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Health care law safeguards KidsCare, AHCCCS – budget will be $400 million short

Most Americans won’t see any real impact from the new federal health care law for several years, but the effects will be immediate for the hundreds of thousands of Arizonans who were about to lose Medicaid coverage.

A provision in the Patient Protection and Affordable Care Act, which was passed by Congress on March 21 and signed by President Obama two days later, prohibits states from changing the eligibility standards for Medicaid and the Children’s Health Insurance Program. As a result, the state cannot legally move forward with a plan to scale back eligibility under the Arizona Health Care Cost Containment System (AHCCCS) or eliminate KidsCare.

While the federal health care law may keep 310,000 patients from losing AHCCCS coverage and keep 47,000 children on KidsCare, it puts a delicately balanced state budget back in the red.

Two days before the U.S. House of Representatives voted on the health care bill, Gov. Jan Brewer signed a budget that counted on $385 million from the AHCCCS rollback and about $22 million from scrapping KidsCare.

That leaves a $400 million hole in a state budget that took nearly a year to craft and only two days to unbalance. Without additional federal assistance, that shortfall jumps to $1 billion in fiscal 2012.
Supporters of the law, however, focused not on what the state will pay, but on what the AHCCCS and KidsCare patient would gain. Rep. Kyrsten Sinema, a Phoenix Democrat who is a member of the White House Health Reform Task Force, advocated for the congressional bill. She said the state has a “moral responsibility” to pay for KidsCare.

Sinema said there was no reason for Gov. Jan Brewer and legislative Republicans to be caught off guard by the Medicaid eligibility provision in the law.

“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.

The changes in AHCCCS eligibility were not scheduled to take effect until Jan. 1, when the state will be liberated from the maintenance-of- effort requirements under the American Recovery and Reinvestment Act, better known as the federal stimulus. The federal government provides a 2-to-1 match to states for their Medicaid programs, but the federal stimulus legislation increased the match to 3-to-1 for three years and required states to maintain certain funding levels for health care programs during that time.

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 Congress fails to act, Senseman said, then Reps. Gabrielle Giffords, Harry Mitchell, Raul Grijalva, Ann Kirkpatrick and Ed Pastor “have all just blown a gigantic hole in the state budget,” referring to Arizona’s five congressional Democrats, all of whom voted for the health care bill on March 21.

If Brewer and the Legislature opted to carry out the cuts to AHCCCS and KidsCare, it would save the state that $400 million, but would likely end up costing Arizona a lot more. If the state goes ahead with its plans to eliminate KidsCare on June 15, it will be in violation of the health care law, Sinema said, and will jeopardize about $7 billion in federal health care money.

“From the basic math, it makes no sense to cut these people off of health care,” Sinema said.
In a letter to Arizona House Speaker Kirk Adams and Rep. Warde Nichols, who chairs the House Rules Committee, Sinema asked them to allow the late introduction of two bills that she said would ensure that the state doesn’t lose billions in federal dollars without adding more spending to the state budget.
One bill would reinstate KidsCare, while the other would expand the state’s sales tax to include warranties on retail products such as computers and appliances. Sinema said the new tax would raise about $22 million, enough to offset the cuts to KidsCare.

Adams said he was looking into the request, but said he was unaware of any potential loss of all federal health care funds.

“You’ll forgive us for not taking Kyrsten Sinema’s word for it,” Adams said.

The Governor’s Office is planning for all contingencies, including the possibility that Congress won’t extend the expanded Medicaid funding.

He said it’s unlikely that Brewer will move forward with the plans to reduce AHCCCS coverage or eliminate KidsCare.

“Given the new federal mandate, it makes it a lot less likely of a possibility,” Senseman said of the planned cuts. “We haven’t closed the door to that, but the real question is, are they going to pay for it or not?”

The Governor’s Office is also hoping for relief from the courts.

Thirteen state attorneys general filed a lawsuit on March 23 against the federal government, hoping to overturn to the health care law.

Attorney General Terry Goddard declined Brewer’s request that he join the suit, but Senseman said the governor may join without him or file a separate suit of her own.

Arizona is in a unique situation due to a ballot measure that voters passed 10 years ago. Proposition 204 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 that money wouldn’t have been 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.

AHCCCS was still crunching numbers to determine the full fiscal impact the health care law will have on Arizona. 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.

If Congress doesn’t provide additional funding, the Arizona Hospital and Healthcare Association might. The trade group is studying options for a possible November ballot that would ask voters to approve a new funding source for AHCCCS, possibly including new taxes on tobacco, alcohol or soft drinks. Association President John Rivers said the group’s plans for the ballot measure have not changed since the health care law passed.

Brewer said the health care law would cost the state about $4 billion through 2019. 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.

Sinema 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 federal law.

“Any allegation that this furthers our deficit or makes the problem worse is just simply not accurate,” said Sinema. “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.”

- Jim Small contributed to this article.

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