Alabama’s Pass on Medicaid Expansion Leaves Birmingham’s Uninsured with Weak Safety Net

Media Advisory
Oct. 17, 2013

FURTHER INFORMATION, CONTACT:
Alwyn Cassil (202) 264-3484 or acassil@hschange.org

WASHINGTON , DC—Alabama’s pass on the Medicaid expansion under national health reform leaves the Birmingham region’s low-income, uninsured adults with a patchwork safety net widely regarded as limited and inadequately funded, according to a new Community Report released today by the Center for Studying Health System Change (HSC).

Funded by the Robert Wood Johnson Foundation (RWJF) and based on interviews with local health care leaders in 2013, the study examined the Birmingham region’s commercial and Medicaid insurance markets.

After making early progress in setting up a state-run health insurance exchange, Alabama ultimately reversed course and ceded the exchange’s operation to the federal government. Transitioning from the current minimally regulated commercial insurance market to the more stringent standards required by the Patient Protection and Affordable Care Act (ACA) poses many challenges for Alabama. One is federal control of the insurance rate-review process, after federal authorities deemed Alabama’s process ineffective. Another is potential rate shock and instability when the ACA’s rating restrictions take effect—especially in the nongroup, or individual, market, which now has no rating restrictions.

Key findings of the report, Alabama’s Pass on Medicaid Expansion Leaves Birmingham’s Uninsured with Weak Safety Net, which is available online here, include:

• Uncompetitive health insurance market. With Blue Cross and Blue Shield of Alabama controlling about 85 percent of the commercial market, Birmingham ranks among the least competitive insurance markets in the country. The predominant commercial offerings are traditional preferred provider organization products with modest out-of-pocket cost sharing, comprehensive provider networks and few, if any, care-management features.
• Academic medical center dominates market. The University of Birmingham at Alabama Health System is the market’s leading provider, with a flagship hospital that serves as a specialty referral center for the entire state.
• Stringent Medicaid eligibility. Alabama sets Medicaid eligibility at minimum federal levels: low income cutoffs for categorically eligible groups and no coverage for nondisabled, childless adults. Despite these restrictive standards and the absence of state outreach activities, Medicaid enrollment grew 24 percent in greater Birmingham from 2008 to 2012, as the economic downturn led to job losses.
• A weak, fragmented safety net. The safety net has limited funding, few providers—one federally qualified health center, a few hospitals providing specialty and inpatient care and several free clinics—and little coordination among providers.
• Uncertainty about the exchange. As in all states with federally run exchanges, decisions about which carriers, products and rates would be available were delayed. When the exchange opened on Oct. 1, technical glitches restricted many consumers’ access to product and price information.
• No Medicaid managed care to date. The state Medicaid agency contracts directly with providers on a fee-for-service basis. However, motivated by the need to slow the growth of Medicaid spending, Alabama recently enacted a law mandating new regional care organizations (RCOs). Beginning in 2016, RCOs will assume full financial risk for enrollee care.

As health reform unfolds in the coming years, there will be ongoing issues to track in the Birmingham-area health care market, including:

• How well will Alabama’s federally facilitated health insurance exchange function?
• How, if at all, will the exchange affect competition among health plans? Will the exchange eventually attract new entrants to the market?
• Will Alabama revisit expanding Medicaid during the next two years?
• What changes, if any, will take place in Birmingham’s limited and struggling safety net over the next several years? Will funding continue to fall short and leave low-income, uninsured people with limited access to care?
• How will Medicaid managed care unfold in the Birmingham market? How will regional care organizations be structured and organized? How equipped will the RCOs be to accept financial risk? What impact will the RCO model have on access to care and quality of care for Medicaid patients?

Birmingham is one of eight metropolitan areas HSC researchers are studying on behalf of RWJF’s State Health Reform Assistance Network initiative—the others are Albuquerque, N.M.; Baltimore; Denver; Long Island, N.Y.; Minneapolis-St. Paul; Portland, Ore.; and Richmond, Va.

The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation's changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is affiliated with Mathematica Policy Research.