Arizona, the only state that has not been participating in Medicaid because it didn't want the costly requirements that went along with the federal program, has come up with a plan that will bring in $50 million in federal funds a year for indigent health care without those strings.
The program, tentative approval of which is being announced by the Department of Health and Human Services Monday, provides that the government will pay 55 percent of the program's costs, slightly less than other states receive under Medicaid. The money will come in quarterly, up front, in contrast to Medicaid's usual practice of paying after doctors submit bills.
Republican legislative leaders say they think the experiment, a three-year demonstration grant, will benefit the government because it puts a cap on expenses and calls for smaller federal funding. The experiment, they add, may serve as a potential model for about 20 other states, such as California and Massachusetts, with foundering health care plans.
In conservative Arizona, a law authorizing Medicaid was passed in 1974, but local matching funds were not appropriated in the face of rising costs. Health care of Arizona's poor has been borne solely by the state's 14 counties.
The new plan is designed to cover indigents and to extend health services to public employes and private employers in order to expand the risk pool. But the federal money would be spent only on indigents.
Under the so-called Arizona Experiment, health care for the poor would be contracted out to private insurers, public and private hospitals, health maintenance organizations, doctors' consortiums and other groups after competitive bidding. Once selected, health care providers would be given a fixed amount of money based on the number of people they would serve. Under Medicaid, there is no cost containment.
In addition to serving Arizona's estimated 100,000 indigents, the plan could cover state, county and city workers, and could be offered to small businesses and even some of the state's major employers, creating a total pool of about 250,000 users.
With a larger pool, the per capita cost of pre-paid health care could be reduced, said Burton Barr of Phoenix, the GOP majority leader in the state House of Representatives.
Democrats say the plan looks a lot like Medicaid, but contains some distinct gaps in coverage that is required under Medicaid in other states. Long-term nursing home care is not covered. Arizona's counties, some close to bankruptcy because of health care costs, still would have that responsibility. In addition, the plan provides for no routine dental care.
Here is how the Arizona Experiment and Medicaid compare:
Eligibility. Arizona and Medicaid serve the same categorical recipients, including Social Security and Aid to Families with Dependent Children. In addition, a single person can earn $2,500 to $3,200 a year and still qualify for benefits, a bit more than they could in other states.
Benefits. One of the key differences is the waiver of skilled nursing home care for Arizona. Other states are required to provide it for any indigent patient, in Arizona, counties will continue to carry that responsibility.
Services covered in Arizona would be early periodic screening for children, in-patient and out-patient care, X-rays, laboratory work, doctors' fees, drugs, dentures, and emergency dental care.
Other waivers to Medicaid requirements include family planning, home health care and the use of a nurse-midwife unless recommended by a doctor.
Delivery of services. Medicaid is a fee-for-service plan that generally pays the bills in full. Arizona would have a pre-paid plan in which a group or hospital agrees to cover a certain number of patients at a predetermined cost. If the costs run short of projections, the group delivering services would pocket the difference. If costs exceed projections, the delivery group would absorb the additional expense.
Financing. Under Medicaid, the federal government pays 60 percent, with the states contributing 40 percent. The money is paid after the services are rendered. The Arizona Experiment calls for the state to receive the federal money up front on a quarterly basis. The federal government would pay 55 percent of the cost, amounting to about $50 million a year. The counties now spend about $145 million a year on indigent health care. So, with the $50 million in federal money, and $20 million from the state, the counties' burden would be reduced to about $75 million.
Sam Thurmond, a Georgia consultant who did a study of Arizona's health costs last year, found that the same services were less expensive in neighboring southwestern states. He blamed the higher costs in Arizona on the fact that all indigent care was funneled through the county hospital systems, which are more expensive to run because of a high turnover of personnel.
Democrats, a minority in the legislature, have indicated they will support the plan, which must be approved by the legislature and governor. A special legislative session is scheduled for Nov. 9, and implementation of the plan is set for October, 1982.