Arizona seeks to remove 280,000 adults from Medicaid coverage

Washington -- Arizona Gov. Jan Brewer has formally asked the Dept. of Health and Human Services for permission to end Medicaid coverage for 280,000 adults beginning on Oct. 1. Brewer said the cuts are needed to help close the state's $1.2 billion fiscal 2012 budget deficit.

"We are in a crisis unlike any we have seen," Brewer wrote in a Jan. 25 letter to HHS Secretary Kathleen Sebelius. Nearly $1 billion of the deficit is due to growth in Medicaid spending, Brewer wrote.

The Arizona Legislature adopted the cuts on Jan. 20, which gave Brewer the authorization to request a Medicaid waiver. If approved, the state would eliminate coverage for about 250,000 childless adults and reduce eligibility for certain parents from the federal poverty level to 50% of poverty, which would affect an additional 30,000 parents. Arizona is the first state to request such an exemption, but many states face deficits due to the expiration of Medicaid stimulus funding on July 1, the beginning of fiscal 2012.

The reductions would save Arizona $541 million in fiscal 2012 and nearly $1 billion in fiscal 2013, said Monica Coury, assistant director of intergovernmental relations for the Arizona Health Care Cost Containment System, the state's Medicaid agency. The waiver would end on Jan. 1, 2014, when a Medicaid expansion in the health system reform law would allow 70% of the enrollees to re-enroll in Medicaid, according to the waiver request.

The national health reform law prohibits states from reducing Medicaid enrollment or eligibility from their levels as of March 2010, when President Obama enacted the law. But the law does not prohibit Sebelius from granting exceptions, Coury said.

If Sebelius denies the waiver request, other options for Arizona include reducing Medicaid fees for physicians, hospitals and others providing care to Medicaid enrollees, according to the waiver. These would be in addition to the 5% Medicaid fee cut the state adopted in 2010 to take effect on April 1. The 5% reduction will save the state $300 million.

Without the waiver, the state can cut only Medicaid prescription drug and community health care coverage, according to the waiver. State education funding also could be reduced.

"It's hard to find a way to sustain a growing Medicaid program and not sacrifice core government services," Coury said.

Sebelius sent a letter to all governors on Feb. 3 reminding states of their existing Medicaid options, saying some states appeared to be confused about their options. States, for example, can eliminate prescription drug coverage, increase enrollee co-pays and other cost-sharing, and better manage care for high-cost enrollees.

Sebelius didn't respond directly to Arizona's waiver request, but she did pledge that senior HHS officials would speak with state leaders on possible Medicaid program changes.

Brewer responded in a Feb. 3 letter, saying that Arizona has enacted or is pursuing all 12 of the options Sebelius mentioned. "Our problem is not with a bloated state structure. It's with federal mandates that leave us no discretion to make the reductions our budget -- and our state constitution -- demand."

Centers for Medicare & Medicaid Services Administrator Donald M. Berwick, MD, said he will work with states on their Medicaid budget issues on a case-by-case basis. "There's no simple answer," he said.

Dr. Berwick said states can't simply cut their way out of health care spending deficits. "We're here to protect the beneficiaries." He spoke Jan. 27 at a conference hosted by Families USA, a consumer health care advocacy organization based in Washington, D.C.

He said he's been all over the country talking to states and their residents about Medicaid coverage and costs. "I'm fully aware of the level of the stress states are feeling."