The pressure from the Obama administration for Arizona to expand our Medicaid program is enormous. Gov. Brewer is on board and even some legislative conservatives seem to be wavering. But legislators should take one more look before they make what could be a fateful leap.
Here’s how it works. If we raise the eligibility requirements for Medicaid to 133 percent of Federal Poverty Level, the feds will drop additional subsidies of $1.3 billion annually into our state over the next three years.
Moreover, this raise can be accomplished with no general fund dollars. The state’s hospitals have agreed to pay additional taxes of $369 million to fund our share of the match. Gov. Brewer points out this is a phenomenal 10:1 “return on investment.”
When politicians use words like “investment” and “return”, your humbug detectors should start going off. If something seems too good to be true, it probably is.
First, the Obama administration pretty much struck out in their attempts to persuade states to establish insurance exchanges, so they’re frantic now to avoid a complete breakdown in the implementation of Obamacare. They’re pouring on the big bucks. But they’re spending borrowed dollars and that can’t last long.
For Arizona, taking on a financially unstable partner in a massive long-term venture wouldn’t be very smart. In fact, the feds are already considering extensive Medicaid cutbacks in their budget negotiations. The bigger point is that sharp reductions in the federal subsidy are a matter of when, not if. By 2020, even the promised subsidy ends. When that happens, Arizona will be left holding the bag.
That bag will be enormous. Of course, the rolls will be swollen by then with the eligibility expansion. But we will also be on the hook for the “woodwork effect”, the high number of patients who have been eligible for Medicaid but never signed up.
A 2010 Harvard study found that barely half of eligible Arizonans were signed up in AHCCCS (Arizona Health Care Cost Containment System), our Medicaid program. These are mostly younger, healthy people who don’t consume much medical care and don’t really need the insurance. If something happens, they can sign up any time.
But with the mandate under Obamacare to provide proof of coverage, the popularity of free insurance will skyrocket. In addition, employers with large numbers of low income workers may drop coverage or shift more workers to part time, making them Medicaid eligible under the new standards. Finally, people on SSI disability, a booming program, are automatically Medicaid eligible.
Medicaid costs have been ballooning 8 percent annually, compared to 1 to 2 percent economic growth. But apparently that’s not enough for the spenders. Total Medicaid spending under Obamacare is projected to grow from $400 billion to $900 billion by 2020. State budgets already stressed by high Medicaid spending will be in big trouble when they’re forced to pick up the tab.
The hospital tax is also deeply problematic. Hospitals are more than willing to go along, because it’s obviously in their best interests. But at heart, it is just a way to force paying patients to fund a welfare expansion that we can’t afford.
But there’s a bigger problem. The tax is unconstitutional unless approved by a two-thirds majority of the legislature. Proposition 108, a voter-passed amendment from 1992, states clearly that any net revenue increase to the state, including fees and special taxes, falls under its provisions.
The Brewer administration, recognizing it is unlikely that two-thirds of each house will sign off on their scheme, has tried to argue that the hospital tax is just a bureaucratically set fee and thus exempt. Whoops, there go the humbug sensors again. They’re not only almost certainly wrong, they’re playing with fire.
If they impose the bed text without legislative super-majority approval and it is later struck down, they would be in a world of hurt. They would lose their revenue and possibly their match and face gigantic Medicaid costs. Plus, there’s little meaning in prop 108’s super majority requirement if it doesn’t apply to this “fee”.
The more you look at this plan, the more serious problems keep bubbling up. Short-term, it has to be tempting to take the money. Ten years from now, the decision is going look a lot different.
East Valley resident Tom Patterson (firstname.lastname@example.org) is a retired physician and former state senator.