Ducey administration argues to keep hospital levy paying for AHCCCS care

PHOENIX — The Ducey administration is asking the Arizona Supreme Court to preserve the levy that pays for an expanded Medicaid program — assuming that expansion isn’t undermined by Congress killing the program.

In legal papers filed Friday, attorney Doug Northup wants the justices to reject arguments by Republican lawmakers that money being paid by hospitals to the Arizona Health Care Cost Containment System is a tax. Instead, he contends, it is simply an “assessment” on hospitals.

That difference is more than wordplay.

The Arizona Constitution says taxes can be enacted only with a two-thirds vote of both the House and Senate. The 2013 legislation to both restore Medicaid coverage to some who had been cut, as well as to expand who is eligible, did not get that margin.

So unless the high court agrees with the governor and his AHCCCS director, the $265 million a year now being collected goes away — as does health care coverage for about 400,000 Arizonans.

Northup is not the only one asking the Supreme Court to spurn the Goldwater Institute’s bid to classify the levy as a tax. The Arizona Center for Law in the Public Interest, which represents some people who would lose coverage if the levy goes away, also weighed in Friday with its own defense of the law.

The filings are in response to a last-gasp bid by GOP opponents of the levy to quash it. Both a trial judge and the state Court of Appeals previously rejected their argument that it is a tax.

But attorney Christina Sandefur of the Goldwater Institute, representing the challengers, is telling the justices those earlier decisions were a mistake.

She also says this is about more than Medicaid. Sandefur is arguing that allowing lawmakers to label any and all new levies an “assessment” essentially guts the voter-approved requirement for a two-thirds vote for raising new revenues.

Northup, in his newly filed response, countered: “Since this lawsuit was filed, four legislative sessions have convened and adjourned, and none of petitioners’ exaggerated concerns about the impact on the legislative process have come to pass.”

At the heart of the dispute is who gets government-provided health coverage.

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Prior to 2013 AHCCCS provided care for Arizonans making below the federal poverty level.

That year, then-Gov. Jan Brewer sought to take advantage of a provision of the Affordable Care Act. Congress agreed to pick up most of the costs for expanding health-care coverage to those making up to 138 percent of the federal poverty level, which is currently about $28,180 a year for a family of three.

To get those federal dollars, however, the state had to restore coverage for childless adults, coverage which had been dropped years earlier in a budget-saving maneuver. And to cover that cost and other state expenses, Brewer proposed, and lawmakers approved, giving AHCCCS Director Tom Betlach authority to impose a charge on hospitals.

The plan was adopted by a simple majority of the House and Senate, with the Republican governor cobbling together a coalition of Democrats and some members of her own party to vote for it.

That led to GOP lawmakers filing suit, noting they had enough votes to block it if it really is a tax.

But Northup said challengers are ignoring the fact that the legislation adopted by the simple majority does not itself set a tax rate. Instead, it simply empowers Betlach to raise the amount of money he needs from hospitals to cover the state’s share of the expenses.

Put another way, he contends that the fact Betlach is authorized by statute to impose the levy is not the same thing as the Legislature itself imposing the levy, with only the latter requiring that two-thirds margin.

Northup has one other related argument. He said the levy can’t be a tax because the proceeds do not go into the state’s general fund, where they could be used for anything.

Whatever the justices decide could end up being moot.

The American Health Care Act, approved by the U.S. House to replace the Affordable Care Act, would end much of the extra funding the federal government now provides for Medicaid expansion starting in 2019.