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Former GOP Chair Randy Pullen: Follow the Governor's Lead

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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