Analysts: Arizona could lose $1.7 billion under GOP health bill

PHOENIX — Arizona stands to lose a third of its federal funds that support the expanded Medicaid program as early as 2020 if Congress adopts the Graham-Cassidy bill, according to legislative budget staffers.

The analysis released late Thursday by the Joint Legislative Budget Committee shows the state now gets about $3.8 billion in federal dollars for Medicaid expansion and the health insurance exchange. That is expected to grow to $4.9 billion by 2020.

Under the Graham-Cassidy health-care bill, the report says, the state would get $3.2 billion in 2020.

That $1.7 billion difference — a 35 percent change compared to current law — could affect the approximately 80,000 Arizonans now getting care under a federally funded expanded Medicaid program.

And it is only part of the financial setback the state would suffer if the proposal awaiting a Senate vote is enacted.

Legislative budget staffers say the change in federal funding could trigger a “poison pill” provision in a 2012 state law that levies an assessment on hospitals.

The $286.5 million raised by the assessment pays to provide health-care coverage for about 320,000 single adults, people who were cut from the program years earlier in a budget-saving move. The state could have to pick up the cost because of a 2004 voter-approved mandate to provide care for everyone earning less than the federal poverty level.

And analysts said if fewer people have health coverage, then the insurance companies will collect less money which, in turn, will mean they owe less to the state in premium taxes, resulting in an estimated loss of $34.1 million.

The new report is significant because Gov. Doug Ducey, who supports the Graham-Cassidy bill, has brushed aside other studies that also show significant losses in federal dollars. One, crafted by the Center for Budget Priorities and Planning, showed a $1.6 billion loss to Arizona in 2026 if the bill passes. Ducey dismissed it as coming from “a left-wing or left-leaning organization that has a real stake in maintaining the status quo.”

The Joint Legislative Budget Committee report shows a lower loss for that year. But it still says Arizona will collect $1.2 billion less that year than it would under current law.

The new report Thursday comes from the staffers who serve the Republican-controlled Legislature.

Despite that, gubernatorial press aide Daniel Scarpinato said it doesn’t change Ducey’s support for Graham-Cassidy.

“This is not a complete analysis of the bill,” he said, saying it “specifically ignores policy provisions that are likely to positively impact Arizona.”

Christina Corieri, the governor’s health policy adviser, said one of those provisions would free the state of its financial obligations to share the cost when Native Americans get care at non-Indian Health Services facilities. Corieri said she could not say what that would save Arizona other than “it’s a very large number.”

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Ducey’s own staff has yet to publicly produce its own analysis, one he said will include “a comprehensive look at all provisions of the bill.”

Thursday’s report comes as there is pressure on John McCain, the state’s senior senator, to vote for the measure.

To this point McCain, who rejected an earlier proposal known as “skinny repeal,” has not announced his intentions. But earlier this week, his press aide Julie Tarallo said he “continues to review the bill to assess its impact on the people of Arizona.”

Jeff Flake, the state’s junior senator, remains a supporter of Graham-Cassidy as he has been of other efforts to repeal the Affordable Care Act. Appearing Wednesday on CBS’s “The Late Show,” Flake told host Stephen Colbert he sees it as “letting those at the local level run it better.”

What’s driving the anticipated revenue loss is the way Graham-Cassidy changes the Medicaid expansion of the Affordable Care Act. Existing federal law gives states an incentive to provide coverage for people making up to 138 percent of the federal poverty level — $28,180 for a family of three — with the federal government picking up virtually all of the cost.

Beginning in 2020 the proposal would both eliminate the expansion funding as well as federal subsidies for individuals who get coverage through the ACA marketplace. A new federal “block grant” program would replace them, with aid to each state based on its share of individuals within a certain income range.

The JLBC report says Arizona’s block grant dollars in 2020 would be nearly $3.2 billion, a figure the analysts said they got using estimates developed by sponsors of the federal legislation. That compares with the almost $4.9 billion Arizona would get under current law.

In future years the state’s block grant allotment is projected by the sponsors to grow by 8.5 percent a year. Extrapolating that to 2026 creates the $1.2 billion difference between current law and what Arizona would get under Graham-Cassidy.

After that is anyone’s guess, as the grants in the federal legislation self-destruct in 2027.

“We have a lot of respect for the analysts from JLBC,” Scarpinato said. But he said “they may have been charged to look at one piece” of the legislation.

Scarpinato also said Ducey remains convinced that Congress needs to act to scrap the Affordable Care Act.

“The governor believes that we can do better with health care in the United States of America and in Arizona,” he said. “Obamacare hasn’t worked.”

The analysis came just after the Arizona Nurses Association added its voice to those of other medical groups in opposition to Graham-Cassidy.

“This legislation threatens health-care coverage for hundreds of thousands of Arizonans and may lead to the elimination of protections for individuals with pre-existing conditions,” said a statement from Robin Schaeffer, the group’s executive director, and Carol Stevens, board president.