A bill under consideration in the Arizona Legislature would eliminate the state’s Medicaid system, which provides health care services for more than 1.3 million residents.
SB 1519, called the AHCCCS Termination bill, would end the Arizona Health Care Cost Containment System and replace it with a smaller health care program for poor and indigent residents.
The proposal recently cleared the Senate Appropriations Committee, which included Sen. Al Melvin, a Republican from SaddleBrooke who voted in favor of the proposal.
“We need flexibility in the way we administer AHCCCS in Arizona,” Melvin said. “We can’t continue spending money that we don’t have.”
The bill would dismantle AHCCCS and the numerous programs it funds.
The state’s Democratic delegation has come out strongly in opposition to the bill.
“This single piece of legislation would devastate Arizona, setting us back to Third World status,” said Tucson Democratic Sen. Paula Aboud (LD 28).
Aboud sits on the appropriations committee and voted against the AHCCCS termination bill.
She said the bill would negatively impact the health care industry and force millions of Arizonans to seek medical care in hospital emergency rooms.
What SB 1519 would do
The bill proposes to replace the current AHCCCS program with one administered under the Arizona Department of Health Services.
The number of residents who would qualify under the new system has not been determined, but it’s speculated to be greatly reduced from the current AHCCCS population of 1.3 million.
Funding levels would decrease as well.
The proposed system would contribute about $1.8 billion for indigent care, services for the developmentally disabled, behavioral health and other services.
The plan calls for $900 million of the funds to be put into the state’s general fund.
Aboud said placing the money in the general fund wouldn’t guarantee that it gets spent on health care.
“It could go anywhere,” Aboud said.
She said the money the bill allows for health care wouldn’t begin to cover the people now covered under AHCCCS require.
“Whatever pittance of money that’s allocated to DHS (department of health services) will not address the vast number of people on AHCCCS,” Aboud said.
Under the current system, about $2 billion from the state’s general fund goes toward AHCCCS programs. A smaller portion of state money for AHCCCS, about $1 billion, comes from tobacco and other special tax funds.
Those figures represent but a portion of total AHCCCS spending in the state.
Federal funds for AHCCCS total more than $7 billion annually. If the legislature eliminated the program, that money would likely be lost.
AHCCCS officials say the proposed elimination and replacement with a solely state-funded system would barely cover a fraction of current enrollees.
“The cost of care for 50,000 elderly, physically and developmentally disabled individuals (in Arizona) is $2.2 billion,” said AHCCCS Director Tom Betlach in testimony before a senate committee considering the termination bill. “This bill does not even provide sufficient funding for our most frail citizens.”
Budget cuts past and present
State Republican lawmakers have said the changes are necessary to help combat Arizona’s persistent budget deficit, which current estimates put at $1.1 billion for the 2012 budget year.
“Just getting rid of 300,000 off the AHCCCS rolls is not going to fix the problem,” Melvin said, referencing a proposal by Gov. Jan Brewer to trim 250,000 people from the state system.
Melvin said the state system is rife with fraud and abuse, and needs reform. He suggested adding penalties when people on AHCCCS don’t show up for doctors’ appointments and instituting co-pays.
“If we did, we could save AHCCCS probably several hundred million dollars per year,” Melvin said.
AHCCCS officials say they have already made extensive cuts to the agency’s budget and significantly reduced administrative costs.
“We’ve made $875 million worth of reductions to the program,” said Monica Coury, AHCCCS assistant director of intergovernmental relations.
Since 2008, the agency has frozen enrollment to some programs, ended certain benefits and eliminated at least 400 staff positions.
If AHCCCS remains, Coury said the agency plans to reduce the reimbursement rates it pays to hospitals.
AHCCCS also stopped funding most organ transplants in late 2010. The elimination of transplant procedures was estimated to save about $1.4 million in state funds. The federal government pays the larger share of transplant procedures, about $4 million.
Nearly 100 AHCCCS enrollees across the state would be denied transplants because of the change.
Aboud speculated that hospitals in rural areas would not be able to provide services, which would force many to drive hundreds of miles for medical services. She said the costs of eliminating AHCCCS would be measured not in dollars but in human lives.
“How many people are going to die before these legislators realize the folly of their ways?” Aboud said.
Economic woes predicted
In a study of the possible termination of AHCCCS, the L. William Seidman Research Institute at Arizona State University’s W.P. Carey School of Business says the results would be devastating to the state’s economy.
The study’s authors estimate the elimination of more than $10 billion in annual health care spending in Arizona would cause the loss of more than 159,000 jobs in the first year alone.
Following that, the study says, the state gross domestic product would drop by $11 billion and more than 40,000 people would flee the state.
“It would cause a collapse of the health care infrastructure in the state,” Coury said. “The trickle-down effect would be unquantifiable.”
In his testimony to the senate committee, Betlach echoed some of the predictions authors made in the Seidman Institute study. Among those, hospitals would have to reduce the number of available beds because they would have fewer health care workers to treat the sick and that businesses would also suffer.
“The impact to the business community would crush their competitiveness,” Betlach said.
Aboud speculated that the push by the state GOP to end AHCCCS was based less on sound policy decisions and more on ideological convictions.
“The Tea Party folks have been elected and are voting for these bills,” Aboud said. “This is the most uninformed legislature I’ve ever seen.”
Melvin said the bill would likely change substantially by the time it winds through both houses of the legislature.
“The objective of the sponsor (Sen. Andy Biggs) is to start up a dialogue on this extraordinary situation we’re in,” Melvin said. “I don’t think he expects AHCCCS will be terminated as we know it today.”
AHCCCS population compared to percent in poverty
AHCCCS as % of State pop Number in poverty % below poverty
2009 19% 1,381,000 21%
2008 17% 1172,000 18%
2007 16% 912,000 14%
2006 16% 902,000 14%
2005 17% 917,000 15%
2004 16% 83,0000 14%
2003 17% 749,000 13%
2002 14% 735,000 13%
2001 11% 778,000 15%
2000 10% 607,000 12%
1999 9% 616,000 13%
1998 9% 812,000 17%
1997 10% 797,000 17%
1996 11% 98,0000 22%
1995 11% 7,00000 17%
1994 12% 673,000 17%
1993 12% 615,000 16%
1992 11% 607,000 16%
1991 10% 532,000 14%
1990 9% 484,000 13%
1989 8% 502,000 14%
1988 6% 491,000 14%
1987 6% 444,000 13%
1986 5% 484,000 14%
1985 5% 345,000 11%
Sources: U.S. Census Bureau, AHCCCS
The growth of AHCCCS
Federal regulations and voter initiatives have increased the mission and reach of AHCCCS since its inception in the early 1980s.
In 1985, the AHCCCS population was about 144,000, equivalent to five percent of the state’s population.
By 2010, the number of people enrolled grew to more than 1.3 million, or 21 percent of the total Arizona population.
AHCCCS population figures have closely mirrored the number of people living under the federal poverty line for much of the agency’s existence.
In 2009, 21 percent of the state’s population lived below the poverty threshold and 19 percent of Arizonans were enrolled in AHCCCS.
Officials said that indicates the system works as envisioned.
“We’re only serving those who live in poverty,” said Monica Coury, AHCCCS assistant director of intergovernmental relations. “That’s certainly the national mission of Medicaid.”