Shelby Promotes Fiscal Responsibility

shelby1Lost in the chatter of news last week was the announcement that Alabama’s senior United States’ Senator Richard Shelby had introduced S.J. Res. 9, a resolution proposing a constitutional amendment that would require Congress to have a balanced budget. Shelby has introduced similar legislation in every Congress since taking office.

“I have long believed that one of the few shortfalls of our Constitution is the omission of a requirement for the federal government to do what hardworking Americans do every day- balance a budget,” said Senator Shelby. “Our national debt recently surpassed $18 trillion, serving as a harsh reminder of the burden that will be placed on future generations if the federal government continues to operate on its unsustainable spending trajectory. Requiring Washington to balance its budget is a common sense policy that would reduce wasteful spending, restore confidence in our economy, and foster job growth.”

On February 9, 2015, S.J. Res 9 was read twice and referred to the Committee on the Judiciary. If passed by Congress and then ratified by three-fourths of the states, this amendment to the Constitution would require that the total amount of money spent by the United States during any fiscal year, except during times of war, not exceed the amount of revenue received by the United States during the same fiscal year and not exceed 20 percent of the gross domestic product of the United States during the previous calendar year.

Shelby joins fellow Alabama Representative Bradley Byrne in pursuing this ambitious goal. (See: Byrne’s H.J. Res. 12 was introduced on January 12, 2015 and referred to the House Subcommittee on the Constitution and Civil Justice.

Why is it noteworthy that Shelby has introduced, yet again, this resolution?

Because his support and influence can make a difference.

This might come as a shock to some folks…. but Shelby is quite powerful now that Republicans once again are in charge of the Senate.

shelby2Senator Shelby currently ranks as the 7th most senior senator and is the 5th highest ranking Republican. Trailing only Orrin Hatch (R-UT, President pro temp), Thad Cochran (R-MS, Chairman of Appropriations), Chuck Grassley (R-IA, Chairman of Judiciary) and Mitch McConnell (R-KY, Senate Majority Leader), Shelby finds himself in the rarefied air of leadership in the United States Congress.

First elected to the Senate in January 1987, Senator Shelby is the Chairman of the Banking Committee and is third highest ranking member of the powerful Appropriations committee, chairing the subcommittee on Commerce, Justice, Science and Related Agencies, which makes him one of the 12 Senate “Cardinals.”

Shelby began his legislative career as a member of the Alabama Senate in 1970, serving until 1978, when he was elected to the United States House of Representatives from the Tuscaloosa-based 7th District. He was re-elected three times and then ran for the U.S. Senate in 1986. Running as a Democrat, he eventually bested incumbent Republican Jeremiah Denton by a razor thin margin of 1% (50.28%-49.72%). Denton had been the first Republican elected to the Senate from Alabama since Reconstruction. Shelby’s victory assisted the Democrats in regaining control of the Senate.

On November 9, 1994, Shelby switched to the Republican Party as the Republicans regained control of the Senate. He won his first full term as a Republican in 1998 by a large margin and has not looked back or slowed down since.

He has announced his intention on running for re-election in 2016 and with his victory, Alabama’s influence on the national stage will only increase.

We will watch with interest to see if Senator Shelby’s stature and power can now move a balanced budget amendment towards full and open debate.

Peeling Back the Layers of the Medicaid Onion- Part I

medicaidThis is the first in a series of articles that will evaluate Medicaid in Alabama, the services provided, the cost of those services and prospective solutions to reduce that expense.



Let’s start with some facts.

In FY2015, the State of Alabama will spend $6.1 billion on Medicaid. You read that correctly. $6.1 billion. The expenditures for all state services (including education) are approximately $28 billion…total.

The FY2015 General Fund appropriation bill (Act 2014-284) sets forth $685 million for Medicaid expenditures (this is the state portion). This is an increase of $70 million over the $615 million set aside in the FY2014 appropriation. The remaining amount for funding Medicaid comes from the federal government and dedicated provider taxes. In FY2012, the total spend was $5.63 billion and $4.3 billion was from federal sources.

FY2015, our current budget year, began October 1, 2014 and concludes September 30, 2015. The legislature convenes March 3rd and will begin working on the FY2016 appropriations.  Medicaid has requested another significant increase.

The State of Alabama has two main appropriation bills; the education trust fund ($5.93 billion in FY2015) and the general fund ($1.839 billion in FY2015). The state’s portion of Medicaid expense in the FY2015 general fund appropriation accounted for 37.25% of the total appropriation. This is an increase compared to a 25% level in FY2008. And it continues to grow.

Keep in mind that the general fund appropriation funds all other state agencies (other than education). As Medicaid expense grows it consumes revenues that could be used for other state services.

This is a huge problem.

medicaid2On October 25, 2012, Governor Bentley established the Alabama Medicaid Advisory Commission charging its members to present recommendations to reform Medicaid by January 1, 2013. Most of the information that follows is set forth in the “Report of the Alabama Medicaid Advisory Commission” authored principally by its chairman, Dr. Don Williamson.

In 2011, 22% of Alabamians qualified for services from Medicaid for at least a portion of the year.

Who are these people that qualify for Medicaid?

Low income families. Parents of children are eligible only if their income is 11% of the Federal Poverty Level. Childless adults do not qualify. Children, ages 6-19, that come from a family if their income is below 100% of the Federal Poverty Level. Pregnant women and children, ages 0-5, if their income is below 133% of the Federal Poverty Level. Aged, Blind & Disabled. Seniors in nursing homes.

Medicaid enrollment has exploded. In 2003 there were 750,000 participants and in 2012 this had grown to 938,000. Much of that growth was seen in the 2008 -2012 time frame which included a severe economic downturn and the implementation of the Affordable Health Care Act. The Advisory Commission’s report assumes that the number of participants will decrease as the economy improves. This has not been the case. The latest available data provided by Alabama’s Medicaid agency indicates that the April 2014 enrollment to be 966,000.

What are the services provided by Medicaid?

Mandatory services are those required by the federal government and include hospital services (inpatient and outpatient), services at Rural and Federally Qualified Health Clinics, nursing home care, laboratory and X-ray services, family planning services and supplies, services of physicians, nurse midwives and nurse practitioners, checkups and health services for children, home health services, transportation, pregnancy related services and dental services.

medicaid3Optional services are those not specifically required by the federal government (however these services are mandatory for children, optional only for adults) and include prescribed drugs, end-stage renal dialysis treatment, eyeglasses, home and community based services, hospice services, organ transplants, prosthetic devices and clinic services that are not part of a hospital.

The report utilizes financial information from FY2012 (October 1, 2011 through September 30, 2012). In FY2012, the total Medicaid expenditure was $5.63 billion and of that amount the state’s portion set forth in the FY2012 General Fund appropriation was $575 million. So in four years, the total Medicaid spend has increased from $5.63 billion to $6.1 billion (an increase of $475 million) and the state’s part, the General Fund appropriation, has grown from $575 million to $685 million (an increase of $110 million).

So, where does this money go?

In FY2012, the three top areas accounted for 63% of the total spend; hospital care ($2 billion), nursing homes ($932 million) and pharmacy services ($593 million). The remaining 37% ($2 billion) was spent on mental health ($430 million), physicians ($397 million), alternative care ($395 million), health insurance premiums ($296 million), support ($216 million), administrative ($207 million), family planning ($64 million) and school based health services ($45 million).

In the future installments in this series, we will evaluate the top three expense areas and provide insight as to what the state is planning (or not planning) to do to try to reign in this out of control expense.

Stay tuned….