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Health care bill may leave $400M hole in budget

Arizona’s balanced budget lasted for about two days before the congressional health care bill took out a chunk that may total $400 million for the next fiscal year.

After a year of debate, argument and political maneuvering, Gov. Jan Brewer signed a budget package on March 19 that balanced the state’s books for the 2011 fiscal year. But the historic health care bill prevents changes to the eligibility standards for the state’s Medicaid program, a crucial facet of the budget package signed by the governor.

That budget included a massive rollback of the state’s Medicaid program that was slated to save the state about $385 in fiscal 2011, and nearly $1 billion in the fiscal 2012. The passage of that legislation meant 310,000 people were to lose medical coverage under the Arizona Health Care Cost Containment System.

The budget also included the elimination of KidsCare, the state arm of the federal Children’s Health Insurance Program. The program’s elimination was expected to save the state about $20 million in fiscal 2011.

“It will cost the citizens of the state of Arizona at least $1 billion in 2012 and more than $1 billion in 2013,” Brewer said in a press release. “No one knows, with certainty, what the cost will be to Arizona’s taxpayers in this current fiscal year 2011 budget because the true costs of this federal bill have been hidden away in other pieces of federal legislation that have not yet been approved.”

The changes in AHCCCS eligibility were not scheduled to take effect until Jan. 1, when the state is no longer bound by maintenance-of-effort requirements under the American Recovery and Reinvestment Act, better known as the federal stimulus. The federal government provides a two-to-one match to states for their Medicaid programs, but the federal stimulus legislation increased the match to 3-to-1 for three years.

Paul Senseman, a spokesman for the governor, said congressional leaders have indicated that they will approve a six-month extension of the expanded matching funds for Medicaid. If Congress approves the extension, he said, the state will avoid taking a $385 million hit to the 2011 budget.

“If they don’t, then Reps. Giffords, Mitchell, Grivalva, Kirkpatrick, Pastor have all just blown a gigantic hole in the state budget,” Senseman said, referring to Arizona’s five congressional Democrats, all of whom voted for the health care bill on March 21.

Voters in 2000 approved Proposition 204, which expanded AHCCCS coverage to include anyone earning up to 100 percent of the federal poverty level. The expansion was to be paid for with revenue from the state’s court settlement with tobacco companies, but the funding source was not enough to cover the massive jump in AHCCCS enrollment. Prior to 2000, AHCCCS covered only parents who earned up to 33 percent of the federal benchmark.

Arizona originally stood to lose out on hundreds of millions in federal dollars from 2014 to 2020 under the version of the health care bill passed by the U.S. Senate in January. The bill provided extensive funding to help states bring their Medicaid eligibility levels up to 100 percent. But those funds weren’t available for Arizona and the small handful of other states that had already expanded Medicaid.

However, the amended bill passed by the U.S. House on March 21 included extra funding for Arizona and the other “early expanders,” as they are known. According to Monica Coury, assistant director of intergovernmental affairs for AHCCCS, the amended bill grants Arizona 50 percent matching funds in 2014, and the match increases incrementally until it reaches 93 percent in 2019.

“They tried to address that in the House reconciliation package and they added some additional federal dollars, only for the childless adult population. And that’s the bulk of our Prop. 204 population,” Coury said. “It’s kind of a funny calculation.”

Coury said AHCCCS is still crunching numbers to determine the full fiscal impact the health care bill will have on Arizona. AHCCCS determined that the original version of the Senate bill would have cost the state about $3.8 billion, but the 93 percent match provided by the federal government will likely reduce that amount.

“Obviously there’s still going to be a cost for expanding the program. So we need to look at that versus the original Senate bill versus the reconciliation package,” Coury said.

Brewer said the health care bill would cost the state about $4 billion through 2019. Rep. Kyrsten Sinema, however, said the state will receive about $2.5 billion in additional Medicaid funding from the federal government during the next nine fiscal years to help fill that shortfall.

The state Constitution prevents lawmakers from overturning voter initiatives, but Brewer and legislative Republicans believe they do not need voter approval to reduce AHCCCS coverage because the Prop. 204 ballot language said it would use tobacco settlement money and other “available revenues.” Because there are no other revenues available, they argue, they do not need voter approval.

Democratic Rep. Kyrsten Sinema, a member of the White House Health Reform Task Force who has been an outspoken advocate of the congressional bill, said Brewer and other Republicans are mistaken. The changes they approved would likely have been found unconstitutional by the courts and overturned, she said, meaning they would’ve had to plug a $385 million hole in the budget, with or without the congressional bill.

“Any allegation that this furthers our deficit or makes the problem worse is just simply not accurate,” said Sinema, a Democrat from Phoenix. “Since the cuts that they wanted to make were unconstitutional, they weren’t real anyway. So we were going to have to fund this population anyway.”

In a letter to Arizona House Speaker Kirk Adams and Rep. Warde Nichols, chairman of the House Rules Committee, Sinema asked for a rule allowing the late introduction of bills. She said wants to introduce a bill that would reinstate KidsCare, and another bill that would eliminate a sales tax exemption on retail warranties. She said overturning the exemption would bring in $22 million, enough to pay for KidsCare.

Sinema also chastised Brewer and Republican lawmakers for not planning ahead.

“Perhaps they should’ve taken the opportunity to read the legislation back in December and prepare for this. This language has been widely available on the Internet since the middle of December,” she said.

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