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Dealing blow to Brewer, appeals court says Medicaid expansion lawsuit can move forward

Dollar Bills and gavelThe Arizona Court of Appeals ruled today that a group of Republican lawmakers has standing to challenge the hospital assessment that funds Gov. Jan Brewer’s Medicaid expansion program.

The decision gives opponents the opportunity to argue that the law was unconstitutional because it didn’t garner a two-thirds vote in the Legislature.

The case now threatens what is arguably Brewer’s greatest achievement as governor. The assessment on hospitals, which pays for the state’s share of Medicaid expansion, is the lynchpin of the Brewer’s plan.

Proposition 108, a constitutional amendment approved by voters in 1992, requires a two-thirds vote of the Legislature to approve a tax increase. Opponents of Brewer’s Medicaid plan, which passed with the support of legislative Democrats and a minority of Republicans, argued that the law violated Prop. 108 because it passed with only a simple majority.

The judges did not rule on the merits of the case, which will go back to Maricopa County Superior Court. At issue is whether it was legal to impose an assessment, which opponents say is a tax, on hospitals in order to fund the expansion of coverage under the Arizona Health Care Cost Containment System.

The appellate court overturned a trial court ruling that the 36 Republican lawmakers, all of whom voted against Medicaid expansion, did not have standing to sue over the program. Maricopa County Superior Court Judge Katherine Cooper sided with Brewer’s attorneys, who argued that it was up to the Legislature to determine whether Medicaid expansion required a two-thirds vote under Prop. 108.

Brewer’s attorneys also successfully argued to the trial court that the lawmakers did not have standing because they did not have to actually pay the alleged tax themselves.

Judge John Gemmill, writing for the three-judge panel, wrote that it is appropriate to grant standing to the lawmakers because the lawsuit involves “pure legal issues of sufficient urgency and statement importance.”

“The issues presented in this litigation have potentially important ramifications for Arizona’s state budget and may impact a portion of Arizona citizens who rely on Medicaid and the state agencies that operate it,” Gemmill wrote.

The judges rejected Brewer’s argument that the Legislature itself had sole power to determine whether a bill needed a two-thirds supermajority under Prop. 108. Gemmill said the Legislature could not make that determination any more than it could decide to raise the state’s income tax with a simple majority.

The court acknowledged that lawmakers do not generally have standing to sue over their votes in the Legislature. But Gemmill wrote that a landmark 2003 Arizona Supreme Court ruling, as well as a U.S. Supreme Court ruling in a Kansas case, support the Arizona lawmakers’ right to sue.

Gemmill said the Arizona Republicans are suing not over a loss of political power but over the potentially unconstitutional “overriding” of their votes. If the hospital assessment required a two-thirds vote, then the 36 GOP lawmakers’ votes would have been enough to defeat it.

“Legislators, like private citizens, have a constitutional right to have their votes count a certain amount, and if a vote is properly alleged to have counted less than the constitutionally required amount, standing exists to claim a constitutional injury,” Gemmill wrote.

Goldwater Institute attorney Christina Sandefur, who represented the anti-Medicaid expansion lawmakers, said called the ruling a victory not just for the legislators but for the state and its taxpayers as well. The ruling was just one step, but it’s an important one, she said, and Sandefur was confident that the courts would ultimately rule in the institute’s favor.

“It preserves the integrity of the legislative process. And what we saw happening in the Legislature in the Medicaid decision is only one instance of what could be a very abusive process in the future if this were not able to be challenged in court,” Sandefur said. “If that were the last word, that would basically mean that no tax ever in the future be challenged for violating the constitution and the Legislature, whenever it decided not to comply with the constitution, could do so.”

Brewer called the ruling “wrong and problematic,” and said she would appeal it to the Arizona Supreme Court. She emphasized that the Court of Appeals did not rule on the merits of the case.

“If we have to return to the trial court to litigate the hospital assessment, we’re confident in its legality and we will comprehensively litigate it,” Brewer told the Arizona Capitol Times in an emailed statement.

Brewer also warned that the consequences would be dire if the courts ultimately threw out her Medicaid expansion plan.

“Arizonans should be concerned if the courts prevent the implementation of my Medicaid Restoration Plan because that would jeopardize the state’s ability to restore critical, cost-effective health care to tens of thousands through AHCCCS. Further, it would do so against the will of voters who twice voted to provide a health care safety net for our most vulnerable citizens,” she said.

The court ruled that three other plaintiffs, including two constituents of anti-expansion lawmakers, did not have standing in the case, upholding Cooper’s trial court ruling.

Brewer’s 2013 plan expanded AHCCCS coverage to include any one earning up to 133 percent of the federal poverty level, up from the voter-approved level of 100 percent. The expansion was done in accordance with the Affordable Care Act, President Obama’s signature health care law, under which the federal government pays increased matching funds to states that voluntarily expand their Medicaid programs.


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