The Arizona Legislature on Thursday authorized Gov. Jan Brewer to apply for a federal waiver with the Department of Health and Human Services that seeks to drop 280,000 people from the state's Medicaid rolls.
The vote, which fell along party lines in the Republican-controlled legislature, would save the state more than half a billion dollars as state lawmakers seek to plug a $1.1 billion budget shortfall.
But the effort still has a couple of hurdles to clear, including approval of the plan by HHS – which seems unlikely – as well as a potential legal challenge in Arizona as to whether the state has the authority to eliminate coverage for that slice of the Medicaid population.
Democrats were quick to slam the measure, saying it would results in more than 40,000 lost jobs and push the uninsured to seek more expensive care in hospital trauma centers and emergency rooms.
"It's time for some accountability here at the state capitol and a good government, a government that is transparent and a responsive, efficient government," said Yuma Democrat Rep. Lynne Pancrazi. "This waiver only puts our rural hospitals at risk in an area where we barely have enough doctors and floods our emergency rooms with the uninsured."
The proposed reduction in enrollment would decrease the number of Medicaid recipients in the state by about 20 percent. Those dropped from coverage would include all non-pregnant, non-disabled childless adults as well as parents whose incomes exceed 50 percent of the federal poverty level.
These populations were added to Arizona's Medicaid eligibility via Proposition 204, which was approved by voters in 2000. Funding comes from a portion of Arizona's $3.2 billion share of the landmark settlement of a 1998 lawsuit brought by 46 states against tobacco companies.
Like other states that are struggling with budget shortfalls, governors and legislatures are looking for ways to cut health expenditures while finding their own methods to pay for healthcare on a state-by-state basis. In Texas, some legislators have suggested dropping out of the Medicaid program altogether.
As Arizona Republican state Senator Sylvia Allen told the Associated Press: "All we're asking for in this situation is to try to design a program that will work for us."
If the state is allowed to drop 280,000 from coverage and save $540 million from its budget, it would also forfeit more than $1 billion in federal Medicaid matching funds. Further, it would be in direct violation of "maintenance of effort" provisions in the Affordable Care Act that require states to maintain eligibility requirements for Medicaid programs until HHS deems a state's health insurance exchange is fully operational. Currently, only two states – Massachusetts and Utah – have operational exchanges.
Even if the waiver is rejected by HHS, it may have the beneficial effect of focusing Washington's attention on Arizona's budget plight.
"We believe this waiver request will be taken seriously by the administration and at the very least will open the door to further dialogue to possible solutions to address Arizona's crisis," said Monica Coury, an assistant director with Arizona Health Care Cost Containment System, the state's Medicaid program.