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Federal health care money for Arizona now in question

Arizona is facing the possibility that it won’t get extra federal health care funding that legislators expected would prop up the state’s ailing budget.

At issue is $24 billion proposed for states nationwide, including $400 million for Arizona, for a six-month extension of a temporary higher rate of federal Medicaid funding.

The U.S. House on May 28 approved a spending bill that omitted the health care money because of federal lawmakers’ concerns about the nation’s budget deficit.

Meanwhile, Arizona’s policymakers await the federal government’s final decision.

If the final version doesn’t provide for that funding, Senate President Bob Burns said they’ll have to review their options and assess the risk of not complying with what is known as federal maintenance-of-effort (MOE) requirements.

Burns said they’ve already tried as best they could to maintain certain spending levels for education and health care.

“You cannot maintain MOE if you don’t have the money to do it,” he said. “At some point we are going to have to tell the federal government: We are doing everything we can with the resources we have and we just cannot do anymore and if you are going to punish us for doing everything we can, then we don’t have any choice.”

If Arizona doesn’t maintain its current level of health care, the federal government could withhold $7.8 billion. That’s the reason why lawmakers restored Kids-Care statutes and undid cuts to the Arizona Health Care Cost Containment System this year.

The legislation faces an uncertain fate in the Senate, so there’s no final congressional decision yet. However, “the likelihood of it passing appears to be dropping,” said John Arnold, Gov. Jan Brewer’s budget director.

Paul Senseman, a spokesman for Brewer, said the federal government has an obligation to fund the health care mandate it imposed on the states. Like Arizona, most states are relying on additional federal funds for their Medicaid programs, he said.

Senseman said he expects Congress to either approve the additional funding or repeal the health care program. If it does neither, however, Arizona may have to drastically scale back AHCCCS to the point where it would not be reliant on federal dollars.

“We’re going to see if they’re going to live up to their word or not or if they’re going to have to admit what the true costs are to this mandate,” Senseman said. “If they don’t, there will be severe economic consequences, not just for Arizona but for many, many other states.”

Others say the state can’t afford to risk the billions in federal money for health care programs.

Rep. John Kavanagh said the state will have no choice but to find another way to fund the $400 million hole in AHCCCS. He said the state would likely have to fall back on a contingency plan the Legislature approved in the event that voters rejected Proposition 100, a temporary one-cent sales tax increase. That plan cut nearly $900 million from the budget.

House Majority Leader John McComish was less certain about what direction the state would take if the additional funding wasn’t available, but said lawmakers would have to figure out something in a special session later this year.

“Not doing anything is not an option,” he said.

The money would maintain Medicaid eligibility for 310,000 people, about a quarter of the Arizona Health Care Cost Containment System’s enrollment.

As one part of her proposal to eliminate the state’s big budget deficit, Brewer in January proposed reducing eligibility effective Jan. 1.

The state budget that was approved in March authorized the eligibility cutoff. State officials later determined, however, that President Barack Obama’s health care overhaul requires the state to maintain the eligibility as is.

Lawmakers then authorized the state to keep the eligibility through mid-2011 if funding is available, but Arnold said it’s now unclear how the state can afford to do that.

Hopefully, the situation will become clearer by fall, Arnold said June 1, especially if tax collections dampened by the recession bounce back so the state has the money to pay for the services.

“Otherwise we’ll have to do something else,” he said, declining to discuss possible options. “We’re still in a position where we don’t think we need to run out and take drastic action. We’re still watching and waiting.”

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