State lawmakers want to do away with Medicaid expansion

PHOENIX -- State lawmakers opposed to Medicaid expansion are making a new bid to kill the program.

Legal briefs filed late Tuesday at the Court of Appeals on behalf of 38 Republican legislators contend that their colleagues acted illegally in 2013 in approving a plan to pay the state's share of the expansion with a levy on hospitals. Attorney Christina Sandefur of the Goldwater Institute says the levy is a tax.

What makes that legally significant is that a 1992 voter-approved amendment to the Arizona Constitution requires a two-thirds vote of both the House and Senate for any tax hike. And Sandefur points out to the appellate judges that the plan did not get that margin.

If Sandefur ultimately wins the case it would mean that the levy -- the state is calling it an "assessment' -- goes away. More to the point, it would leave Arizona without the funds to pay for the expanded program and potentially kick 350,000 individuals off the state-provided health insurance plan.

The Arizona Health Care Cost Containment System, the state's Medicaid program, was charged by voters with providing free care for everyone below the federal poverty level. That is currently $20,090 for a family of three.

In 2013 then-Gov. Jan Brewer year built a coalition of Democrats and some Republicans to expand eligibility to 138 percent of the poverty level, with the federal government initially picking up virtually all of the additional cost. At last count, more than 1.8 million Arizonans are getting some form of care through AHCCCS.

The problem for Brewer, however, was that even with new federal dollars, there was still a cost to the state. So Brewer crafted what she called an "assessment' on hospitals to pay that $256 million share.

That levy, however, was approved by barely a simple majority. In fact, there were enough votes against it to deny it the two-thirds margin.

That led Republican legislative leaders, who found themselves outvoted, to challenge whether that violated the constitutional requirement for a supermajority vote.

Last year Maricopa County Superior Court Judge Douglas Gerlach sided with AHCCCS, accepting arguments that the levy fits the definition of an assessment. That's because the amount each hospital pays was set not by the Legislature but by the AHCCCS Director Tom Betlach instead.

Sandefur, in her arguments to the appellate court, said Gerlach missed the point. She said it was the Legislature that created the new levy in the first place.

More to the point, Sandefur said this did not simply empower Betlach to get money from hospitals. She said the law says Betlach "shall establish, administer and collect an assessment' on hospitals "for the purpose of funding the nonfederal share of the costs.'

She acknowledged the law does give Betlach some discretion in determining the amount of the levy. But Sandefur pointed out the statute details not only how the revenues are to be used but also how failure to pay must be punished.

Part of the reason the dissident lawmakers are suing over the levy is that the hospitals have no financial interest in challenging it.

That's because more people covered by the Medicaid program means fewer people showing up in hospital emergency rooms without insurance or ability to pay. And AHCCCS specifically crafted the amounts owed so that each and every hospital chain would make money, even after paying the fee.

In her legal briefs, Sandefur told the appellate judges that leaving the levy -- and the design behind it -- in place would set a bad precedent.

"Expanding Medicaid in Arizona has come at a substantial cost -- not just to taxpayers but to the state's constitutional checks and balances,' she wrote. "In an attempt to bypass constitutional protections against taxation, (the law) has stripped the Legislature of its taxing authority and consolidated power in an unaccountable administrator who is free to play favorites.'

The legal fight has put current Gov. Doug Ducey in an interesting situation, as he said during the 2014 gubernatorial campaign he opposed the expansion.

But he also said that, having started the program by accepting federal dollars, he opposed any move to repeal it. Now he and his administration are stuck defending it.

On Twitter: @azcapmedia

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