Arizona Business Magazine July/August 2011
AzHHA Proposes Alternative To Medicaid Reform Plan, AHCCCS
AzHHA and other health care organizations propose an alternative to Gov. Brewer’s Medicaid reform plan, the Arizona Health Care Cost Containment System ( AHCCCS )
The economic recession has had an impact on industries across the board and health care in Arizona is no exception. Arizona hospitals have lost more than $700 million in state and federal Medicaid funds since 2008 due to previous payment cuts and freezes and another $530.7 million in cuts is headed to hospitals in fiscal year 2012, bringing the total cuts to $1.3 billion.
To address the state’s fiscal woes, the Legislature passed a budget that authorizes several reforms to Arizona’s Medicaid program, the Arizona Health Care Cost Containment System (AHCCCS).
On March 15, 2011, Gov. Jan Brewer presented her plan, which includes reforms that will lower costs by an estimated $500 million in the State’s General Fund for the partial first year.
Included in these reforms is a phase-out plan for the Proposition 204 population — a voter-passed initiative that entitles anyone whose annual income is equal to or below the federal poverty level of $11,000 annually for an individual to AHCCCS coverage.
In a statement on the organization’s website, the Arizona Hospital and Healthcare Association (AZHHA) stated they are “deeply concerned that the budget will damage Arizona’s economy at a time when we are struggling mightily to recover from the recession. The budget authorizes the Arizona Health Care Containment System (AHCCCS) Administration to alter eligibility in a way that could result in 160,000 patients losing their healthcare coverage and financially harm the hospitals and healthcare professionals who will care for them when they become ill or injured.”
The most pertinent matters to AzHHA include: the 5 percent cut in all provider payments; the elimination of the Medical Expense Deduction program for patients with catastrophic illnesses and injuries; elimination of federal emergency services coverage for foreign national patients; and implementation of an inpatient bed day limit.
“Each of these proposals will increase the cost of uncompensated care hospitals provide, part of which will be passed on to patients with private health insurance,” says Laurie Liles, president and CEO of AzHHA.
“When AHCCCS and other government programs stop paying for care or pay hospitals significantly less than the cost of caring for their patients, hospitals must make up these losses elsewhere,” Liles adds. “Some hospitals — particularly those located in small, rural communities that operate on very slim margins and serve a high number of AHCCCS patients — have little ability to shift their costs to commercial plans. For those hospitals, the cumulative effect of the AHCCCS budget cuts will be devastating,”
As CEO of a hospital in a rural community, Tim Barnett of Yavapai Regional Medical Center understands this all too well: “Cutting expenses may seem like a good short-term solution but when those cuts are carefully and thoroughly analyzed, it’s clear that the long-term ramifications are potentially disastrous,” Barnett says. “It is far more prudent to think in terms of identifying additional sources of cash coming into our state for the benefit of all our residents.”
According to Barnett, Yavapai Regional Medical Center will lose at least $14 million annually from the cuts in AHCCCS funding. This amount is more money than the center’s annual net revenue. “We would have to look at very drastic changes in how we serve our community… The cuts would affect our ability to care for everyone, not just AHCCCS patients,” Barnett says.
Jim Dickson, CEO of Copper Queen Community Hospital in Bisbee agrees. “It will have a severe economic impact… They’re downsizing the healthcare system substantially, Arizona is already undeserved and we’re going even lower.”
On average, AHCCCS now pays hospitals less than 70 percent of the costs they sustain caring for Medicaid patients. Weathering the recession has been difficult enough and these additional cuts would force hospitals to cope with losses by delaying construction projects, some staff may experience salary freezes and furloughs, eliminating certain high-cost services, leaving vacant positions unfilled and more.
Though AzHHA supports Governor Brewer’s effort to preserve coverage for the existing Proposition 204 population, their goal is to maintain coverage for even more Arizona residents. AzHHA along with a coalition of Arizona hospitals, Medicaid health plans and skilled nursing facilities has proposed a viable alternative to the proposed reforms — a special health care assessment that would generate $465 million to protect coverage for low-income Arizonans.
“AzHHA believes the special healthcare assessment represents a fiscally responsible alternative to AHCCCS cuts included in the recently enacted state budget and the cuts included in the governor’s Medicaid Reform Plan,” Liles says.
AzHHA’s proposal, developed with the Arizona Association of Health Plans (AzAHP) and the Arizona Health Care Association (AHCA), would be tied to available funds and bring in $465 million annually, which would then generate two federal matching dollars for every one dollar from the assessments. The assessments would also stop reductions in health care provider rates, a component of Gov. Brewer’s proposal.
“Part of the federal match would be used to reimburse providers for the assessment, so there is no pressure to pass the assessment on to commercial insurers, business or patients,” Liles says. “The assessment is a ‘loan’ to the state to bring in additional federal dollars to help cover people enrolled in the Proposition 204 program.”
The federal matching funds would come from federal tax dollars that Arizonans are already paying and the assessment is considered to be a short-term solution through 2013 while the economy recovers. In the meantime, the organization plans to work with policy makers on a long-term plan to streamline Medicaid utilization and improve quality of care. Many of the hospitals that may otherwise be adversely affected by Gov. Brewer’s reforms have a positive outlook on the health care assessment.
“AzHHA’s proposal is definitely a good alternative… The best-case scenario would be for the legislature and the governor to work collaboratively along with AzHHA and its colleagues to implement the best solutions for patients,” Barnett says. Recognizing the economic difficulties Arizona is facing and a shared mission of helping heal the state’s economy is something Barnett hopes will bring both sides to a resolution.
“We’re blessed that we already have that solution developed… AzHHA, nursing homes, Medicaid insurance plans and hospitals throughout Arizona are focused on how we can contribute to the solution and how we can help make Arizona an even better place to live and work,” he says.
AzHHA plans to work with policy makers to ensure that lawmakers reconsider their health care assessment and support this alternative to eliminating health care coverage and provider payment cuts.
AHCCCS Cuts Hurt Arizona’s Economy
- The Arizona Health Care Cost Containment System (AHCCCS), the state’s Medicaid program, is a shared matching program between the state and federal government. For every $1 the state puts in, the federal government matches it with $2.
- A rollback of the Prop. 204 population would result in a loss of nearly $1.5 billion in state and federal funding. The annualized impact is $2.27 billion.
- If Arizona chooses to opt-out of the Medicaid program, the state will be removing $7.2 billion in federal money from the economy.
- Money spent on healthcare is a long-term investment that pays off. The healthcare sector is vast, and there are many large and small companies in various industries. It is also one of the only areas of the economy that has continued to grow throughout the recession.
AHCCCS Cuts Result in Job Losses
- As lawmakers struggle to recover the 300,000 jobs lost during the current recession, cuts to the AHCCCS program undermine these efforts by causing more jobs to be lost.
- Arizona currently holds a 9.4% unemployment rate.
- Scaling back Prop. 204 will eliminate 13,568 private-sector healthcare jobs and 30,000 jobs across all areas of the private sector, as well as a reduction of $2.5 billion to the gross state product in the first full year of the rollback.
- A total elimination of Arizona’s Medicaid program would result in a loss of 159,000 jobs, nearly 82,000 in healthcare alone. The healthcare jobs that will be affected are high quality, high-paying positions such as physicians, physician assistants, nurses, dentists, physical therapists, and behavioral health professionals.
- These cuts and resulting job losses then create an access-to-care issue (particularly in rural areas) for all patients when services and the professionals who provide them are no longer available.
AHCCCS Cuts Create a Cost Shift to Arizona’s Businesses
- Healthcare providers often respond to reductions in AHCCCS payments by shifting a portion of the cost to private payers and insurance companies, which results in higher premiums for Arizona’s businesses and the privately insured.
- This cost shift limits the ability for businesses to grow and prosper.
Sources: The Potential Economic Impact of Withdrawing from Medicaid in Arizona. January 2011. W.P. Carey School of Business, Arizona State University.
Arizona Chamber of Commerce