Arizona patients sue state over Medicaid co-pays

Increases in out-of-pocket payments are stopping beneficiaries from seeking needed care, lawsuit says.

By Alicia Gallegos — Posted June 11, 2012

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High patient co-payments are preventing low-income residents from seeking primary care and causing patients to forgo their medications, says a lawsuit filed against the state of Arizona. The suit, filed on behalf of patients in the U.S. District Court for the District of Arizona, claims that the state is violating federal Medicaid law by setting unfair co-payment rates for childless adults.

“Patients can often not afford to purchase their medication and go for weeks without it,” said Ellen Katz, director of the William E. Morris Institute for Justice, a plaintiff in the case. The Phoenix-based organization advocates on behalf of low-income populations. If patients “can’t afford [medications], then they have to wait and they have much more expensive emergency room” care, she said.

At this article’s deadline, messages left with the Arizona Health Care Cost Containment System, the state’s Medicaid program, had not been returned. A spokesman for the U.S. Dept. of Health and Human Services said the department could not comment on pending litigation.

The dispute on co-payment levels started in 2003, when the state adopted a rule raising co-pays for some Medicaid-eligible Arizonans. The rule, approved by HHS, allowed health professionals to deny services to Medicaid beneficiaries who were unable to cover their co-payments.

The Morris Institute sued over the co-payments, and a judge enjoined the rule from going into effect. An appeals court later ruled against the co-pays.

In 2010, the state sought approval for an amended version of a similar rule. The requirement, aimed at childless adults and parents with no minor children, raises doctor’s office co-pays from $1 to $5. Co-pays for nonemergency services received at a hospital emergency department went from $5 to $30.

Generic drug prescriptions are now $4, and brand-name drugs are $10 when a generic is available. Before the rule change, there was no charge for prescriptions. In 2011, HHS approved all those increases.

In the May 21 suit against the state and HHS, the Morris Institute said Medicaid-eligible participants are going without needed medical care because of the co-payments. The National Law Health Program, a nonprofit organization that advocates for the health rights of low-income populations, joined the suit as a plaintiff. Included in the claim are patients with anemia, depression, back pain and other conditions.

The state is violating a provision of federal Medicaid law that says only nominal co-payments can be imposed on Medicaid participants and that health professionals cannot deny patients care because of failure to pay co-pays, the plaintiffs said.

In a March 2011 letter to HHS, Arizona Gov. Jan Brewer said the state wanted approval for the co-pays as part of a demonstration project to test a “unique and previously untested use of co-payments.” The letter, which discussed budget shortfalls faced by Arizona, said the state would limit the demonstration to two years or less.

“Over the past four years, while we have made unprecedented spending reductions in almost every other area of state government, Medicaid expenditures have increased by over 65%,” Brewer wrote, later adding, “We must, therefore, have your assistance in making further changes to the program to assure its future sustainability.”

Arizona patients lost another legal challenge over restrictions placed on childless adults. In that case, the Arizona Court of Appeals in March ruled that a Medicaid enrollment freeze for childless adults was constitutional. The freeze, which took effect July 8, 2011, prevents residents without children from enrolling in a state assistance program that was part of a previous Medicaid coverage expansion.

Childless adults who were enrolled in Medicaid before the July date were grandfathered in, but future access will be denied if their enrollments are not renewed. The Arizona Center for Law in the Public Interest, which filed the lawsuit, had asked the state Supreme Court to review the case, but the request was denied. Since the enrollment freeze, about 100,000 residents have been taken off the rolls, Katz said.

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