Thousands of low-income Arizonans will keep government-funded medical coverage but face new co-payments and fees under a decision that federal officials announced Friday.
The Centers for Medicare and Medicaid Services OK'd some of Arizona's proposals to reduce the state's financial burden. But federal health officials rejected other key pieces: The state will not be allowed to impose a smoking fee or cap enrollment for low-income parents, a move that would have left an estimated 30,000 people uninsured in the first year.
Agency director Cindy Mann said the state failed to show that freezing enrollment for poor parents would do anything more than save money, which is not reason enough to allow an exception to Medicaid standards.
"It's not sufficient justification to depart from federal law because there are cost pressures on the state," Mann said in a conference call from Washington, D.C.
The agency will finalize the decisions next week, Mann said.
The rejected proposals amount to $52 million in savings the state had been relying on to help reduce a budget shortfall.
Gov. Jan Brewer and lawmakers cut the Arizona Health Care Cost Containment System, the state's Medicaid program, by about $500 million to help balance the fiscal 2012 budget. Another $40 million in planned savings has been delayed indefinitely.
Brewer spokesman Matthew Benson said the governor never expected federal officials to accept all of her proposals and is pleased the "big-ticket items" have been approved.
"We recognized that some of these were long shots. The governor is quite pleased that most of what she's requested has been approved," he said.
But health-care advocates said any more cuts to Medicaid are too many.
"I don't know how much more the health-care system in this town and this state can take," said Janice Ertl, clinic director for St. Vincent de Paul.
Cost-saving plan
Brewer, lawmakers and AHCCCS officials said cutting benefits and eligibility was the only way to keep the burgeoning program afloat. AHCCCS currently covers more than 1.3 million Arizonans.
Arizona, the last state to join Medicaid, must renew its program every five years. Any changes the state makes must be "likely to further the objectives" of Medicaid. This renewal plan was unusually complex, with more than a dozen new proposals, and the state and the CMS have negotiated since the proposal was submitted in March.
The state dropped two proposals during those negotiations: A $50 fee for overweight patients who fail to follow treatment and limiting hospital reimbursement for emergency-room visits.
The state is still waiting to see whether the federal government approves another planned cost-saving measure, a 5 percent cut to reimbursement rates for hospitals, physicians and other health-care providers, worth $95 million.
Monica Coury, an assistant AHCCCS director, said she expects the agency will make up the difference between what lawmakers cut and what federal officials denied and not require supplemental funding this year. For example, she said, there may be extra savings from a freeze on childless-adult enrollment and higher federal reimbursement for prescriptions.
State health officials view the changes as a bridge to 2014, when most of those who lose coverage in the next two years are expected to be picked up under Medicaid's expansion through federal health-care changes.
Rejected proposals
Friday marked the first time that federal health officials had rejected any of the governor's cost-cutting proposals.
Under Brewer's plan, parents earning between 75 percent and 100 percent of the federal poverty level would have remained on AHCCCS, but no new parents would be eligible and those who fell off the rolls for any reason could not get back on.
AHCCCS estimated that about 30,000 people, or half of the 60,000 parents in that category, would lose benefits in the first year, for savings of $17 million.
Mann said U.S. Health and Human Services Secretary Kathleen Sebelius did not believe eliminating coverage for low-income parents furthered the Medicaid mission.
Sebelius and the CMS also denied a plan to require AHCCCS members to re-enroll every six months, instead of annually. The proposal would have saved an estimated $15 million, primarily because people would fail to sign up in time or become ineligible.
As many as 10,000 people churn off and on the AHCCCS rolls every month because they get jobs, move, fail to provide sufficient paperwork or miss their enrollment deadlines.
Mann said a proposed $50 annual fee for smokers who fail to quit was too high and could discourage people from getting the care they need. Besides, she said, the state has other options it hasn't tried.
Coury said Arizona had applied for a grant to pay people to quit smoking, with gift cards or free classes or other incentives, but didn't get the funding.
And as expected, the CMS said Arizona's request to eliminate state emergency-services funding for people who could not prove citizenship was not within their authority. It would require a change in federal law. The state had projected a $20 million savings this year.
Accepted proposals
Brewer previously won federal approval to eliminate a program for people with costly health emergencies and cap enrollment for adults without dependent children, expected to save $260 million this year and leave about 110,000 people without health coverage.
On Friday, federal officials also approved:
- A $4 copayment for taxi rides to non-emergency medical appointments in Maricopa and Pima counties, applied to childless adults only. Brewer had asked that all non-emergency transportation be eliminated in urban areas, and copays imposed in the rural counties. The state must study whether access to care or patients' health is compromised.
- A $3 fee for parents and childless adults who fail to give 24-hour notice for missed appointments in Maricopa and Pima counties. Brewer wanted a $25 fee applied statewide. The state also must evaluate this program.
- Sixty days of health benefits for people who have lost federal disability coverage in the past month.
Sebelius already OK'd two AHCCCS reductions.
In July, federal officials approved the enrollment cap for childless adults, preventing new people from being eligible as well as those who fall off the rolls for any reason. AHCCCS estimates that 100,000 people will lose coverage this year.
They also approved elimination of the "spend-down" category. About 6,000 people were receiving AHCCCS benefits because medical bills had reduced their income to 40 percent of the federal poverty level. Enrollment in the program was capped in May and it ended Oct. 1.
Coverage for childless adults and the spend-down population is considered optional because it goes beyond minimum Medicaid requirements.
The childless-adult freeze is being challenged in court. Voters in 2000 agreed to expand AHCCCS coverage to everyone earning below the federal poverty level. Attorneys argue that the cuts violate Proposition 204 as well as the state Constitution, which voters amended in 1998 to prevent legislative meddling with ballot measures.
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