Alabama Medicaid to request $1.184 billion for 2026

by Anna Barrett, Alabama Reflector
February 7, 2025

The Alabama Medicaid Agency will request $1.184 billion from the state for FY 2026, about $229 million more than its budget this year. 

“Most of it is related to health care inflation cost,” Alabama Medicaid Commissioner Stephanie Azar told legislators Thursday afternoon. “We have to build that in to make sure that we can pay our providers for what comes along.” 

The request was not a surprise but represents something of a landmark for Alabama Medicaid, a cornerstone of the state’s health care sector. 

Despite strict eligibility requirements that mostly limit the program to children, the elderly and those with disabilities, Medicaid provides health care coverage for about 20% of the state; pays for more than half the births in Alabama and is critical to keeping hospitals, nursing homes and medical practices open. 

Azar said that the increase in her request is technically $53 million, but it appears to be $229 million because of the federal aid the state received during the COVID-19 pandemic, aid that is no longer coming to the state. 

“It looks like the growth of the program is a lot more than it was, because we’ve had federal COVID dollars that has made the Legislature be able to appropriate us less,” she said. “And this year, that’s really moving away.”

Since last June, Alabama Medicaid enrollment has dropped by nearly 300,000 to 1.081 million, according to Azar’s presentation. This is nearly back to its pre-COVID enrollment at 1.054 million.

“I’ve always been an advocate for the people in this state that have needs. But there are some that have taken advantage of the system,” Rep. Chris Blacksher, R-Smiths Station, said. “That’s not fair to the people who truly need it.”

Medicaid makes up the largest single allocation in the Alabama General Fund budget, which pays for most noneducation state programs. But the state share is only a fraction of the total cost of the program. The federal government is expected to pay about 73% of the program’s costs next year. Azar estimates that Medicaid will receive over $7 billion from the federal government.

“I’m optimistic that I will be appropriated for my 2026 budget,” she said. “As long as we follow federal requirements, which is our full intention, we should draw our matching dollars for that state share.”

House General Fund Ways and Means Committee Chair Rep. Rex Reynolds, R-Hazel Green, said the committee will try its best to grant Medicaid its requested budget.

“We certainly hope we can. We know that if we don’t, it impacts our hospitals, impacts our nursing homes and impacts our providers,” he said. “We really got to find a way to make that happen.”

Alabama Reflector is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Alabama Reflector maintains editorial independence. Contact Editor Brian Lyman for questions: info@alabamareflector.com.

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