When Republican state lawmakers balanced the budget earlier this year, one of the biggest cuts came in the area of health care.
While they didn't specifically roll back the coverage that voters had expanded through a successful initiative in 2000, they did tell Gov. Jan Brewer they wanted to cut health-care spending by $510 million annually.
The Brewer administration found roughly $210 million in savings by reducing eligibility for the Arizona Health Care Cost Containment System, or AHCCCS.
She hopes to save another $300 million by requiring various co-pays for doctor visits and prescriptions, as well as fines for overweight diabetics who don't shed pounds, smokers who refuse to give up their cigarettes, and irresponsible patients who skip their visits to the doctor.
To implement those changes, the state needs to seek waivers from the federal government, which has already granted permission to the state to reduce coverage for childless adults below the federal poverty line.
But the federal Department of Health and Human Services has yet to sign off on many of the other changes.
Arizona's hospital administrators are worried about the changes. A study earlier this year by Arizona State University's W.P. Carey School of Business predicted that if 2000's Proposition 204 expansion were rolled back, the result would be the loss of 13,000 jobs in the health-care industry, and 31,000 jobs overall in the state.
One of the key reasons that so many jobs would be lost: The federal government gives about $2 to Arizona for every dollar that the state spends on health care, so cutting $500 million from AHCCCS translates to a loss of roughly a billion dollars in federal matching funds.
That adds up to a cut of $1.5 billion in health-care spending in Arizona—which has some hospitals very concerned about their ability to keep their doors open.
To understand what's happening with AHCCCS, a bit of background is helpful.
Despite the conservative Legislature, Arizona has had one of the most generous health-care programs for low-income residents. That's because in 2000, Arizona voters passed Proposition 204, which extended health-care coverage through AHCCCS to anyone below the federal poverty line.
That meant that earlier this year, a single person with an income of less than $10,890, or a single mom with two kids with an income of less than $18,530, could count on the state to provide health-care insurance.
AHCCCS essentially contracts with insurance companies. The state pays a fee per patient to insurance companies, which then cover the health-care bills of AHCCCS patients.
The initial funding for Prop 204 was supposed to come from dollars generated by a lawsuit settlement with tobacco companies, but the initiative also called on the state to use "other available funds" to supplement any shortfall.
And there was a significant shortfall. Before the AHCCCS cuts were made, state budget planners estimated that in the fiscal year that started last week, tobacco settlement dollars totaled $108 million, while the general fund's share of the Prop 204 expansion would be nearly $462 million.
The costs were climbing because more Arizonans qualified for the program as the state's economy worsened, and more people lost their jobs. The Prop 204 expansion population swelled from 238,000 Arizonans enrolled at the beginning of 2009 to 377,000 by the beginning of 2011, according AHCCCS figures.
At a time when the budget was facing a multi-billion-dollar shortfall, AHCCCS became a fat target for conservative lawmakers who are generally suspicious of government involvement in health-care spending.
Last year, lawmakers briefly passed a law knocking an estimated 250,000 Arizonans off the health-care rolls, but they reversed themselves after the federal government passed a new stimulus plan that used federal dollars to cover the state's costs.
But with no new aid from the federal government coming in, lawmakers took a different approach this year. They budgeted for about $510 million in cuts to health-care spending, but gave Gov. Jan Brewer wide latitude in how she would go about finding the savings.
The Brewer administration has come up with a plan that saves money by freezing AHCCCS enrollment for many Arizonans under the federal poverty line, and slowly weaning people off the program.
The proposal will block all childless adults from enrolling in the program, as well as parents who earn more than 75 percent of the federal poverty level. That means a single mom with two kids who earns more than $13,900 will no longer be eligible for state-subsidized health insurance.
AHCCCS officials estimate that 200,000 Arizonans who would have been eligible for health-care insurance will not be covered over the next 27 months.
One big question about Brewer's plan: Is it legal?
Brewer certainly thinks so. Her spokesman, Matt Benson, says that the governor "is confident in the legality and constitutionality of her Medicare reform proposal."
But attorney Tim Hogan, executive director of the Arizona Center for Law in the Public Interest, says the Brewer administration can't reduce the eligibility level, because it was put in place by voters, so it is subject to the Voter Protection Act, a constitutional amendment that prohibits most legislative tampering with successful propositions.
Much of the debate centers on the wording of the original proposition, which says that the state will use "available funds" for the health-care coverage once the tobacco-lawsuit money has been exhausted.
Hogan argues that the state has funds available for the program, but lawmakers decided to spend them elsewhere.
"The state's budget is $8.3 billion," Hogan says. "This population has first claim on the budget. (Lawmakers) have to fund what's legally obligated first."
Hogan filed a special action with the Arizona Supreme Court in May in an attempt to block the changes, but last month, the justices declined to issue an injunction and said that Hogan needed to start at the Superior Court level.
Hogan filed a new case in Maricopa County Superior Court on Monday, June 27. Later in the week, Maricopa County Superior Court Judge Mark H. Brain declined to issue an injunction blocking the changes; Hogan is still awaiting a court hearing to examine the merits of his lawsuit.
In the meantime, the Brewer administration is moving forward. As of last Friday, July 8, the state will no longer allow adults who have no children under the age of 18 to sign up for AHCCCS.
Childless adults who are now on AHCCCS will remain covered, provided that they renew their paperwork every six months—but if they neglect to fill out the proper form, they will be kicked off the AHCCCS rolls and will be ineligible to reapply.
Rep. Matt Heinz, a Democrat who represents midtown Tucson, says the Brewer administration created the new requirement that people renew every six months as a way to push them out of the system.
"I think that's really sneaky," Heinz says. "They are counting on that tripping people up. ... They plan on people messing up and (then) pushing them out of the system."
The Brewer administration is still awaiting a waiver regarding the reduction of eligibility levels for adults with minor children who earn between 75 percent and 100 percent of the federal poverty level. The administration hopes to implement that change on Oct. 1.
The state is also waiting on approval of the various fees and fines to raise additional money to pay for the program.
If these AHCCCS cuts go through, the impact will be widespread.
There's the obvious impact on poor people who no longer have health insurance. Some will get along without it as long as they avoid any kind of health emergency that requires medical attention. But those with chronic conditions—diabetes, emphysema, high blood pressure—will no longer have access to the medication and regular checkups that can keep their diseases from developing into more serious health problems.
"These people need to follow up with one or two specialists to make sure they're OK," Heinz says. "We already get a big bubble of people coming in with their chronic conditions going out of control. And it happens very frequently because someone lost a job, and they no longer have insurance coverage, and they can't afford their insulin or whatever."
As a result, people with chronic conditions will seek more care in emergency rooms. That's bad enough for the suffering patients—but it also means emergency rooms will be more crowded, which means longer waits for everyone who needs emergency care.
"You jam up the emergency room," Heinz says, "and you create urgent situations. The beautiful thing about AHCCCS is that it allows a lot of these folks with chronic conditions to have stable medical care. They can go see a primary-care doctor. They can see their cardiologist as an outpatient, not waiting around in the ER. And when they do that, it costs a few hundred bucks. But when they step foot into the emergency room, they're likely to have a $6,000 to $7,000 bill."
It also means that hospitals will lose a lot more money caring for people without insurance.
Before, if a person who didn't have health insurance went to the Tucson Medical Center emergency room, staff could sign them up for AHCCCS on the spot, which ensured that the hospital would receive payment for any treatment. But once patients are no longer eligible for the state program, "the cost of that care will be shifted onto TMC," says Heinz.
As hospitals feel the pinch, they'll have to raise rates for paying patients—which, in turn, means that insurance companies will have to pay more to the hospitals, which means insurers need to raise their rates.
As the cuts became more likely, the Arizona Hospital and Healthcare Association approached lawmakers about creating a new tax on themselves in the hopes of keeping the federal matching funds coming to Arizona. But lawmakers, who were more focused on eliminating the health-care program, didn't give the proposal any consideration.
As the Weekly has reported ("Government in Action," April 21), hospitals in Tucson are already bracing for new losses—because from 20 percent to 39 percent of their patients are AHCCCS clients.
Local clinics are also expecting a financial hit. El Rio Clinic CEO Kathy Byrne expects that the cutbacks will affect 7 to 8 percent of the roughly 73,000 patients that the clinic's doctors serve annually, which translates to a financial hit of $3 million to $4 million, among a budget of $80 million.
"We've been working hard to control our expenses, because we know our patients will need to be seen, and we would like to be able to see them," Byrne says.
Rural hospitals can expect even bigger budget hits.
Jim Dickson, CEO of Bisbee's Copper Queen Community Hospital, says his hospital will be hammered if all of Brewer's AHCCCS cuts go through, as will other critical-access hospitals in Southern Arizona.
Rural hospitals, particularly in Southern Arizona, have a unique set of challenges. More of their patients are unemployed or underemployed, so they don't have insurance. On top of that, "we have the immigration morass that occurs down here, because we are the throughway of immigration," says Dickson.
Private-practice doctors have been fleeing rural Southern Arizona because they can't stay in business. As a result, hospitals like the Copper Queen not only provide diagnostic laboratories and radiology for rural residents; they also operate most of the primary-care clinics.
"We had to put in federally qualified health centers and rural health clinics, because the doctors needed some kind of protection from the really terrible financial conditions here," Dickson says.
Dickson says he's managed to stay in the black, but it hasn't been without sacrifices. He's eliminated 10 jobs—about 5 percent of his workforce—and downsized a planned emergency-room expansion because he wouldn't have been able to afford the debt service, even with a 40-year loan at 4 percent interest, courtesy of the federal government.
Dickson's neighboring hospitals in Nogales, Douglas and Sierra Vista face big financial problems. He warns that the AHCCCS cuts are "going to decimate the delivery system. I would predict that at least two hospitals will go bankrupt or close because of these cuts."
That, in turn, will put more pressure on Copper Queen Community Hospital.
"I run a very efficient hospital," Dickson says. "But if they close down the Douglas hospital, what am I going to do? I have to cover another group of people, and it will start pushing me into risk. It will have a domino imploding effect on the delivery system."
Dickson has his own plan to rescue the rural hospitals, but it will require help from the Brewer administration.
Since the Arizona Hospital and Healthcare Association proposal to tax hospitals so the state could continue drawing federal funds is dead, Dixon is proposing that rural hospitals pay into a voluntary pool to cover the cost of treating uninsured patients. That money would then be used to bring in federal matching funds.
"Arizona pays the taxes to the federal government," Dickson says. "Why would we not get the dollars back? ... As long as the federal government does not cure the border situation and allows free entry for health care, we should take every federal dollar we can for health care and not even flinch about it, because this is a federal situation, and we have a federal program to solve it, and the state of Arizona is stupid not to do that."
Dickson calls the plans to cut back on the health-care infrastructure "ludicrous," because under the Affordable Care Act (aka "Obamacare") passed by Congress in 2010, states are supposed to expand the health-care coverage to anyone under 130 percent of the federal poverty level by 2014. Federal funds are supposed to cover more than 90 percent of the cost of the new enrollees.
That means in a few years, the state will have to not only insure the people they are now cutting off, but even more people will be eligible for health-care coverage—so hospitals and clinics will need more staffers.
"What we're doing is making drastic cuts and hurting providers," Dickson says. "And then when we have to come back up, we will not be able recruit people here."
Heinz makes a similar point. Unless the Affordable Care Act is declared unconstitutional by the U.S. Supreme Court (and a federal appeals court recently ruled that the law passes constitutional muster) or is repealed by Congress, the state needs to be preparing to expand its health-care infrastructure. Instead, it's cutting back on it.
"The federal government shouldn't allow us to do this, because it flies in the face of the ACA," says Heinz. "Once you have a system that has been so ravaged by these losses and cuts that is asked to take on all these additional Medicare patients, it collapses what's left of the entire infrastructure. The ACA could destroy our health care instead of enhancing it."
Congressman Raul Grijalva opposes the AHCCCS cuts and has called for public hearings on the impact of any waivers granted by the federal government.
"We all understand these are difficult financial times, but it is very shortsighted to look at Medicaid as one of the primary areas for the reduction of the budget," Grijalva says. "It's so easy to look at AHCCCS and Medicaid and say, 'Ah, it's the poor people. Let them eat quiche. They'll figure it out.' On the contrary: Forty percent of the people on AHCCCS are people like me and you. Something happened in their lives, and they find themselves in need of support."
Grijalva worries that the Obama administration is "giving out waivers and saying it won't affect the ACA. Well, it does, because you're going to have all these contradictions coming down the road. ... I'm concerned that we're going to keep that pattern going, and then we're going to have an Affordable Care Act whose implementation will be different in Arizona than anywhere else in the country."
Heinz is supportive of proposals, such as Dickson's idea of a voluntary pool for rural hospitals, which allow the state to find a way to continue to draw federal funds. However, he believes that it would be best to handle it with a statewide program that maximizes the federal funding available.
Heinz remains hopeful that when Republican lawmakers see hospitals closing emergency rooms—or shutting down completely—in their districts, they may be willing to reconsider proposals that they rejected during the session.
"You can completely disregard the fact that the cuts are bad for people and families and creates greater patient suffering," Heinz says. "You can eliminate that argument entirely and still realize that it's really bad for the viability of AHCCCS and the hospitals and the infrastructure. There are huge cost benefits of not closing hospitals and supporting local jobs. That's a powerful argument in the economic climate right now."
