Past holds lessons on expanding Medicaid

As Arizona lawmakers debate whether to pass Gov. Jan Brewer’s proposed Medicaid expansion, many seem to have forgotten the lessons of the recent past.

In 2010, the governor wisely declined to run a state-run, high-risk, health-insurance pool the feds promised to fund because it was likely to imperil the state budget.

She said at the time: “In light of Arizona’s existing fiscal challenges, I cannot commit the state to a program without confidence that there is funding available to sustain it.” That was the right move. States that took the federal dollars and set up the high-risk pools saw costs dramatically underestimated, out-ofpocket maximums raised, provider payments slashed and enrollment frozen.

Last month, the feds anCHRISTINA

nounced that CORIERI

they will be capping the maximum reimbursement a state can receive, shifting risk and costs to the states that opt to continue the program.

Instead of learning from history, Arizona lawmakers are poised to fall into the same trap. Estimates set the cost of Medicaid expansion at $154 million for the first year, and the provider tax would be designed to cover that.

But if cost estimates are faulty (and last time the state expanded Medicaid, they were off by 400 percent) the general fund would be on the hook for the difference — a bill that could easily reach $450 million and crowd out other spending priorities or result in tax increases.

Even President Barack Obama has acknowledged that the Medicaid expansion will be expensive and has already proposed, on more than one occasion, cutting the promised reimbursement rate.

While the proponents rightly acknowledge that the feds could renege on their promise, they insist the “circuit breaker” in the Medicaid-expansion plan will protect Arizona. Unfortunately, this protection is far from certain.

First, the circuit breaker does not activate until the federal rate drops below 80 percent, despite the fact that the promised rate is 90 percent. Second, all it takes to override a circuit breaker is a simple majority of the Legislature. There is no way to know who will be in the Legislature or behind the governor’s desk when the circuit breaker is triggered.

Fortunately, Arizona has options. Instead of hitching itself to promises of federal money that fails to materialize, Arizona could create a healthsavings-account program for the existing childless-adult population that is currently enrolled in the Arizona Health

Care Cost Containment System. That would save the state money while incentivizing enrollees to not seek unnecessary care.

Arizona could also include sensible reforms such as a work requirement for ablebodied adults, drug testing, co-pays, disincentives for using the emergency rooms and ambulances in non-emergency situations, etc. The feds prevent these reforms as long as they are sharing in the cost of coverage.

Part of the costs for this program could be covered by moving state employees onto AHCCCS, which would result in significant savings for the state. Proponents extol the care AHCCCS provides, so they should not mind receiving that same care themselves.

Even without Medicaid expansion, individuals making 100 to 138 percent of the federal poverty level would be eligible for highly subsidized insurance on the federal exchange.

Capped at 2 percent of income, the insurance would be virtually free. While this would increase federal spending, it will not risk Arizona’s budget when the federal government inevitably pulls back.

When Arizona’s last Medicaid expansion became too costly, Arizona did not kick anyone off the program. Instead, policymakers merely froze the population — meaning the high costs were felt by taxpayers for years to come.

Declining to put this group onto AHCCCS prevents this and prevents a storm of lobbying efforts to persuade the Legislature to bypass the circuit breaker with a simple majority vote.

If the Legislature opts to lift the childless-adult freeze, those making below 100 percent of the poverty level who are not currently eligible for AHCCCS could be covered without Medicaid expansion, as well.

Restoring coverage to all eligible childless adults makes the state eligible for a 2-1 federal match. The remaining cost could then be covered by moving state employees onto AHCCCS, requesting a waiver to implement additional costsaving measures, and covering the gap through the general fund or a provider tax the proponents seem so keen to levy.

Arizona shouldn’t rush into expansion. Arizona’s Medicaid program is one of the best in the nation because Arizona waited and learned from the experiences and mistakes of other states. Arizona should learn its lessons again before it becomes a lesson in what not to do.