Medicaid Options: Brewer says only 1 choice is viable, but key Republicans balk

Arizona Capitol Times
Tuesday, April 23, 2013
Jeremy Duda

Gov. Jan Brewer believes she found her “game-changer” in her quest to expand Arizona’s Medicaid program.

On April 25, the U.S. Centers for Medicare and Medicaid Services (CMS) issued a guidance memo for the states that appeared to answer a question that has been hovering over Brewer’s top agenda item — whether the state can continue its enrollment freeze for childless adults in the Arizona Health Care Cost Containment System.

The feds said they “do not anticipate” authorizing enrollment caps or similar policies for states’ Medicaid programs, meaning Arizona likely won’t be able to continue its enrollment freeze when the current AHCCCS agreement with CMS expires at the end of the year.

The announcement bolstered Brewer’s case by taking the wind out of the sails of opponents who urged Arizona to maintain the AHCCCS status quo and simply leave the enrollment freeze in place. But with CMS signaling that Arizona won’t get any federal funds to keep the last 60,000 or so childless adults on AHCCCS, that becomes an expensive prospect.

The Ninth Floor said the decision by CMS makes clear exactly what options are available to Arizona. None are very appetizing, the administration says, except Brewer’s expansion plan.

Following the release of the CMS memo, Brewer issued a public letter to Senate President Andy Biggs and House Speaker Andy Tobin outlining what she views as the options available to Arizona, now that the status quo is off the table.

• Eliminate coverage for childless adults, which will boot around 60,000 people from the AHCCCS rolls at the end of the year.

• Restore coverage under Proposition 204, the 2000 ballot measure that expanded AHCCCS coverage to 100 percent of the federal poverty level. The restoration would cost Arizona about $1.3 billion through fiscal year 2016.

• Continue the enrollment freeze with state money only, which would cost the state around $880 million through 2016.

To Brewer, that leaves one feasible option: her plan to expand AHCCCS coverage to 133 percent of the federal poverty level, using a hospital tax to fund the state’s share of the cost and bringing in massive amounts of federal matching funds.

Already, the CMS guidance appears to be pushing some reluctant Republican lawmakers toward supporting Brewer’s plan. In the House, which most observers view as the tougher battleground for GOP votes, several lawmakers said the enrollment freeze issue is having an impact.

Rep. T.J. Shope, R-Coolidge, said his preference would have been to maintain the enrollment freeze and keep the last remaining childless adults on AHCCCS, along with putting Prop. 204 back on the ballot to find a dedicated funding source. But now that CMS has effectively shut the door on that idea, Shope said he’s leaning toward supporting Brewer’s plan.

Rep. Frank Pratt, Shope’s seatmate in Legislative District 8, said he’s not a definite yes or no vote on expansion. But the CMS guidelines provided a lot of clarity on Arizona’s options.

“It puts things into a little more perspective as to what our financial obligation would be. I’m not in favor of kicking off 60,000 (childless adults),” said Pratt, R-Casa Grande.

Rep. Jeff Dial, R-Chandler, agreed that CMS provided a lot of clarity on the issue. The governor has been clear about her plan, he said, but expansion opponents haven’t so far.

Dial said he’s still exploring the issue, but he’s open to Brewer’s proposal. And the CMS guidance narrowed down the options, he said.
“We want to do what’s best for the state financially,” Dial said.
The sickest of the sick

Brewer spokesman Matthew Benson said it’s too early to tell whether the CMS guidance will attract more Republican votes for the governor’s plan. But it’s still a game-changer, he said, because it makes clear to expansion opponents that Arizona simply can’t continue its current path.

“Between the guidance from CMS and the JLBC’s (Joint Legislative Budget Committee’s) revised fiscal estimate, it really closed off the viability of the leading alternative plan that was being put forward by some legislators,” Benson said. “What they wanted to do was status quo. And what they learned last week was the status quo is not possible.”

For many lawmakers, doing what’s financially best for the state includes not using up the $450 million in the rainy day fund and not upending a budget that has been precariously balanced through years of financial hardship. According to the state’s Finance Advisory Committee, Arizona could face a $120 million deficit in fiscal year 2016 based on current revenue estimates, though the JLBC recently estimated that the state will spend less than expected on AHCCCS over the next three years.

Those estimates by JLBC assume that AHCCCS would be able to continue its enrollment freeze while still receiving the two-to-one federal matching funds for childless adults.

Brewer touts her plan as a money-saver. The proposed hospital tax will not only pay for the state’s share of the new AHCCCS coverage without using general fund dollars, she says. It will pump new money into the general fund.

Of course, eliminating coverage for childless adults altogether would save the state money as well. But many Republican legislators are unwilling to take that step.

“My presumption is a lot of the folks that are on there are the sickest of the sick, and I don’t want someone who’s in treatment falling off,” said Rep. J.D. Mesnard, R-Chandler.

While the CMS guidance appears to be convincing lawmakers who are on the fence, some opponents are digging in their heels. And many are coalescing around the idea of paying for the childless adult freeze with state money only.

And some opponents aren’t convinced that the CMS guidance memo is the feds’ last word on the enrollment freeze.

Senate President Andy Biggs emphasized that CMS simply released a packet of information to all 50 states in response to frequently asked questions, and didn’t unequivocally say it wouldn’t approve future waivers for enrollment freezes like the one in place in Arizona. CMS hasn’t responded directly to any request from Arizona, he said.

“That’s kind of what they were saying last time when we wanted the waiver, before we submitted formally, made phone calls, lobbied, etc. to attain that,” Biggs said, referring to CMS’ decision to allow the childless adult freeze in 2011. “So there’s a potential that you have this status quo, actually. You have a potential for the absolute status quo.”

If the feds won’t provide matching funds to continue the freeze, Biggs said the state-only plan is still the best option, even if it dries up the rainy day fund.

JLBC estimates that the plan would cost about $808 million between January, when the state would stop receiving federal funds, and the end of fiscal year 2016. But Biggs said the cost will be lower.

Under the JLBC estimate, which assumes continued federal funds for the enrollment freeze, the state is already slated to spend about $244 million on coverage for childless adults. And the rainy day fund will take care of another $450 million.

In addition, Biggs noted, JLBC recently lowered its estimates for how much the state will spend on AHCCCS over the next three years.
“That leaves us, we’re somewhere around $100 million unfunded,” said Biggs, R-Gilbert. “I’m not sure you’d have to make other cuts in the long run. There are ways to skin that cat.”

Not perfect
Biggs said his plan isn’t perfect. But Brewer’s plan is worse, he said.

The expansion plan could put as many as 400,000 new patients on the AHCCCS rolls and employ as many as 45,000 people, according to proponents. Biggs said he disagrees with some of the numbers, but if federal funding dries up after President Obama leaves office in January 2017, the state will be left with severe fallout from the loss of that money, and would have to make some tough decisions.

Biggs said the state-only plan would cost more in the short term. But the long-term impact is far more preferable.

“I’m not going to say it’s the easiest thing. It’s not even the optimum. But it is far superior to Medicaid expansion,” he said.
Rep. Warren Petersen, another opponent of the expansion, agreed. He also said Arizona should be wary that federal policymakers have debated eliminating states’ ability to pay for their share of Medicaid costs with the type of hospital tax that Brewer wants to implement.

“The Obama solution, the Medicaid expansion, one of the problems we have in America right now is people want something instantly, they want a quick fix. It’s short-term gain and long-term pain,” said Petersen, R-Gilbert.

Biggs said the state-only option would also buy Arizona some time to figure out the best direction for its Medicaid program in the long run as well.

“There are other plans that are out there that I haven’t even had the chance to study their viability. We’re talking about an incredible, multigenerational plan that was introduced to us about a third of the way through January,” Biggs said of Brewer’s plan. “And here we are, not even four months later, and people want us to just willy-nilly go out there and vote for this thing when, by the way, they’re still writing the regulations on Obamacare. We don’t even know what all those regulations will be.”

Not dying in the streets
Some expansion opponents say there are ways to further reduce the cost of state-only coverage for childless adults. Biggs and Rep. John Kavanagh, R-Fountain Hills, said the state will be able to implement certain reforms that it can’t do if it’s using federal funds, such as co-payments and deductibles for AHCCCS patients, or eliminating coverage for non-essential services.

Benson said he doubted that the state could reap much from co-pays, considering that AHCCCS recipients are already below the poverty line.

Kavanagh said he’d prefer to continue covering the remaining childless adults with state money. But if that plan puts too much pressure on the budget, he said he’d be open to eliminating childless adult coverage altogether.

“I’d like to put them on something more sustainable, more generic if possible,” said Kavanagh, who chairs the House Appropriations Committee. “But if we can’t do it, we can’t do it. You know, these people didn’t have coverage years ago and these people weren’t dying in the streets.”

Biggs said he’d be OK with cutting childless adult coverage if need be as well, but said it’s not a realistic plan because such a plan couldn’t get enough votes to pass in the Legislature.

Benson said the state-only option isn’t feasible.

“The cost is not a couple hundred million dollars. It’s over $800 million over three years,” he said. “More and more legislators are going to view that as an option that doesn’t make a lot of sense.”
Kevin McCarthy, president of the Arizona Tax Research Association, said lawmakers shouldn’t be so quick to use up the rainy day fund.

Arizona may face more fiscal problems over the next few years, McCarthy said, and it would be illogical to reject the expansion while spending every last dime from the rainy day fund, which is supposed to be reserved for crises.

“We’re certainly not out of the woods here,” McCarthy said. “There’s storm clouds out in ’15 and ’16 that need to be recognized.”

Some GOP lawmakers aren’t necessarily convinced about Brewer’s plan, but are wary of paying for childless adult coverage strictly out of the general fund, especially if that means draining the rainy day fund in the process.

“I definitely don’t like the idea of using the rainy day fund,” said Mesnard. “We’re going to get a year and a half into this thing and it’s going to be gone.”

Other options could emerge. House Speaker Andy Tobin, R-Paulden, said he’s working on four options of his own, though he said he won’t provide any details until he presents the plans to House Republicans.

Tobin said he doesn’t think the CMS guidance is pushing more House Republicans toward the governor’s plan. The guidance, he said, isn’t necessarily as definitive as the Ninth Floor made it out to be.

And even if it is, it may not make a difference for some lawmakers.
Many Republicans oppose the expansion simply because they oppose anything that furthers the Affordable Care Act, and Tobin said some simply have serious philosophical objections.

“To many of our members, this has more to do with ideology than math,” he said.