26-03-2025
Report: Congressional cuts to Medicaid could cost Alabama $800 million
A hallway at Vaughan Regional Medical Center in Selma, Alabama on Tuesday, Sep. 3, 2024. A new analysis from KFF estimates that proposed federal cuts in a March 2025 U.S. House budget resolution could cost Alabama $824 million in Medicaid funding each year. (Will McLelland for Alabama Reflector)
Alabama could lose over $800 million in federal Medicaid funding if U.S. House Republicans go through with a plan to cut hundreds of billions of dollars from the health insurance program, according to a new report.
KFF, a national health policy research organization, said in an analysis released Monday that a House budget resolution currently under discussion in Congress targeting up to $880 billion in Medicaid spending could cost Alabama $824 million annually in Medicaid funding.
State officials and advocates warn the cuts could cut vulnerable Alabamians off from essential health care services and strain the state's already limited health care system.
'There's just no way to do those cuts in Alabama without significantly harming children, seniors, and people with disabilities,' Robyn Hyden, executive director of Alabama Arise, an advocacy group focused on poverty issues, said of the proposed cuts.
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The Alabama Medicaid Agency's state allocation is expected to surpass $1 billion for the first time in the next fiscal year. If the agency has to make up over $800 million in federal funds, it could easily take the state's allocation to $2 billion.
Alabama relies heavily on federal funding to sustain its health care infrastructure. The federal government pays for about 73% of Alabama's Medicaid program, which currently covers more than one million residents, including nearly 57% of children and nearly 70% of nursing home residents.
If federal funding is reduced, the state would have to either find a new revenue stream, raise taxes or make cuts to Medicaid services.
Unlike most states, Alabama has not expanded Medicaid under the Affordable Care Act, and it has one of the most restrictive eligibility criteria in the nation. Adults without dependent children do not qualify for Medicaid, and parents can only receive coverage if they earn less than 18% of the federal poverty level, or about $4,797 a year for a family of three.
Sen. Greg Albritton, R-Atmore, chair of the Senate Finance and Taxation General Fund committee, said in an interview Monday that if the cuts are enacted, Alabama could be forced to scale back services or reduce eligibility, saying 'that's the biggest' way to cut costs.
The state's ability to shift funding from other areas is limited. Unlike most states, Alabama maintains separate budgets for education and general government spending. That would make it nearly impossible to reallocate education funds to cover Medicaid shortfalls.
Albritton said that money could be shifted from other agencies, like the Department of Transportation, to avoid a significant reduction in Medicaid services. The Alabama Department of Corrections receives the second largest allocation after Medicaid out of the General Fund. But reallocation from the state's prison system — facing numerous lawsuits over violence and overcrowding — will not happen, at least 'not willingly,' he said.
Although Albritton said KFF's estimates are worst-case scenarios, calling it 'draconian,' he said 'something like that is going to happen.'
'Whatever degree, it's going to have an adverse effect on our budgetary process, and it's going to affect us hugely,' he said. 'We don't know what's going to happen.'
One policy consideration is implementing work requirements for Medicaid recipients. Although supporters of work requirements say that they encourage self-sufficiency, critics note that the vast majority of Medicaid recipients already work and say requirements create unnecessary hurdles that could push thousands of eligible people off Medicaid rolls.
'Even people who are eligible would get cut because of an inability to comply with a lot of red tape and bureaucracy,' Hyden said.
With a GOP-controlled Congress pushing for spending reductions, Alabama's lawmakers could face a balancing act. Albritton feels people are 'unaware' of what may be coming. The state has been flush with federal funds over the past few years, he said, with people living 'fat, dumb and happy for a long time.'
'But there is no way to get around the point that the federal candy-time is over with and how we're going to deal with that is questionable. And we're not dealing with it at this point,' Albritton said.
Hyden said she's had conversations with U.S. lawmakers and asking them to oppose the cuts. She said that they seem to hear the concerns 'loud and clear' and know that cuts to Medicaid are 'politically unacceptable, very unpopular.'
'We've been told by members of Congress they don't want to see widespread coverage loss,' Hyden said. 'But I'm unsure how they can do funding cuts without having that impact.'
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