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Medicaid commissioner outlines FY26 request, explains large difference driven by lost COVID carryforward not just program growth
Summary
Medicaid Commissioner detailed enrollment changes since the pandemic, explained why FY26 appropriation needs rise after reduced carryforward, and provided program breakdowns by beneficiary group and projected FY26 funding needs.
Commissioner Jane Azar of the Alabama Medicaid Agency briefed the Joint Interim Committees on enrollment trends, federal COVID-era funding impacts and the department’s FY26 funding request, emphasizing that a one-time drop in carryforward funds—not a sudden surge in recipients—accounts for most of the requested increase.
"The 2026 budget request before you today is $1,237,000,000 in projected funding need," Azar explained, and then clarified that an estimated $53,000,000 in carryforward reduces the FY26 appropriation request to $1,184,000,000. She emphasized the $229,000,000 difference from the FY25 appropriation is largely explained by the loss of substantial COVID-era carryforward dollars.
Why it matters: Medicaid accounts for a large share of state health spending and provider revenue; funding decisions affect hospital budgets, nursing homes, pharmacies and a broad provider network that serves low-income and vulnerable Alabamians.
Enrollment and population mix: Azar summarized the program’s population and expenditure composition: disabled and blind beneficiaries account for about 18% of members and roughly 46% of expenditures; children make up about 50% of members and roughly 24% of expenditures; adults age 65+ represent about 8% of members and 15% of expenditures. She noted Alabama’s Medicaid rolls surged during the COVID public-health emergency because federal rules prevented terminations while the enhanced 6.2 percentage-point FMAP was in effect.
Fiscal context and drivers: Azar said fiscal 2024 expenditures were about $9.38 billion. For 2024 the Medicaid funding mix was about $6.8 billion federal and $2.5 billion state funds. She told the committee the principal inflationary drivers in FY26 include pharmacy inflation, nursing-home factors, and utilization changes; she said part of the FY26 request reflects updating fee-for-service codes that have not been adjusted in many years (for example, a baby-well-visit code not updated since 2004).
Access and providers: Azar noted Medicaid’s provider base—more than 34,000 enrolled providers—carries economic weight across the state. She highlighted that Medicaid funds represent around 66% of Children's of Alabama hospital revenue and about 75% for The USA Children’s & Women’s hospital in South Alabama.
Clarifying the requested increase: Azar told the committee the raw FY26 request looks large because of carryforward declines; she calculated that underlying program growth between the adjusted 2025 need and the 2026 estimate is roughly $65,000,000 after accounting for realized 2024 expenditures and typical inflationary adjustments.
Questions and follow-up: Legislators pressed Azar for more granular roll-forward detail and for assumptions about utilization, provider rates and enrollments. Azar said the agency will provide follow-up materials and emphasized Medicaid’s limited control over federal matching rates, specialty drug entries and national health-care inflation.
Ending: Azar closed by thanking staff and committee members and noting the agency will return with the detailed breakout of cost drivers and eligibility trends.
