While the Alabama Legislature confronted a myriad of issues during the 2023 regular session, one topic expected to receive discussion was notedly absent: Medicaid expansion.

In the months preceding the session, expansion proponents made their case for why expansion was a good idea, namely, that it would bring an influx of federal dollars to the state. Though vowing to oppose full expansion, House Speaker Nathaniel Ledbetter (R-Rainsville) indicated he was willing to make adjustments to the state Medicaid program, i.e. more limited expansion. Gov. Kay Ivey remained largely silent on the issue, though she has generally said that the ongoing costs of full Medicaid expansion are a concern.

But the debate is not over. Proponents are back with the same tired arguments, likely already eyeing another push in 2024, if not before.

However, the bottom line remains the same. It is unlikely that Alabama’s government could afford a permanent Medicaid expansion. Moreover, the negative impacts of expansion could outweigh any perceived short-term benefits.

In the final days of the session, Alabama Arise, a longtime expansion proponent, published an article renewing the push for Medicaid expansion, arguing that expansion would fortify the state’s General Fund (GF) budget. Of all the virtues claimed by expansion proponents, this one makes the least amount of sense.

Because of Alabama’s unique two-budget system, nearly 79% of fiscal year 2022 revenues were earmarked to the Education Trust Fund (ETF). Proponents argue that expansion will create new jobs and more consumer spending, thus paying the upfront costs, but much of any new income and sales tax receipts realized from expansion would go back into the ETF budget, not the General Fund. The Alabama Medicaid Agency relies solely on GF appropriations for its state funding.

A 2022 estimate showed that the average annual cost of Medicaid expansion in the first six years would be $225 million, though the projected costs reach nearly $250 million by year six. Yes, the state would receive more federal Medicaid funding in return for increased state spending, but all that money would go back into the Medicaid program. It could not be used for other GF agencies, meaning a gap would exist that taxpayers would likely be left to fill.

Another argument made by Alabama Arise and other proponents is that Medicaid expansion would mean Alabama brings more of its federal tax dollars back to the state. Essentially, the argument is that Alabamians are already covering the costs of expansion in other states.

There are several flaws with this argument. First, Alabama is already one of the most federally dependent states in the nation. In 2022 the state ranked fourth in dependency. More federal dollars mean more federal control of Alabama state programs. For example, the Biden administration struck down Medicaid work requirements in at least six expansion states. Alabama withdrew a work requirement proposal after Biden became president. If Alabama becomes more reliant on federal Medicaid dollars, it will be forced to adhere to the policy decisions of whomever controls the White House and Congress.

The second question is whether Alabama wants to play a bigger role in a national problem or be part of the solution.

The federal deficit was $2.1 trillion in the past 12 months, a 50% increase over the same period in 2022. Revenue growth has slowed, while spending on interest on the national debt, healthcare, and Social Security continues to climb. Taking hundreds of millions of additional federal dollars each year will only exacerbate the nation’s spending problem, a problem that all Americans will eventually be forced to confront.

Finally, Alabama Arise argues that Medicaid expansion will support hard-working Alabamians, saying it “would be a valuable tool to help people find work or stay employed.” There are certainly circumstances where it might help someone who is temporarily unemployed and intends to reenter the workforce. But for some Alabamians, it could provide justification to leave the workforce altogether and not return.

For the past six months, Alabama’s labor participation rate has hovered between 56.5-57.1%, among the lowest in the country. Expanding Medicaid will do nothing to reverse that trend, instead providing a disincentive to work. The legislature made progress in this area during the 2023 session by passing an overtime income tax exemption. Expansion could undo that good work.

The push to expand Medicaid in Alabama is unlikely to end soon. However, the long-term budget and societal impacts continue to outweigh the rewards of bringing in more federal money.

Justin Bogie serves as Fiscal and Budget Reporter for 1819 News. The views and opinions expressed here are those of the author and do not necessarily reflect the policy or position of 1819 News. To comment, please send an email with your name and contact information to: Commentary@1819News.com.

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