Arizona hospitals file suit over Medicaid cuts
PHOENIX -- Arizona hospitals filed suit Tuesday to block efforts by the state to further cut what it pays health care providers for treating Medicaid patients.
In legal papers filed in federal court here, attorneys for the Arizona Hospital and Healthcare Association contend the latest 5 percent cut, on top of an identical reduction in April and a three-year freeze in reimbursements "results in rates that are so low that they violate the mandate of federal law.' That law, the lawyers said, requires that rates for Medicaid services "be consistent with quality and assure that Medicaid beneficiaries have equal access to services.'
Peter Wertheim, the association's vice president, said the net effect of all those moves means that the Arizona Health Care Cost Containment System, the state's Medicaid program, would be paying hospitals just two thirds of what it actually costs them to provide care.
The hospitals want Judge David Campbell to void not only the state's actions but last week's ratification of the cuts by Kathleen Sebelius, director of the U.S. Department of Health and Human Services.
Laurie Liles, the organization's president, said this is more than a dispute between hospitals and the state.
She said the prior cuts already have forced some hospitals to eliminate services, reduce staff and close off rooms. It also has meant cost shifting, Liles said, with the hospitals forced to increase what they are charging commercial health plans.
"That cost shift amounts to a hidden healthcare tax on all consumers, exactly the wrong prescription for our ailing economy,' Liles said in a prepared statement. And the attorneys for the association said federal law requires states to set rates that are "reasonably related' to the actual costs.
"Under no circumstances may the state reimburse providers substantially less than their costs for purely budgetary reasons,' the lawsuit states.
But Matthew Benson, press aide to Gov. Jan Brewer, said a study done for AHCCCS ahead of the latest cut undermines that claim.
That report said that the projected rates "are expected to more than cover hospitals' variable costs.' And it called it "unlikely' that hospitals, unwilling to accept the lower payments, will stop working with AHCCCS managed care plans.
Benson also said that federal officials, who approved the state's move, had to do their own financial analysis to see whether there would be an impact on patient care. "And they also found that the impact would be small,' he said.
The cuts were part of a broader plan by the Legislature earlier this year to cut about $520 million in state spending on health care to balance the budget.
One provision says the state will no longer enroll single adults, no matter how low their income. Another eliminates the "spend down' provision which pays the medical bills of someone whose income is above the federal poverty level -- the qualifying line for AHCCCS -- but accumulates medical bills that effectively bring that income down to 40 percent of the federal poverty level.
The reduction in payments to hospitals and medical providers alone is supposed to save $95 million.
Benson said his boss understood there would be an impact on hospitals from the move. But he said the governor had no choice given the state's financial condition.
"These are difficult decisions but they needed to be made,' he said.