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Appeals court breathes new life into Medicaid challenge

Gov. Jan Brewer sighed deeply as she prepared to address the Court of Appeals ruling that injected new life into legal challenge against her prized Medicaid expansion plan.

“All Arizonans should be concerned by the court’s decision, which could prevent the state’s ability to restore quality, cost-effective health care to tens of thousands through our model program, the AHCCCS program,” Brewer told reporters during an April 22 press conference.

The appellate court ruled that 36 Republican legislators who sued to block a key part of Brewer’s Medicaid law have standing to sue, overturning a trial court ruling and allowing the case to move forward. The lawmakers allege that the hospital assessment that funds Arizona’s share of the expansion violated Proposition 108, a provision in the Arizona Constitution requiring a two-thirds vote to pass a tax hike.

The Arizona Court of Appeals did not rule on whether the hospital assessment, which the Legislature approved with a simple majority, is a tax that is subject to Prop. 108, as the 36 GOP lawmakers contend. And Brewer said she will appeal to the Arizona Supreme Court in hopes that it will rule that the legislators don’t have standing to bring the lawsuit.

But now that the appellate court allowed the case to go forward, Brewer faces the possibility that Medicaid expansion, arguably the signature achievement in her six years as governor, will be struck down by the courts.

Even worse for Brewer is the likelihood that if the lawsuit prevails, the case won’t be settled until after she’s left office in January, possibly leaving the fate of the Arizona Health Care Cost Containment System in the hands of a governor who opposed the expansion.

Only two gubernatorial candidates, presumptive Democratic nominee Fred DuVal and former Mesa Mayor Scott Smith, one of more than a half dozen Republicans vying for the GOP nomination, support her plan. The rest of the Republican field stands in opposition to Medicaid expansion, a major plank of President Obama’s Affordable Care Act.

Brewer said “of course” she is concerned that the next governor won’t fight for Medicaid expansion if the courts ultimately strike it down.

“I think that they have a responsibility certainly to uphold the will of the voters who … twice voted an expansion of Medicaid, and certainly to keep the plan which we’ve been able to establish, along with the Legislature, to have a balanced budget, a cash carry-forward and a rainy day fund. And we don’t have to go in and decimate our education and public safety budgets,” Brewer said.

Brewer remains optimistic

The governor emphasized that a lot is riding on the continuation of the expansion. Because of the 90 percent match that the federal government provides for the first three years of the program, expansion actually puts money back into the Arizona’s general fund by offsetting state funds that were being spent on AHCCCS. Losing that money, Brewer said, would pull funds away from other critical areas.

And the overturning of the assessment and the expansion program would boot thousands of people from Medicaid coverage.

So far, only about 14,000 childless adults who earn more than 133 percent of the federal poverty level — the new category of patients covered by the expansion — have enrolled in AHCCCS, according to the agency. AHCCCS expects that number to reach 57,000 by the end of 2014.

The governor expressed confidence that if the courts must rule on the Prop. 108 issue, they will uphold the hospital assessment that serves as the lynchpin of her Medicaid expansion plan.

“If we have to return to the trial court to litigate the hospital assessment, we’re confident in the legality,” she said. “Medicaid restoration is right for Arizona. And I pledge to all Arizonans that I will fight to make sure this vitally important law is fully implemented.”

Opponents are confident as well.

Attorney Christina Sandefur of the Goldwater Institute, which represents the 36 legislators, said she believes the courts will ultimately strike down the law. Sandefur praised the ruling that allowed the lawsuit to move forward.

“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’s plan authorized the director of AHCCCS to impose a hospital assessment and to decide the amount, which the Governor’s Office and other supporters cited as the key to avoiding a Prop. 108 problem. Prop. 108 does not apply to fees and assessments that are authorized by statute but not set by formula or amount, and that are set by a state officer or agency.

But Prop. 108 covers “the imposition of any new state fee or assessment or the authorization of any new administratively set fee.”

Mulling over a vote

Glenn Hamer, president and CEO of the Arizona Chamber of Commerce and Industry, which lobbied strenuously for Medicaid expansion, described the Court of Appeals decision as nothing more than a procedural ruling. He said he has no doubt that the courts would uphold the hospital assessment.

“It was crafted very carefully. It’s not like this passed through and people were shocked that there was legal action against it,” Hamer said.

Hamer wouldn’t say what path the state might take if the courts strike down the expansion, saying he wouldn’t start thinking about worst-case scenarios.

Other expansion supporters pondered the possibilities. Greg Vigdor, CEO of the Arizona Hospital and Healthcare Association, a staunch advocate of expansion, said that if the courts strike down Brewer’s program, the state’s best bet may be to refer Medicaid expansion to the ballot.

“That’s one of the possible journeys we’ll go down,” Vigdor said.

Tom Jenney, director of the Arizona chapter of Americans for Prosperity, a conservative organization that opposed Medicaid expansion, noted that some skeptics suggested referring expansion to the ballot last year. Jenney said it likely would have passed, considering the amount of money that supporters like the chamber of commerce and hospital association could pour into the campaign — polling also shows Medicaid expansion with strong support — but it at least it would be constitutional.

Jenney said it’s possible that the Legislature could refer expansion to the ballot if the courts strike it down. But it may be difficult without Brewer on the Ninth Floor. The governor doesn’t have to approve of legislative ballot referrals, but Jenney questioned whether lawmakers would approve one without a governor whipping up votes at the Capitol.

“I’m not sure that would happen with a future governor, and without a future governor strongly in favor of Medicaid expansion, it’s questionable whether you could put together the legislative majorities to make that happen,” he said.

Brewer said she hasn’t given any consideration to referring Medicaid expansion to the ballot this year, saying she thinks it’s unnecessary.

A victory for opponents

The appellate court ruling was a huge win for the expansion opponents, whose case was in doubt after Maricopa County Superior Court Judge Katherine Coleman ruled that the lawmakers didn’t have standing to challenge the law because they hadn’t shown that they suffered a particularized injury.

The three-judge appellate panel unanimously disagreed. In the ruling, Judge John Gemmill said the GOP lawmakers 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.

The judges also rejected Brewer’s attorneys’ 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.

“Such an omission would not defeat the constitution’s requirement that any bill raising the state’s income tax rates be passed by a two-thirds supermajority of each legislative chamber,” Gemmill wrote.

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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