Lawmakers again target levy that expanded AHCCCS program

PHOENIX — State lawmakers opposed to the 2013 vote that added hundreds of thousands of people to the state’s Medicaid program are making a new bid to void the expansion.

Legal briefs filed late Tuesday at the Court of Appeals on behalf of 38 Republican legislators contend their colleagues acted illegally in approving a plan to pay the state’s share of the expansion with a levy on hospitals. Attorney Christina Sandefur of the Goldwater Institute says the levy is a tax.

What makes that legally significant is that a 1992 voter-approved amendment to the Arizona Constitution requires a two-thirds vote of both the House and Senate for any tax hike. And Sandefur points out to the appellate judges that the plan did not get that margin.

If Sandefur ultimately wins the case it would mean the levy — the state is calling it an “assessment” — goes away. That would leave Arizona without the funds to pay for the expanded program and potentially kick 350,000 individuals off the state-provided health insurance plan.

The Arizona Health Care Cost Containment System, the state’s Medicaid program, was charged by voters with providing free care for everyone below the federal poverty level. That is currently $20,090 for a family of three.

In 2013 then-Gov. Jan Brewer built a coalition of Democrats and some Republicans to expand eligibility to 138 percent of the poverty level, with the federal government initially picking up virtually all of the additional cost. At last count, more than 1.8 million Arizonans are getting some form of care through AHCCCS.

The problem for Brewer, however, was that even with new federal dollars, there was still a cost to the state. So Brewer crafted what she called an “assessment” on hospitals to pay that $256 million share.

That levy, however, was approved by barely a simple majority. In fact, there were enough votes against it to deny it the two-thirds margin.

That led Republican legislative leaders, who found themselves outvoted, to challenge whether that violated the constitutional requirement for a supermajority vote.

Last year Maricopa County Superior Court Judge Douglas Gerlach sided with AHCCCS, accepting arguments that the levy fits the definition of an assessment. That’s because the amount each hospital pays was set not by the Legislature but by AHCCCS Director Tom Betlach.

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Sandefur, in her arguments to the appellate court, said Gerlach missed the point. She said it was the Legislature that created the new levy in the first place.

Sandefur said this did not simply empower Betlach to get money from hospitals. She said the law says Betlach “shall establish, administer and collect an assessment” on hospitals “for the purpose of funding the nonfederal share of the costs.”

She acknowledged the law does give Betlach some discretion in determining the amount of the levy. But Sandefur pointed out the statute details not only how the revenues are to be used but also how failure to pay must be punished.

Part of the reason the dissident lawmakers are suing over the levy is that the hospitals have no financial interest in challenging it.

That’s because more people covered by the Medicaid program means fewer people showing up in hospital emergency rooms without insurance or the ability to pay. And AHCCCS specifically crafted the amounts owed so that each and every hospital chain would make money, even after paying the fee.

In her legal briefs, Sandefur told the appellate judges that leaving the levy in place would set a bad precedent.

“Expanding Medicaid in Arizona has come at a substantial cost — not just to taxpayers but to the state’s constitutional checks and balances,” she wrote. “In an attempt to bypass constitutional protections against taxation, (the law) has stripped the Legislature of its taxing authority and consolidated power in an unaccountable administrator who is free to play favorites.”

The legal fight has put Gov. Doug Ducey in an interesting situation, as he said during the 2014 gubernatorial campaign he opposed the expansion.

But he also said that, having started the program by accepting federal dollars, he opposed any move to repeal it. Now he and his administration are stuck defending it.