AAPS responds to GOP support for Medicaid Expansion


Arizona Legislators
1700 West Washington
Phoenix, AZ 85007

RE: March 26th letter from Randy Pullen

Dear Legislators:

We disagree with the analysis in Mr. Pullen’s letter defending Gov. Brewer’s decision to push hard for expanding Medicaid.

ObamaCare is “here to stay” only if the states implement it. A key feature in its survival is the effort to dump a lot of people into Medicaid (AHCCCS in Arizona). That move would mean turning as many as 300,000 vulnerable Arizonans over to a system in which access to care is increasingly problematic, and in which the death rate of people who actually use medical care is higher than even among uninsured patients, and much higher than in privately insured patients.

The New England Journal of Medicine (Harvard) study, cited by advocates for the expansion, does not compare persons on Medicaid with persons not on Medicaid, but looks at all-cause mortality in the adult population in three states, before and after a Medicaid expansion, compared with neighboring states with no expansion. The results for Arizona were not statistically significant. Results in New York were small, even if statistically significant, and the study could not show they had anything to do with expanding Medicaid.

Pullen says that “it is becoming clear that a majority of Americans are viewing healthcare as a right and not a privilege.” Whatever the truth is about this asserted right, ObamaCare is turning medical care into a privilege that you can have only at the discretion of the Secretary of HHS.

Pullen says that the state is now running a surplus. How long will that continue, especially if another 300,000 people are loaded onto AHCCCS? Pullen worries about what will happen if Arizona does not restore Medicaid coverage—but Medicaid is the reason that states are siphoning money from public safety and other programs.
Hospitals now receive DSH (disproportionate share hospital) payments to help cover uncompensated care. ObamaCare slashes these payments, but cuts them more if Medicaid is expanded than if it is not. This effect needs to be considered.

Pullen asserts that the expense of added enrollment would be paid for by a provider tax on hospitals. Aren’t these the very hospitals that are complaining of financial distress? Where is this money to come from, since hospitals allegedly can’t pass it on to anybody? From cuts in service?

Proposition 204 has the caveat, already litigated, that legislators can’t be forced to spend money that the state does not have. Pullen’s concern about the will of the voters apparently does not extend to Proposition 108. Are taxpayer protections in Prop 108 meaningless until the courts rule on them? Pullen says that “the state has enacted all kinds of ‘fees’ for different reasons over the past few years including a provider tax on nursing homes in 2012.” That reminds us of Jonathan Swift’s remark in Gulliver’s Travels that if a wrong can be legally done once, then it can be done again. In other words, if politicians get away with violating the law once, they can keep doing it over and over again. In this case, Brewer and Pullen want to gut the Arizona Constitution by changing a word from “tax” to “fee.” This unprincipled stand violates the oath that elected officials take to defend the Constitution.

The argument from the Jackson Hewitt tax service about the added cost to employers does not take into account the fact that the ObamaCare legislation does not permit a tax to be imposed on employers if the state does not implement an exchange. (And why has Arizona not filed a parallel lawsuit to the Oklahoma effort, to fight against the attempts by the IRS to rewrite the law?)

Prop. 204 brings to mind the Yogi Berra quip that Pullen cites. In general, Prop 204 failed to solve the uncompensated care problem, just as it failed to budge the percentages of uninsured people in Arizona. (In fact, the $2,000 per family figure was used in the 2000 ballot fight!) Why do Pullen and Brewer think this time will be different? It really is “déjà vu all over again.”

Pullen urges Republicans to make a smart choice in following the lead of the Governor. But we suggest following the money. The $2 billion coming to “Arizona” would be coming specifically to AHCCCS, which has failed to solve the problem with the $9 billion it already gets every year. From AHCCCS, less than 25% trickles down to those troubled hospitals. Will some of it fund the treatment of the patients whose hard-luck stories are being solicited? Possibly. But what about the invisible people harmed by diverting the $2 billion from taxpayers into special interest lobbies, including AHCCCS, its program contractors, and certain hospitals?

Sincerely yours,
Jane M. Orient, M.D.
Executive Director, AAPS

(Below is the letter sent from former AZ GOP chair Randy Pullen to AZ Legislators mentioned above.)

March 26, 2013

As a conservative Republican, a Republican Precinct Committeeman and the former Chairman of the Arizona Republican Party, I have listened closely to the debate on restoring and expanding AHCCCS to come into compliance with the Federal requirements for Medicaid covering adults up to 138% of the Federal Poverty Level. As with the debate over the temporary one cent sales tax increase in 2009, which was overwhelming approved by the voters in a special election in 2010, both sides have made strong arguments as to why we should or should not expand AHCCCS.

The one thing that is certain is the American health care system provides the best health care in the world and it is to our benefit that it remains that way; however, the current delivery system for all of us is costly and dysfunctional and needs to be restructured. What also is becoming clear is a majority of Americans are viewing health care as a right and not a privilege.  I continue to oppose Obamacare and believe it is not the answer. It is the typical Democrat big government answer to a problem, which always turns out be more expensive and falls well short of public expectations.

While the national healthcare issue is being sorted out, here in Arizona, we have to make some tough choices in the very near future regarding our Medicaid program. In 2000, Proposition 204 mandated an expansion of AHCCCS in Arizona to cover all adults up to 100% of the Federal Poverty Level. In order to balance the State budget during the recession, Governor Brewer and the Republican legislature significantly reduced the coverage for adults under AHCCCS.  The court approved the reduction as the State was broke; however, that is not the case any longer with the State running a surplus. This also was viewed as a temporary solution by the federal government and their suspension of the rules is set to expire at the end of this year.

Anyone who believes that the State will not be sued over Proposition 204 if it does not restore adults up to 100% of the Federal Poverty Level to AHCCCS, or the court will continue to rule that the State does not need to adhere to Proposition 204  is gambling the future of Arizona on a bad hand. Also, if we do not come into compliance with the federal government, we stand to lose all of our matching funds for the people that the voters approved coverage for under Prop 204; they have the power to do this.

Based on my review of information available, here are four things we can be pretty certain will happen if we don’t restore the cuts to AHCCCS and further agree to increased coverage for adults up to 138% of the Federal Poverty Level:

If Arizona does NOT restore Medicaid coverage, Arizona taxpayers (and not the hospitals) will continue to subsidize Medicaid spending instead of using those dollars for education, public safety or further tax cuts.  Arizona voters approved Proposition 204 in 2000 to expand Medicaid eligibility to 100% of the Federal Poverty Level to be funded by a tobacco tax, funds from a settlement with the tobacco companies and the State General Fund.  We will have to restore the temporary cuts to AHCCCS next year and this alone will add around 360,000 new and reenrolled recipients to AHCCCS. None of this is required to be paid for by the federal government unless they agree. Given the dislike for the State by the Obama Administration, it could happen and we could be going it alone.

Under the Governor’s proposed Medicaid restoration plan, the added enrollees would be paid for by a provider assessment on hospitals that would cover not only the expansion of Medicaid for adults between 100% and 138% of the Federal Poverty Level, but would also cover the General Fund portion under Proposition 204. Arizona hospitals support this idea. Under the proposed law, this hospital assessment could not be passed along to patients or insurance policy holders.

If Arizona does NOT restore Medicaid coverage, legal aliens will qualify for health care benefits greater than those given to U.S. citizens in our state. Because Obamacare assumes that states would expand Medicaid coverage, the only provision for a subsidy below 100% of the Federal Poverty Level is for legal aliens who are in the country legally but are ineligible for Medicaid because of their alien status. The ACA allows them to receive a federal health insurance subsidy as though they had an income of 100% of the Federal Poverty Level.  Thus, if Arizona does not restore Medicaid for poor Arizonans below 100% of the Federal Poverty Level, only legal aliens, but not citizens, would be eligible for subsidies.

If Arizona does NOT restore Medicaid coverage, Arizona hospitals will continue to pay for uncompensated health care provided to childless adult citizens. Arizona hospitals report that they have experienced an 81% increase in these costs over the last 6-months. This will undoubtedly increase next year as another 60,000 adults will be dropped from AHCCCS. There is no certainty that the federal government will compensate hospitals for these additional costs while continuing to require them to provide the care. Right now, I can tell you from my own experience that rural hospitals in Arizona are feeling the pinch. An increase in their uncompensated care could cause severe financial distress or potentially ruin many of them.

If Arizona does NOT restore Medicaid coverage, Arizona employers will be subject to $45 Million to $60 million in higher taxes under Obamacare according to the Jackson Hewitt Tax Service.  The higher taxes are in the form of higher “shared responsibility” penalties for employees who are from 100% to 138% of the Federal Poverty Level and enroll in the premium assistance tax credits on the Obamacare health exchanges. Employers that offer health coverage and have 50 or more full-time equivalent employees must generally pay up to $3,000 penalties for each employee who enrolls in the premium assistance tax credits. The “shared responsibility” provision also caps an employer’s total liability at approximately $2,000 multiplied by the total number of employees.  These tax increases don’t occur under the Medicaid restoration plan because those persons will be eligible for Medicaid.

The arguments made by opponents to expanding AHCCCS generally fall into two categories: The first consists of philosophical arguments centered on the idea that any change to AHCCCS that would bring it in line with new federal standards for Medicaid is ipso facto support of Obamacare. The second category consists of arguments based on the premise that any expansion of Medicaid will cost more and Arizonans will pay higher taxes.

The philosophical arguments raised at many Republican legislative and county districts meeting remind me of the old Yogi Berra quip, “this is like deja vu all over again.” We heard similar arguments from conservatives and think tanks like the Goldwater Institute and Americans for Tax Reform in 2009 that the idea of a temporary sales tax increase of one cent to balance the budget during the recession would hurt the State’s economy, cause more unemployment and once a tax was imposed it would never be rescinded. Well, these dire predictions turned out not to be true as the state is running a surplus, unemployment is less than it was and the tax will expire in June as promised. The same is true now with Obamacare. It is not likely that Medicaid will go away even if Obamacare is repealed. AHCCCS is here to stay and it is the responsibility of our elected officials to provide the best and most cost effective Medicaid system possible in Arizona.

The arguments based on the assumption that all Arizonans will pay higher taxes when Medicaid is expanded next year are very likely true.  What they are not saying is this will be true regardless if AHCCCS is expanded or not.  The fact is that the federal government is expanding Medicaid up to 138% of the Federal Poverty Level.  If we participate, the total cost will be less to us in Arizona.

There are of course risks that the Federal government will pull back funding and leave the State(s) to pay for it on their own.  The new law as proposed would have a reset provision that would allow the State to rescind and go back to the Proposition 204 levels. There is also the possibility that the courts would rule that the assessment on hospitals is a tax and falls under Proposition 108 and requires a two-thirds vote of the legislature. This is not likely as the State has enacted all kinds of “fees” for different reasons over the past few years including a provider tax on nursing homes in 2012.

So where do you go from here? In 2010, Republicans in Arizona made tough choices. As Chairman of the Arizona Republican Party, I supported our Governor in passing a temporary sales tax increase, reforming spending programs and balancing the budget. The angst over the sales tax turned out to be not true and the voters rewarded us by electing Republican super majorities to both houses of the legislature – the first time that had ever happened. Every Republican in the legislature who voted for the sales tax initiative was reelected in 2010. We also captured every statewide office.

We now are presented with a similar situation with AHCCCS.  Republican leadership needs to step forward and make another smart choice – follow the Governor’s lead. She’s been proven right before!

Randy Pullen
Former Chairman of the Arizona Republican Party

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