The Goldwater Institute opened the next front in the battle against Medicaid expansion, filing a lawsuit arguing that the hospital assessment that will fund the program violates the Arizona Constitution.
In the lawsuit filed on Thursday in Maricopa County Superior Court, the day after a referendum drive against Medicaid expansion failed, the institute argued that the Legislature violated Proposition 108, a 1992 constitutional amendment that requires a two-thirds vote for a tax increase. The assessment passed by a simple majority in both chambers of the Legislature.
The institute also said the Legislature violated the separation-of-powers provision in the state Constitution by delegating its taxing authority to the director of the Arizona Health Care Cost Containment System.
The lawsuit was filed on behalf of 36 Republican lawmakers who voted against Medicaid expansion, as well as three private citizens. Gov. Jan Brewer and AHCCCS Director Tom Betlach are named as the defendants.
The Goldwater Institute wants a judge to block the hospital assessment from going into effect. The expansion and the assessment that will fund it are scheduled to begin in January.
Gov. Jan Brewer’s administration has long argued that the assessment didn’t need a two-thirds vote because of an exemption in Prop. 108 for fees and assessments, as long as the amounts are set by a state officer or agency instead of the Legislature. Lawmakers used that provision numerous times in recent years to chip away at budget deficits by authorizing agency directors to impose new fees.
But Goldwater Institute attorney Christina Sandefur said the hospital assessment is clearly a tax, and Brewer can’t get around it simply by calling it something else.
“Just calling this an assessment instead of a tax does not make it so,” Sandefur said.
The Goldwater Institute argued in its lawsuit that the hospital tax is not a fee or assessment because it is not imposed in exchange for privileges or benefits of the people who pay it. Instead, it is a broad-based, mandatory tax levied on all hospitals, regardless of whether they’ll benefit from it.
Under the hospital tax proposal drafted by AHCCCS, every hospital system in the state is projected to gain money from the assessment due to the increase they will see in federal Medicaid payments.
Sandefur argued that the Prop. 108 exemption for fees and assessments still requires legislative authorization that is subject to a supermajority vote. She said it simply means that agency heads or state officers don’t need a two-thirds vote from the Legislature every time they want to exercise that authority.
A provision of Prop. 108 states that a two-thirds majority is required for “the authorization of any new administratively set fee.”
In its separation-of-powers argument, the Goldwater Institute argued that the Legislature unconstitutionally delegated its authority to impose taxes to the AHCCCS director. It cited a provision of the Arizona Constitution that states, “The power of taxation shall never be surrendered, suspended or contracted away,” and that even when a power may be delegated, it must be in a way that lays out sufficient guidelines.
Brewer spokesman Andrew Wilder said the governor is confident that Medicaid expansion falls under the Prop. 108 exemption for assessments and fees.
“All one must to do is read Prop 108. to see that it doesn’t apply to the provider assessment in the Medicaid restoration law. There are countless examples where agencies have been given fee authority – in fact, the Legislature’s granted it over 80 times in the last five years,” Wilder said in an email.