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Arizona Medicaid agency estimates Senate health bill cost at $7.1B

(Pixabay Photo)

PHOENIX (AP) — A new analysis released by Arizona’s Medicaid agency Friday concludes that the U.S. Senate proposal repealing much of former President Barack Obama’s health care law would cost the state at least $7.1 billion through 2026.

The costs occur even if the state freezes enrollment in expanded Medicaid, a program now covering 82,000 state residents who earn between 100 percent and 138 percent of the federal poverty level, the analysis said. Extra state funds that help pay for those people and another 319,000 childless adults who earn less than the poverty level also would go away, forcing the state to choose between throwing them off the program or raising taxes.

Raising taxes to replace the money is unlikely in a Republican-controlled state, so Arizona would likely see drastic cuts to services. Gov. Doug Ducey has been urging the state’s two Republican U.S. senators, John McCain and Jeff Flake, to provide a more gentle phase-down of the Medicaid funding cuts to allow the state time to adjust.

Ducey spokesman Daniel Scapinato said Friday that an analysis shows the five areas Ducey identified in a letter to McCain before the Senate bill was released weren’t addressed and the proposal falls short. The governor wants a slower phase-out of higher Medicaid expansion matches, higher inflation adjustments, elimination of a penalty for states that expanded parts of Medicaid early, explicit flexibility for the program covering 1.9 million Arizonans and to retain $9 million in prevention funding that predates the Affordable Care Act.

Still, the governor is attacking Obama’s law, noting that “I have said for years that Obamacare is a disaster that must be repealed.”

McCain said Thursday he wanted to hear Ducey’s opinion before deciding if he supports the bill.

The analysis does not look at the effects on individual insurance or the costs to hospitals of the repeal bill. The state’s hospital association is vigorously opposed to the plan, calling the Medicaid cuts “a massive shift of financial risk and burden from the federal government to states, local healthcare providers and Arizona patients and families.”

Changes to federal matching payments for the state’s 1.9 million Medicaid recipients would cost $2.9 billion. Limiting inflation adjustments would cost $2.2 billion.

Another $2 billion loss would occur when a hospital assessment that pays the state costs of covering 82,000 people in the expanded program and 319,000 childless adults stops. That will happen in 2022 when federal matching rates drop below an 80 percent trigger in the 2013 state law authorizing expansion.

The Senate plan essentially eliminates the Medicaid expansion in Obama’s law designed to insure people who could never afford to buy their own insurance. It also changes Medicaid from an open-ended entitlement program to one with strict spending limits and tight controls on yearly inflation adjustments that would be well below historic health care inflation rates.

It also cuts more than $800 million a year in taxes that paid for expanded Medicaid, many paid by wealthy Americans, health insurers and medical device makers. The requirement that large companies provide health insurance and that individuals buy insurance is repealed.

The analysis by the state Medicaid agency, known as the Arizona Health Care Cost Containment System or AHCCCS, says annual health care inflation averaged 3.2 percent in the past four years, while consumer price increases that would be used under the Senate plan averaged 1.3 percent.

AHCCCS Director Tom Betlach said if the cuts come to pass and the entire 400,000 new enrollees lose coverage, a cascade of problems are likely to follow similar to those that happened in a previous enrollment freeze.

“Just like what happened before, uncompensated care increases greatly for the hospital systems, that cost gets borne by other payers of the system, hospitals will have to make business decisions right away around how they … can survive,” Betlach said.

On the spending side for AHCCCS deep cuts would come, he said. “Your options are what you pay providers and what you offer for services, and that’s really it,” Betlach said.

Not included in the $7.1 billion figure are major cuts to payments that help cover costs to hospitals that see unusual rates of uncompensated care. That’s expected to cost the state general fund $350 million between 2020 and 2026.

Flake and McCain have remained mum on whether they will support the Senate health bill. Both said they were studying it.

A vote was possible next week.