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Health-care law: Arizona tries new approach to get by federal Medicaid rules

No 'political ploy'

Beth Lazare, Brewer's deputy policy director, countered that the waiver request was a genuine effort to address the state's nearly $2 billion shortfall over the current and next fiscal years and that the governor had no Plan B.

"This is not a political ploy," Lazare said. "This is our plan. We don't see a whole lot of other options."

The economic downturn has been particularly devastating to Arizona, Lazare noted, depleting tax revenues even as it led to newly poor residents who swelled the state's Medicaid rolls by 46 percent over the past four years.

State lawmakers have already responded with some of the deepest Medicaid cuts of any state in recent years - slashing payment rates to doctors and other providers by 10 percent, freezing enrollment in the state's supplemental health insurance program for children, and ceasing to pay for Medicaid benefits including certain kinds of organ transplants.

When that last high-profile policy took effect in October, nearly 100 indigent patients who were on the waiting list for a transplant were told that the state would no longer cover the procedure.

Since then, one of those patients has died. Another was forced to give up the liver offered to him by a dying family friend. A third man was able to get funding for a bone marrow transplant from an anonymous donor but died of complications from his cancer before the operation could take place.

Since 2009, Arizona and other states have received tens of billions of dollars in additional federal Medicaid funding included as part of a congressional stimulus package and an associated extension.

Even so, Arizona's spending on Medicaid has increased by 65 percent over the past four years, now accounting for 29 percent of the state budget compared with 17 percent in 2006. And the extra federal Medicaid funding expires in June, contributing to an anticipated $1 billion shortfall for the state program in the 2012 fiscal year.

The new health-care law has also added limits on the state's room to maneuver.

To participate in Medicaid - and receive the billions in matching federal dollars it brings in - states must cover all children and pregnant women up to specified levels of poverty, as well some elderly, blind or disabled people, and parents of poor children, up to certain poverty levels.

Until recently, states also had the option of expanding that coverage with federal assistance by, for instance, raising the poverty threshold or including childless adults.

Beginning in 2014, the health-care law will require states to open eligibility to all individuals who earn up to 133 percent of the poverty level - with the federal government covering the lion's share of the extra cost. In the meantime, the law requires states to maintain their current levels of coverage, no matter how far above the original base line.

Waiver request

The waiver Brewer is seeking would effectively push out all 250,000 childless adults on Medicaid. An additional 30,000 parents whose incomes are above 50 percent of the poverty line would also lose their coverage.

Anticipating that the waiver would be granted six months into fiscal 2012, Brewer's staff projects that the move would save $541 million, then $900 million the following year.

Sinema said she and other state Democrats will be pushing to get the savings instead by closing some of what she maintained are at least $10 billion in corporate tax loopholes on Arizona's books - including tax exemptions for liposuction and country club memberships.

Meanwhile, the Medicaid battle with Arizona and other states is not expected to be resolved anytime soon. With the 2014 date looming for a greater expansion of Medicaid benefits, many say it will instead grow more heated and contentious.

Already, Republican governors from 26 states have sued the federal government to block that expansion, claiming it is unconstitutional.

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