’s proposed lottery will require that the anti-gambling clause of the Alabama Constitution be repealed.  If the anti-gambling verbiage is removed from Alabama’s Constitution then that could and likely would open the door for all gambling.

About The Lottery Bill

The Lottery Bill proposes to have lottery proceeds go to the state’s General Fund.  The Alabama Department of Finance describes the State General Fund as “one of five major operating funds in the State of Alabama”.  The General Fund revenues “are used for the ordinary expenses of the executive, legislative, and judicial departments of state government, for other functions of government, for debt service on general obligation bond issues, and for capital outlay”.  The state programs supported by the General Fund include criminal justice, public health and safety, child development and protection, mental health, legislative activities, and the court system.  Currently, the General Fund is funded by taxes “from over 40 sources”.

The Medicaid Deficit

The largest issue that our state government must resolve immediately is the $85 million deficit in the Medicaid program’s budget.  Governor Bentley is telling Alabamians that the Special Session was needed to get the votes for the lottery bill so the state can solve the state’s budget crises, including the Medicaid budget deficit.  When a special session is called it can cost the state anywhere from $300,000 to $400,000.  For a Governor that initially ran on not taking a salary, Bentley certainly has no problem spending Alabamians money like calling special sessions and increasing some of his staff’s salaries by an insane amount which I discussed in the blog post The People of Alabama Deserve Better.

I voted for Governor Bentley and I am outraged by his lack of analyzing the issues in Alabama and offering valid solutions, but instead making quick decisions regardless of the consequences to the Great State of Alabama and us, the people who live here.  A lottery will not resolve the $85 million budget deficit in Medicaid for the 2017 fiscal year.  If the House passes the lottery bill, Alabamians will get to vote in November on the bill and if it passes, it will likely be at least one year before a lottery could be put in place.  So what is Medicaid to do now, Governor Bentley?

I certainly agree that our state must find ways to increase revenue and balance the state’s budget.  However, in addition to increasing revenues, the expenditures of our state should be examined closely.  I want the Governor and our state legislature to control spending and remember that the state’s money will always belongs to the people of Alabama.

Lottery Can’t Fix Immediate Issues

In October, the 2017 fiscal year begins for Medicaid and it only has $700 million to work with instead of the $785 million needed to fund the program for the year.  Where will that $85 million come from for this fiscal year?  The Governor and state legislators should clearly know that the lottery is not going to resolve the $85 million budget deficit.  On August 1st, Medicaid had to start making cuts which hit pediatricians the most.  Also, Medicaid reduced preventative services which will cause people to use emergency rooms more often, thereby increasing medical costs which ultimately Medicaid will have to pay.

Transition to Regional Care Organizations

Governor Bentley, I have heard you state that the lottery will fix Medicaid’s $85 million budget problem.  How?  It has taken, at minimum, one year for other states to implement their lottery programs.  How can Alabama get it done within the 2017 fiscal year?  If we do not raise the $85 million needed to fill the deficit, then it is my understanding that the state’s proposed Regional Care Organizations (RCOs) will be in jeopardy since Alabama will not be able to show the federal government that the Medicaid system is financial stable to support RCOs.

In 2014, state legislation was created to move Medicaid to a “new managed care structure” to provide services to Medicaid patients at a set cost rather than the current volume based, fee-for-service environment.  To do this, Medicaid will enter into contracts with RCOs, which “are locally-led managed care organization that will ultimately provide healthcare services to most Alabama Medicaid patents.  To transition to the RCOs model, Alabama applied to the federal government for a Section 1115 Waiver to get approval for the “experimental” project.

After applying for the Waiver, “Alabama was one of three states selected by the National Governors’ Association to receive technical assistance aimed at helping” Alabama make this transition to RCOs.  In laymen terms, if Medicaid is able to meet certain federal requirements, including solving the $85 million deficit, then our state would receive federal funding of up to $748 million over the next five years to help Alabama implement and fund the RCO model.  If Alabama fails to solve the $85 million deficit then Alabama will lose out on these federal funds so time is of the essence to solve this deficit now not a year from now when the lottery may actually be implemented.  The RCOs are necessary to help manage the rising costs in medical care and ultimately help reduce Medicaid’s enormous budget needs.  RCOs will help Medicaid reduce its current spending.

Raid of Alabama Trust Fund

My guess is that if the lottery is approved in November that Governor Bentley is thinking he has a better chance in getting the legislature to “raid” the use of taxes from the Alabama Trust Fund to fund the deficit, as he tried to do earlier this year.  If the funds are raided from the Alabama Trust Fund, I am sure that there will be a promise to pay those funds back once the revenue from the lottery begins to POUR into the General Fund.  To date, the Alabama Trust Fund has not been paid back the $110 million that was taken during Bob Riley’s term nor the $435 million taken during the past three years during Governor Bentley’s term.

Bottom line, Governor Bentley and the state legislature need to address the real budget issues and solve the $85 million budget deficit now.