Health reform law, Arizona Medicaid cuts at odds

The new reform statute prohibits Medicaid eligibility reductions, but a 5% Medicaid physician pay cut for the state will remain in effect.

By Doug Trapp — Posted April 5, 2010

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Much of the new national health system reform law won't take effect for a few years, but the act is having an immediate impact in Arizona.

Arizona Gov. Jan Brewer on March 18 signed a fiscal 2011 budget that repealed the state's Children's Health Insurance Program -- which covers 47,000 kids -- and eliminated Medicaid coverage for 310,000 of the program's 1.3 million enrollees. The cuts closed $385 million of the state's $2.6 billion fiscal 2011 budget deficit.

But the Patient Protection and Affordable Care Act, signed by President Obama on March 23, likely will lead state lawmakers to reverse these cuts, said Monica Coury, assistant director of intergovernmental relations for the Arizona Health Care Cost Containment System, the state's Medicaid agency. The new law requires states to maintain existing Medicaid eligibility or risk losing all federal Medicaid funding. The CHIP elimination is due to take effect on June 15, while the Medicaid cuts would happen in January 2011, she said.

More federal funds could be on the way to help balance Arizona's 2011 budget. The House and Senate adopted separate bills with provisions to extend enhanced Medicaid stimulus funding for six months, through June 2011. But both chambers must adopt the same legislation for the $25 billion in assistance to take effect. Congress will reconvene April 12.

If Congress adopts the extra Medicaid funding, Arizona would receive about $400 million. This would be enough to offset the state's cost of covering the 357,000 CHIP and Medicaid enrollees subject to the cuts, Brewer spokesman Paul Senseman said.

Many Arizona lawmakers are unhappy that the state faces billions in additional mandatory spending over the next decade due to Medicaid expansions in the federal health reform law. But few in the Republican-controlled Legislature would take a stand that risked federal Medicaid funding.

"This is the wild West, but we tend not to break the law," Coury said.

Still, Brewer, a Republican, is dissatisfied enough with the law to try to roll back a big part of it. On March 26, she said she was seeking approval from the Arizona Legislature to join a lawsuit challenging the constitutionality of the individual health insurance mandate in the federal health reform law. "This massive new federal mandate is a threat to our individual freedoms and state sovereignty."

Brewer is seeking the Legislature's approval because Arizona Attorney General Terry Goddard, a Democrat, declined to join other attorneys general in a lawsuit to invalidate the health reform law. Goddard said in a statement that he believes the lawsuits have "little chance of prevailing."

Physician pay cut stands

The federal health reform law does not prevent a 5% Medicaid physician pay cut Arizona adopted as part of the fiscal 2011 state budget. The cut is necessary to make up for increased utilization of Medicaid services, according to Brewer's 2011 budget request.

Arizona lawmakers mostly avoided significant health care cuts last year, but this year they faced a deficit equal to about 30% of the state's total budget -- the largest in the country, said David Landrith, the Arizona Medical Assn.'s vice president of policy and political affairs.

"You have to be somewhat sympathetic with this Legislature, because they really are over a barrel," he said.

Arizona's Medicaid physician pay is probably in the top third in the country, Landrith said. But physicians are not meeting their costs treating Medicaid patients. "You can't cut too deeply before physicians can't afford" to see Medicaid patients.

Medicaid patients in rural Arizona already have a difficult time finding physicians, and balancing the budget by cutting Medicaid pay won't help, said family physician Mark Ivey Jr., MD, past president of the Arizona Medical Assn. Physicians already prefer to practice in cities, he said. "Why would you want to leave Phoenix and Tucson?"

The state also eliminated $14.6 million in funding for graduate medical education and $8.8 million for private hospital care for the indigent. But the federal government provides matching funds for this spending, which means the true cut is $64.6 million.

Brewer has presided over about $2.2 billion in widespread, permanent cuts -- or 20% of state spending -- since she took office in January 2009. "This is the most significant streamlining of state government ever undertaken, and it is absolutely necessary to balance our budget and begin the Arizona comeback," she said.

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Why Arizona can't cut Medicaid

Arizona Gov. Jan Brewer on March 18 signed a measure closing its Children's Health Insurance Program and ending Medicaid eligibility for about 300,000 adults. But the Patient Protection and Affordable Care Act, signed by President Obama on March 23, prevents the cuts. The new federal law:

  • Requires states to keep the same Medicaid eligibility levels for adults through Dec. 31, 2013, and for kids through Sept. 30, 2019.
  • Exempts states from keeping eligibility requirements for non-pregnant, non-disabled adult enrollees earning more than 133% of poverty if the state is experiencing a budget deficit or projects it will during the next fiscal year.
  • Expands Medicaid eligibility nationwide to 133% of poverty for all Americans in 2014.
  • Pays for all of the cost of covering newly eligible Medicaid enrollees from 2014 to 2016, but then provides less funding to states -- such as Arizona -- that already covered all adults to 100% of the poverty level.

Source: Arizona Health Care Cost Containment System

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