The Medicaid program provides medical insurance to several low-income and disabled citizens of Alabama. Jointly funded by the federal government and Alabama, the program is managed under federal guidelines (1). Every October, the state receives the Medicaid budget and passes it through legislative committees to release the program funds. However, several challenges arise during the incremental and activity-based budgetary formulation processes. For instance, several Medicaid managing departments work with large amounts of data that can lead to data inaccuracies when condensing the data for budgeting purposes. Besides, concentration on the financial aspects of the program may lead to a neglect of significant qualitative components such as employee workplace satisfaction.
However, the federal government, in collaboration with the state of Alabama, have enacted legislations such as the Congressional Budget Act of 1974, to govern the budgetary process. Budgetary allocation for Medicaid has led to improved living standards in Alabama, suggesting a 20% increase in 65-year-old citizens by 2047 at the state level. The critical funder of the program is the federal government, with significant support from the state of Alabama and other non-governmental institutions. Despite the budgetary challenges arising when modifying the budget to suit the current financial and economic factors when certain unforeseen conditions emerge and changes need to be made, legislators have ensured the seamless provision of health insurance to those who need it most; the poor and the disabled. Meanwhile, the most significant difference between federal and state budgets is that the federal government is allowed to operate in debt, with its expenditures beyond its revenues.
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Submission Process
The Budget Isolation Amendment notes that Alabama's budget must be approved first before any other legislation is passed. Therefore, every October 1 of each regular session, the governor presents the state's fiscal year budget. The process begins by sending instructions from Alabama's budget office to Medicaid concerning the preparation and of the agency's budget requests (2). The instructions provide a framework for financial and descriptive information presentation while setting specific limits on certain Medicaid expectations and demands based on the prevailing fiscal environment. Next, Medicaid submits the prepared requests to the Alabama budget office, where the requests are developed into an executive budget proposal, according to the governor's priorities. Alabama's deadline for submitting the budget to the Legislature is November 1. After receiving the funding, the legislature holds a budget hearing committee to deliberate on certain parts of the Medicaid budget to reach an agreement. The budget is passed and handed to the governor for approval into law.
Budget Format
In 2021, the Alabama Senate passed a $2,391,206,601, higher than the previous year’s budget of $2,222,345,909 due to the economic fallout caused by the Covid-19 pandemic (2). However, Alabama Medicaid received an allocation of $94 million for the departments of health and transportation. The budget was strong to give state agencies a place to start their operations as they work on their individual budgets for 2022. It is worth noting that Alabama uses incremental and activity-based budgetary methods because the federal government earmarks over 93% of the budget for the education trust fund and infrastructure (2). In the former, the current year’s budget is arrived at by adding or subtracting specified percentages to the last year's actual figures. On the other hand, activity-based budgeting involves the preparation of a high-level budget by the senior management.
Revenue Sources
A significant amount of Medicaid funding comes from the federal government who approve the budget through the legislature. The government aligns national spending for the program beneficiaries by qualifying the eligible individuals to health services without limit. The federal government funded 64% of the Medicaid costs in Alabama in 2019 to provide fiscal relief to the state. The second source of revenue for the program come from Alabama state. The revenue collected within its jurisdiction is used to pay part of the Medicaid program for its citizens supporting the federal government. In 2019, the state of Alabama contributed 36% of the Alabama Medicaid costs. Other non-governmental and non-profit organizations such as the Consumer Oriented and Operated Plans (CO-OPs), have also played a vital role in providing health insurance and financial support to meet the program objectives , especially since the Covid-19 pandemic began. Finally, the program received donations and support from its research and development in medical instruments. The revenue from these projects adds to the Medicaid budgetary process and ultimately supports the vulnerable individuals in Alabama who are eligible for the health insurance.
Challenges
Several challenges arise regarding the management of the Medicaid budget. First, creating a budget can be a complicated task due to data entry errors from various branches of the organization. Medicaid comprises several departments such as medical research and development, marketing, resource management, and recruiting. Therefore, collating the individual Medicaid department expenses often leads to inaccuracies in data collection, thereby impacting the agency's budgetary allocation. Secondly, Medicaid prepares its budget before the start of the fiscal year. The challenge arises when modifying the budget to suit the current financial and economic factors when certain unforeseen conditions emerge and changes need to be made. According to Rudowitz et al., (3). This results in misappropriation of institutional resources by overstating or understating the real values of certain components of the program such as assets and service values.
In addition, the agency faces significant challenges due to excessive focus on budget and financial outcomes. Overlooking the qualitative aspects of Medicaid and concentrating on revenue and profits has the ripple effect of derailing the agency's work performance. The other challenge is insufficient time to create a well-organized budget. For instance, the deadlines under which the agency is required to submit its budget may not allow for the compilation of all departmental budgets, and production of a final program budget. The inaccuracies in the Medicaid budget can cause harm to millions of Alabama citizens relying on the program and thus the need to govern the process.
Federal and State Submission Process
Budgeting for critical objectives such as education, healthcare and security is similar across the federal and state governments. However, several differences occur between the two due to the distribution of power and authority. The main difference is the issue of fiscal deficits. The federal government is allowed to operate in debt, with its expenditures beyond its revenues. However, Alabama is required by the federal laws to maintain a balance between expenses and income (4). That is so because the federal government would be restricted from borrow in emergencies if it adopted a balanced budget. Secondly, the federal government carries significant budgetary implications and are authorized to make and issue currency. In other words, when faced with tight fiscal situations, the federal government could print more money. On the other hand, state governments have no authority over currency printing. Most importantly, the federal budget encompasses the whole country's taxes, whereas the state of Alabama encompasses a few jurisdictional areas with specific towns and cities to collect taxes from.
References
Becker, D. J. (2019). Medicaid Expansion in Alabama: Revisiting the Economic Case for Expansion.
Moseley, B. (2020). Alabama Senate passes state general fund budget. (2020). https://www.alreporter.com/2020/05/06/alabama-senate-passes-state-general-fund-budget/#:~:text=Tuesday%20the%20Alabama%20Senate%20passed,the%202020%20budget%20of%20%242%2C222%2C345%2C909 .
Rudowitz, R., Orgera, K., & Hinton, E. (2016). Medicaid financing: The basics. Menlo Park, CA: Kaiser Commission on Medicaid and the Uninsured.
The Concord Coalition. (2021). Medicare and Medicaid Funding Challenges. https://www.concordcoalition.org/medicare-and-medicaid-funding-challenges
