Research & Commentary: Alabama Medicaid Expansion

Published December 4, 2015

At a recent meeting, the Alabama Health Care Improvement Task Force recommended Gov. Robert Bentley and the legislature expand the state’s Medicaid program. Thirty states and the District of Columbia have chosen to expand Medicaid under Obamacare, and 20 have refused to do so.

Medicaid expansion under the Affordable Care Act would cover Alabamians with incomes up to 138 percent of the federal poverty level, around $33,000 for a family of four. According to the Florence, Alabama Times-Daily, about 290,000 people would be covered under Medicaid expansion in Alabama.

The Alabama Policy Institute notes expansion would not mean good health care for the expansion population. The low reimbursement rate paid by Medicaid means “it is unlikely expansion can create a system where more doctors want to accept Medicaid and this, in turn, would funnel 300,000 newly insured Alabmanians to a small network of doctors.” Medicaid already has a proven track record of failing to provide cost-effective and efficient care for those in need.

Since implementation of the Affordable Care Act, Medicaid spending nationwide has exploded. Peter Ferrara, a senior fellow at The Heartland Institute, warns total future costs to state governments are estimated to exceed the funds provided by the federal government, with the shortfall reaching as much as 66 percent of state expenditures. States will inevitably find the situation unsustainable.

The federal government has promised to cover 100 percent of the costs of newly eligible enrollees until 2017, but the matching rate declines over time, so states will eventually have to find other ways to pay for the newly eligible population. Moreover, the 100 percent match applies only to newly eligible enrollees. Those who were eligible for Medicaid before expansion and are required to enroll under Obamacare’s individual mandate are subject only to the lower, regular matching rate.

Funding Medicaid expansion remains a serious problem in every state. The Times-Daily cited a July report from the School of Public Health at the University of Alabama at Birmingham, which estimated if Alabama were to pick up 10 percent of the Medicaid expansion costs, the obligation would be about $222 million a year. The report also found if the current approach to funding Alabama’s Medicaid match is maintained, the General Fund would be responsible for about 33 percent of that amount, or about $73 million per year.

The Alabama Health Care Improvement Task Force is likely to discuss a tobacco tax increase of 75 cents per pack to pay for its recommended expansion. Tobacco taxes are an unreliable revenue source, dependent on a narrow and shrinking tax base, making them an especially bad choice for an entitlement program such as Medicaid.

Medicaid expansion is supposed to improve health outcomes and reduce costs, but the results have been less than promised. In 2008, Oregon expanded its Medicaid program by 30,000 people, selected randomly from a waiting list of 90,000. A 2013 study published in The New England Journal of Medicine found although Oregon’s Medicaid expansion did create some improvements, such as overall health care use and financial assistance, the expansion failed to achieve the principal goal of health care reform: improving overall health.

The recommendations from Alabama’s task force will not be binding: Medicaid expansion will still require approval from the governor and funding from the legislature. Alabama lawmakers should continue to resist Medicaid expansion and instead reform the fiscally unsustainable program in ways offering better care to enrollees and lower costs for taxpayers.

The following documents provide more information about state Medicaid expansion and reform.

Ten Principles of Health Care Policy
This pamphlet in The Heartland Institute’s Legislative Principles series describes the proper role of government in financing and delivering health care and provides reform suggestions to remedy current health care policy problems. 

Medicaid Expansion in Alabama   
The Alabama Policy Institute examines Medicaid expansion and the possible effects it would have in Alabama: “As the largest line item in the State’s General Fund Budget, Medicaid should also command most of the Alabama Legislature’s attention. State leaders must find Alabama solutions for Alabama problems and create lasting reform which reins in costs and provides quality care and access.”

Medicaid Expansion by the Numbers 2014
The Alabama Policy Institute outlines several major statistics about Alabama’s Medicaid program and health care market and the costs of expansion.

Lessons from Arkansas: Alabama Should Reject Medicaid Expansion
State Senator Bryan King and Katherine G. Robertson discuss the failures of Arkansas’ Medicaid expansion program and warn state legislators against following Arkansas’ model as a means to get their hands on federal money while distancing themselves from ACA: “Unfortunately, as Arkansas can now attest, Medicaid expansion remains a bad deal for states and cannot truthfully be sold as a fiscally prudent or free market idea.”

Research & Commentary: States Should Innovate, Not Expand Medicaid 
Matthew Glans of The Heartland Institute discusses how expanding Medicaid can cause problems extending beyond state budgets and the health care industry, and he notes better options are available: “It is important to remember government spending creates little or no income or economic growth; it is merely the redistribution of tax dollars taken from the pockets of taxpayers.”

The Empty Promises of Arkansas’ Medicaid Private Option
The Foundation for Government Accountability examines the empty promises of Arkansas’ Medicaid Private Option – directly quoting its supporters from sources including media interviews, floor speeches, and social media posts – and rebuts them point by point.

Research & Commentary: Examining the Arkansas Medicaid Expansion Model
Examining the Arkansas Medicaid expansion model, Matthew Glans of The Heartland Institute argues state lawmakers should instead consider reform options that reduce costs and offer better care to patients in the current system, recommending for consideration the pilot program being tried in Florida.

A Cure for What Ails Us: State-Led Healthcare Solutions to Fix Washington’s Botches
The Beacon Center of Tennessee outlines problems facing the health care system, offering in-depth policy discussions and recounting real-life experiences of Tennesseans who are already coping with and preparing for the effects of PPACA. 

Policy Tip Sheet: Medicaid Expansion
In this Heartland Institute Tip Sheet, Kendall Antekeier explains why states should avoid Medicaid expansion and instead reform this fiscally unsustainable program in ways offering better care at lower costs to taxpayers. 


Research & Commentary: The Medicaid ‘Cure’
Kendall Antekeier of The Heartland Institute examines the Medicaid Cure, a pilot program established in five large Florida counties, which uses a premium support model in which 290,000 Medicaid recipients are given a range of premiums and plans from which to choose. 

A Medicaid Cure: Florida’s Medicaid Reform Pilot
The Foundation for Government Accountability provides insight into the success of the Florida Medicaid Cure: “When the patient is the priority, government and HMO bureaucrats are finally held accountable. Costs flatten and patient health and satisfaction improves.”

The Private Option: Medicaid Expansion by Another Name
Nicole Kaeding of Americans for Prosperity provides a forecast of the effects of the decision to expand Medicaid in Arkansas. 

Why States Should Not Expand Medicaid
Writing for the Galen Institute, Grace-Marie Turner and Avik Roy outline 12 reasons states should not expand Medicaid and should instead demand from Washington, DC greater control over spending to better fit coverage expansion with their states’ needs, resources, and budgets.


Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Health Care News at, The Heartland Institute’s website at, and PolicyBot, Heartland’s free online research database at

If you have any questions about this issue or The Heartland Institute’s website, contact Heartland Institute Government Relations Manager Logan Pike at [email protected] or 312/377-4000.