WASHINGTON – Arizona is the only state that expects to cover fewer people under its Medicaid program in 2012 than it did in 2011, according to a new report by the Kaiser Family Foundation.
Arizona is one of 11 states that reduced their Medicaid budgets this year. But while the others plan to prevent declines in enrollment, Arizona expects changes in the program to shed 96,000 people from coverage by next summer, according to the report.
Unlike most other states, Arizona’s Medicaid program was recently up for renewal. Federal health care reform prevents states from scaling back coverage, but because Arizona’s program was set to expire Oct. 1, it could be tweaked with federal approval.
That gave the state a cost-cutting opportunity unavailable to most, at a time when Arizona was hit harder than most in the recession.
“They had this opportunity to renegotiate with the federal government,” said Tracy Gordon, a fellow at the Brookings Institution. “Once you’re in one of these (Medicaid contracts) you might not always be able to get out.”
Following negotiations with federal officials, Arizona was able to eliminate coverage for 6,000 medically needy people and freeze coverage for 90,000 childless adults, resulting in an expected enrollment drop from roughly 230,000 to 140,000. These cuts will save the state an estimated $260 million.
The cuts are part of Gov. Jan Brewer’s efforts to save up to $500 million from the Arizona Health Care Cost Containment System, the state’s Medicaid program.
Despite the cuts, AHCCCS said it expects to be able to function effectively.
“Based on where we stand today, we can expect to operate our current Medicaid program within the confines of our current budget,” said Jennifer Carusetta, chief legislative liaison for AHCCCS.
Every state faces increased budget pressure in 2012 because higher-than-usual federal contributions to Medicaid expired in June. The money, provided under the American Recovery and Reinvestment Act, sent $103 billion to the states over the preceding three years, said Vernon Smith, who co-authored the Kaiser report.
As part of that funding, AHCCCS got about three dollars for every dollar the state invested in Medicaid since October 2008. That federal-to-state ratio fell to about 2-to-1 in July when the higher rate expired.
Smith called the enhanced federal match rate “one of the most significant things” in Medicaid’s history.
“Even with the enhanced (rates), there were still state budget shortfalls of historic size,” he said. “But these cuts would have been much, much greater without the enhanced Medicaid funding.”
But the new, lower federal support places a heavy burden on states, which have increased spending by an unprecedented 28.7 percent from fiscal 2011 to fiscal 2012, Smith said.
Arizona increased its share of Medicaid spending by $50 million – 1 percent of the Medicaid budget – but cut more than $1.5 billion from the program, most of that in foregone federal funding.
States, including Arizona, are finding other ways to minimize costs, by limiting and eliminating certain benefits, increasing copayments for beneficiaries and cutting reimbursement rates to providers who serve Medicaid patients.
“A lot of those one-time measures make sense when you’re really up against a wall,” Gordon said.
“But having run out of those, and run out of solutions, I can see why they (Arizona) would take advantage of the opportunity” to renegotiate with the federal government, she said.
Community advocates said the costs to society far outweigh the savings to the state, but that they are not surprised the legislature does not see it that way.
“The folks are struggling today because they have lost their jobs or have had a healthcare emergency that has wiped out their savings,” said Cynthia Zwick, executive director of the Arizona Community Action Association. “It’s just a huge cycle that they fall into once things start to fall apart.”
Max Levy is a reporter for Cronkite News Service.