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Supreme Court Sides with AZ’s Plans to Cut Medicaid

State Prevails on Proposition 204 Litigation.

Governor’s Statement.   “I applaud the Superior Court today for its ruling regarding the State of Arizona’s Medicaid Reform Plan. This ruling ensures that elected officials maintain their authority to make difficult financial decisions on behalf of the State of Arizona.

“I don’t take lightly the Medicaid reforms we’ve implemented. The human impacts are real. But I and members of the Legislature were elected to make difficult decisions. In this case, our decision to freeze future Medicaid enrollment of adults without children spared devastating cuts to other critical state services, including K-12 education and public safety.

“As previously constructed, Arizona’s Medicaid program was unsustainable. State expenses climbed 65 percent in just four years. Today’s decision affirms both our effort  to get a handle on those costs and the bedrock authority of elected officials to make decisions in the best interest of the state.”  Today’s Statement by Governor Jan Brewer.

House Democrats: ‘Health-care ruling another blow to state’s recovery’

Assistant House Minority Leader Steve Farley released the following statement today on the Maricopa County Superior Court’s ruling that upholds Gov. Jan Brewer’s and Republicans’ massive cuts to health care:

The court’s ruling on cutting health care is unfortunate because Republicans’ actions undermined the will of the voters and directly violated the Voter Protection Act. This ruling couldn’t have come at a worse time — the economy is tanking again and Arizona families are hurting and struggling to get by. Gov. Brewer’s cuts now will make life even harder for these families by kicking them off of health care. All of Arizona will suffer from this ruling; the more than 100,000 people cut off of health care by Gov. Brewer will flood our emergency rooms looking for care that could be handled by physicians. These cuts are not the solution and today’s ruling is not only disappointing, it’s another depressing and harmful blow to our state’s recovery.”


(Editor’s Note:  The following story was written earlier this year by Diane Hope, detailing potential ramifications of these budget cuts.)

Healthcare is a significant part of the economy in Northern Arizona and one of the few areas with continued growth during the recent recession. But continuing uncertainties about Medicaid cuts are a big headache for local hospitals and health centers across the region. “None of the proposals look good,” said Bill Bradel, president and CEO of Flagstaff Medical Center (FMC), where 30 percent of patients are currently on Medicaid.

Partly due to large numbers of small employers who don’t provide employee medical coverage, as well as proximity to the reservation, reliance on Arizona’s Health Care Cost Containment System (AHCCCS) in the Flagstaff area is high. Bradel estimates the proposed cuts will reduce annual income by $12 million – an amount by which expenses will have to be reduced. And since around 70 percent of healthcare costs are for staff, that may mean job losses.

Last month, FMC presented Governor Brewer with a plan for the state’s hospitals to funnel a good proportion of their federal Medicaid reimbursement to the state, avoiding cuts in Medicaid eligibility. The plan is in line with one proposed by Arizona’s Hospital and Healthcare Association (AzHHA), a statewide trade association representing more than 100 hospitals, healthcare systems, affiliated health organizations, and the patients and communities they serve. AzHHA is worried that the cuts will not only harm low-income Arizonans but also damage the state’s economy. AHCCCS is a shared matching program between the state and federal government – for every $1 the state puts in, the federal government matches it with $2, meaning a huge drop in federal funding since as the overall economy declines, enrollment goes up. AzHHA predicts that businesses and families be forced to purchase private health insurance and that commercial health plan premiums will rise because of hospitals passing on increased costs of treating the uninsured.

But, with Arizona facing a fourth straight year of budget deficits and Medicaid costs rising by 65 percent over that time, the governor insists on taxing hospitals directly. On March 31, Brewer sent her planned reforms to U.S. Health Secretary Kathleen Sebelius, in an attempt to close a gap estimated at $763 million for this year and $1.15 billion in 2012. Her move will slash the state’s “Cadillac” coverage – the Medicaid plan in Prop 204 approved by voters a decade ago that made Arizona one of six most generous states in the country – a state where employer-provided benefits are well below the national average. To make up the shortfall from the state’s general fund, cuts have already eliminated treatments such as transplants, dental care, podiatry and frozen the KidsCare health insurance program, while provider (e.g. hospitals and physicians) Medicaid reimbursement has been cut by five percent. Now Brewer is asking for a new five-year federal waiver to allow changes that will save the state $500 million – at the top of the list is freezing eligibility for a group quaintly termed “childless adults.” Brewer’s initial proposal to cut 280,000 from AHCCCS has been revised and the latest plans will see 120,000 people being dropped, with new enrollment frozen. The plan also increases AHCCCS co-payments, charges “no-show” fees for missed appointments and eliminates state reimbursement for emergency care of non-qualified aliens. The federal government has to approve the final proposals in advance of Sept. 30, when the state’s current AHCCCS agreement expires.

While FMC hopes to stave off job losses, a hiring freeze has already been implemented for all but the most urgent positions. With annual revenues of around $350 million and profits typically around three to four percent of that figure, FMC has some funding reserves to help weather the economic storm – for a while, predicts Bradel. Unlike some other health care professionals, he does not expect a big rise in emergency room visits. “Such visits have been down at FMC over the last 18 months – when people don’t have insurance, they simply don’t use the system as much,” he explained. Bradel sees the biggest challenge for the future “is to focus much more on wellness, to keep people out of hospital.” FMC has been starting demonstration pilot projects to set up educational resources and clinics for patients with conditions such as diabetes and congestive heart failure, to help them keep up with their daily wellness routine and avoid their conditions turning critical. “We’d like to show that such approaches can work,” Bradel said.

Over at North Country Health Care, the largest federally qualified health center in Northern Arizona, it’s a different story. Chief Medical Officer Dr. Eric Henley explains that 10-15 percent of their funding comes from a federal grant mandating treatment of the uninsured. Hence, around 40 percent of North Country’s patients are currently on AHCCCS, with 15 percent on Medicare, 25 percent with commercial insurance and the remaining 15-20 percent uninsured. If the governor’s proposal to cut 20 percent of the current Medicaid population goes ahead, Henley estimates a reduction of around 10,000 patient visits annually. Some patients may still be able to pay on the sliding scale, whereas others might stop getting care completely. Henley thinks they’re looking at a loss of around $1.5 million to their total annual operating budget of $30 million budget – a sizeable five percent reduction, which could threaten up to 30 equivalent positions at North Country statewide. North Country has 14 clinics across the state, including three in White Mountains, one at Grand Canyon South Rim and a number along I-40. Of their current total of 350 employees, around 200-250 are based in Flagstaff/Coconino County. There may have to be a reduction in opening hours too.

Henley also worries about human costs. With health care charges the leading cause of bankruptcy across the country as a whole, the stress can take a toll. Governor Brewer wants individuals to “increase responsibility” for their wellness. The best hope for the newly uninsured and financially incapable is that they will be eligible to receive subsidized coverage in 2014 when the national health care law takes effect – and that they stay healthy in the meantime. FBN



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