Federal health officials on Friday rejected some of the changes the state wanted to make to trim costs for the Arizona Health Care Cost Containment System.
Cindy Mann, director of the Center for Medicare and Medicaid Services, told state officials in a letter that she likes some of what Gov. Jan Brewer and her AHCCCS director are proposing. She said it "will test the benefits of Arizona's unique health care delivery system."
But Mann said her agency cannot find any legal or policy reason to approve - and, in some cases, fund - some of the shifts the state wants in the AHCCCS program, which is the state's Medicaid program.
The decision will mean that the more than $500 million the state was hoping to save this budget year will be slashed by about 10 percent. But gubernatorial press aide Matthew Benson said AHCCCS has enough available cash in its budget to make up the difference.
Benson said the ruling that the state can't make all the cuts it wants is not a big surprise.
"We understood going in that some of these items that the governor and the agency proposed were going to be a reach," he said. "We're pleased that most of what she asked for was granted." He said those that were rejected may be pursued "at a later date."
Potentially the biggest of these rejected changes was the state's plan to eliminate coverage for 60,000 parents whose family income is between 75 and 100 percent of the federal poverty level - between $13,898 and $18,530 for a family of three.
Federal officials had previously agreed to let the state stop enrolling childless adults into the program, regardless of income, though those already getting care from AHCCCS will be allowed to remain in the system. But Mann said her agency, which provides about two-thirds of the cost of AHCCCS, said it saw no justification in making the change "except to achieve state savings."
Similarly, Mann rejected the state's proposal to require AHCCCS recipients to prove every six months that they remain eligible, twice as often as now required.
And she said her agency has no legal authority to allow the state to stop providing emergency care for illegal immigrants who are otherwise eligible.
Also gone is one of the state's more interesting proposals: a $50 annual assessment on childless adults who smoke.
"The state has not addressed concerns that such fees will discourage enrollment and access to needed health care," Mann wrote. She said her agency has offered "alternative approvable approaches" to Arizona officials - approaches "that at this time the state has not accepted."
Monica Coury, an assistant AHCCCS director, said what the federal government wanted were incentive programs, paying people to stop smoking. But she said Mann's agency was unwilling to pick up the tab, meaning that the price tag would be borne by state taxpayers, directly undermining the whole goal of cutting costs.
"There are no state funds to pay AHCCCS members to quit smoking," Coury said. "We thought it was best to test whether a penalty approach, like what is used in the commercial market, makes sense," she continued, noting there is evidence that the higher the tax on cigarettes, the less people smoke.
It is that issue of cost to the state, though, that resulted in Arizona seeking to scale back the program.
Voters approved a ballot measure in 2000 requiring the state to provide care for everyone whose income falls below the federal poverty level. Enrollment in AHCCCS has ballooned, from about 550,000 at the beginning of 2000 to more than 1.3 million as of last week.
And while the federal government picks up the lion's share of the cost, legislators concluded the state, facing a $1.8 billion price tag, could no longer afford its share of the cost. So they directed Brewer and her agency to come up with a plan to slash more than $500 million in state spending.
About $200 million of that is linked to not enrolling any more childless adults. Another $70 million in savings comes from eliminating a "spend-down" program, also approved earlier.
That typically involves someone whose income is higher than AHCCCSs standards but has no health insurance and suffers some sort of accident or illness that puts them in the hospital. Under the now-gone program, they would qualify for care where their medical bills eat up enough of their income to bring it down below 40 percent of the federal poverty level. That translates to about $4,300 a year for a single person or $7,400 for a family of three.
Friday's ruling by Mann's agency does not end the debate, at least not at all levels.
The Court of Appeals is considering a lawsuit brought by several public interest groups who contend the governor and lawmakers cannot ignore a 2000 voter-approved requirement to provide free care to all below the federal poverty level.
Maricopa County Superior Court Judge Mark Brain ruled against the challengers in August, saying nothing in that initiative can require lawmakers to fund specific programs. And without the legislative funds, Brain said that Brewer is free to direct AHCCCS to scale back eligibility.