In Alabama 860,000 citizens depend on Medicaid for their basic health needs.

While other states spend 4.6% of their budget on administration, Alabama Medicaid functions well with only 2.7% of their budget spent on administration. In addition, the 84,000 Medicaid employees generate billions in revenue forAlabama. Compare this 2.7% to the 10.7% administration costs of commercial insurance. The 84,000 employees makes Medicaid the state's second largest insurance program.

The Medicaid program is responsible for the health care needs of 20% of theAlabama population, including 37% of children under the age of 19, 46% of deliveries, 21% of senior citizens and 74% of nursing home residents.

Funding for Alabama's Medicaid agency, and thus the health care of its many dependent citizens, is extremely fragile. For every dollar Alabama contributes to the Medicaid program, the federal government matches approximately two dollars and forty three cents. This is why any cuts in state funding could be catastrophic when coupled with the federal matching fund loss.

Cuts in state funding are very possible this year. A special session of the state legislature will begin on July 18, 2005. The primary business of the legislature will be to pass the General Fund budget for 2005-06.Alabama's Medicaid budget for the coming year will be determined at that time. Ninety percent of Alabama's state budget is earmarked. The state's Medicaid budget comes out of the General Fund portion of the remaining 10%. As is often the case, Alabama is facing a budget shortfall, and the agency's funding could be severely squeezed in the budgeting process. The Medicaid agency has already responded to previous funding shortfalls by implementing many cost-cutting measures. These include a tighter reign on drug costs, saving the agency 118 million dollars. The state's Medicaid program remains in dire need of a stable revenue stream.