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Budget analysts: Arizona to lose a third of health care funds under Graham-Cassidy

Meanwhile, Ducey's office promises 'holistic look' at federal legislation

Luis Reyes Serna, left, gets health care through Arizona's Long Term Care system. His mother, Paulina Serna, and his twin sister, Paulina Reyes Serna, along with his dad and other sister (not pictured), all receive health insurance through Medicaid expansion. The family could lose coverage under the American Health Care Act, a previous repeal effort that went nowhere.

Luis Reyes Serna, left, gets health care through Arizona’s Long Term Care system. His mother, Paulina Serna, and his twin sister, Paulina Reyes Serna, along with his dad and other sister (not pictured), all receive health insurance through Medicaid expansion. The family could lose coverage under the American Health Care Act, a previous repeal effort that went nowhere.

JLBC study says under latest repeal effort:

  • Arizona stands to lose $1.7 billion in 2020
  • Hospital assessment might get repealed
  • Fewer insured could lead to $34.1 million loss in premium taxes

Arizona stands to lose a third of its federal funds that support the expanded Medicaid program as early as 2020 if Congress adopts the Graham-Cassidy health care bill, according to legislative budget staffers.

The analysis released late Thursday by the Joint Legislative Budget Committee shows the state now gets about $3.8 billion in federal dollars for Medicaid expansion and the health insurance exchange. That is expected to grow to $4.9 billion by 2020.

But under Graham-Cassidy, the state will only get $3.2 billion in 2020, a difference of $1.7 billion, the report says.

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Gov. Ducey

The new report is significant because Gov. Doug Ducey, who supports the Graham-Cassidy bill, has brushed aside other studies that also show significant losses in federal dollars.

That $1.7 billion difference – a 34.9 percent change compared to current law – is only part of the financial setback the state would suffer if the proposal currently awaiting a vote in the U.S. Senate is enacted.

Aside from how that might affect the approximately 80,000 Arizonans now getting care under a federally funded expanded Medicaid program, legislative budget staffers say the change in federal funding could trigger a “poison pill” provision in the 2012 law that levies an assessment on hospitals.

That is significant since the $286.5 million raised through the assessment pays to provide health care coverage for about 320,000 single adults, people who were cut from the program years earlier in a budget-saving move. The state might have to pick up the cost because of a 2004 voter-approved mandate to provide care for everyone earning less than the federal poverty level.

And analysts say if fewer people have health coverage, then the insurance companies will collect less money, which, in turn, will mean they owe less to the state in premium taxes, resulting in an estimated loss of $34.1 million.

The report comes on the heels of Ducey lashing out in particular at study crafted by the Center for Budget Priorities and Planning, which showed a $1.6 billion loss to Arizona in 2026 as coming from “a left-wing or left-leaning organization that has a real stake in maintaining the status quo.”

What is in the JLBC report does have a lower figure for that year. But it still shows Arizona collecting $1.2 billion less than what it would otherwise get.

More significant, what was released Thursday comes from the staffers who serve the Republican-controlled Legislature.

Despite that, gubernatorial press aide Daniel Scarpinato said none of that changes his boss’ support for the measure.

“This is not a complete analysis of the bill,” he said, adding it “specifically ignores policy provisions that are likely to positively impact Arizona.”

Christina Corieri, the governor’s health policy adviser, said one of those provisions would alleviate the state of its financial obligations to share the cost when Native Americans get care at non-Indian Health Services facilities. Corieri said she could not say what that would save Arizona other than “it’s a very large number.”

But Scarpinato had no counter to the JLBC study, as Ducey’s own staff has yet to publicly produce its own analysis, one he said will include “a comprehensive look at all provisions of the bill.”

The report could become crucial to the fate of the entire legislation, coming as there is pressure on U.S. John McCain, the state’s senior senator, to vote for the measure.

To this point McCain, who rejected an earlier “skinny repeal” proposal, has not announced his intentions. But in a statement earlier this week, press aide Julie Tarallo said her boss “continues to review the bill to assess its impact on the people of Arizona.”

Jeff Flake, the state’s junior senator, remains a supporter of Graham-Cassidy as he has been of other efforts to repeal the Affordable Care Act. Appearing on The Late Show, Flake told host Stephen Colbert he sees it as “letting those at the local level run it better.”

What’s driving the anticipated revenue loss is the way the Graham-Cassidy bill changes the Medicaid expansion of the Affordable Care Act. That provides an incentive for states to provide coverage for people making up to 138 percent of the federal poverty level – $28,180 for a family of three – with Washington picking up virtually all of the cost.

Beginning in 2020, the proposal would both eliminate the expansion funding, as well as federal subsidies for individuals who get coverage through the ACA marketplace. It would be replaced with a new federal “block grant” program, with aid to each state based on its share of individuals within a certain income range.

The JLBC report says Arizona’s block grant dollars in 2020 would be nearly $3.2 billion, a figure they said they reached using estimates developed by sponsors of the federal legislation. That compares with the almost $4.9 billion the state would get under current law.

In future years, the state’s block grant allotment is projected by the sponsors to grow by 8.5 percent a year. Extrapolating that out to 2026 creates the $1.2 billion difference between current law and what Arizona would get under Graham-Cassidy.

After that is anyone’s guess, as the grants in the federal legislation self-destruct in 2027.

Corieri said the are other elements in what the Senate is weighing that she believes also could end up saving money to the state, though she provided no specifics and said the language about care for Native Americans is “one of the largest pieces” that was not part of the JLBC analysis.

“That is one of the things we are putting into the numbers we are working on and making sure it is a holistic look at the bill, not a myopic look at one piece of the bill,” she said.

“We have a lot of respect for the analysts from JLBC,” Scarpinato said. But he said “they may have been charged to look at one piece” of the legislation.

Scarpinato also said Ducey remains convinced that Congress needs to act to scrap the Affordable Care Act.

“The governor believes that we can do better with health care in the United States of America and in Arizona,” he said. “Obamacare hasn’t worked.”

The analysis comes just hours after the Arizona Nurses Association added its voice to other medical groups in opposition to the Graham-Cassidy bill.

“This legislation threatens healthcare coverage for hundreds of thousands of Arizonans and may lead to the elimination of protections for individuals with pre-existing conditions,” according to a statement by Robin Schaeffer, the group’s executive director, and Carol Stevens, president of the board.

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