I had a frightening realization the other day: I've become so accustomed to the state's fiscal crisis that it's almost easy to forget about it. We shouldn't.
This week, the state's fiscal woes are back in the news with Governor Brewer's plan to cut 280,000 Arizonans from AHCCCS coverage (the Arizona Health Care Cost Containment System is the state's Medicaid program). A few weeks ago Brewer sent a request to the federal government to waive the state's obligation - under President Obama's health care reform bill - to maintain coverage at or above 2010 levels.
It's not clear yet whether the White House will grant that waiver (though indications are that they won't). And critics of Brewer's plan say that regardless of the federal government's decision, the plan to cut coverage violates the 2000 ballot proposition that expanded AHCCCS coverage in the first place.
But those aren't really my primary concerns. Even if President Obama okayed Arizona's plan to cut Medicaid coverage, and even if those cuts were not deemed an unconstitutional violation of Proposition 204, cutting AHCCCS the way the governor is proposing would still be a bad idea.
The reasons why are very similar to the reasons why massive AHCCCS cuts were a bad idea this time last year. Let's consider the economic impact of AHCCCS cuts (data comes from a January 2011 report prepared by the Seidman Institute at ASU). In the first year alone, the economic impact of cutting 280,000 Arizonans from AHCCCS (excluding the Proposition 204 expansion group) would be:
- Arizona employment would be approximately 30,000 lower relative to the baseline (no change in AHCCCS)
- Real Gross State Product (GSP) would be lower relative to the baseline by approximately $2.5 billion (2010$)
- Real disposable income would be lower relative to the baseline by approximately $1.35 billion (2010$)
- The Arizona population would be lower relative to the baseline by approximately 8,200
Over the entire 20-year study period, the aggregate impact would be a loss of $46 billion (2010$) in total real Gross State Product and $30 billion (2010$) in real disposable personal income.
And, for those individuals and families dropped from AHCCCS, the likely alternative is to seek treatment from already overcrowded hospital emergency departments. Arizona hospitals will face millions of dollars in potential write-offs due to former AHCCCS patients who are unable to pay for treatment.
The negative economic impacts of AHCCCS cuts are greatly exacerbated by the fact that the federal government matches state Medicaid expenditures 2 to 1 (for every $1 the state spends, we get $2 from the feds). So the $540 million cut that Governor Brewer is proposing would actually take $1.5 billion out of the state's healthcare system.
It's true that cuts always hurt - and that, in a fiscal crisis like this one, cuts have to be made. But it's extremely hard to make sense out of cutting the one area where the state receives $2 for every $1 it spends.
Now, there are some new alternatives. The Arizona Hospital and Healthcare Association (AzHHA) has proposed a $300 million assessment on the state's hospitals. They would get $100 million of that back from the state as payment for AHCCCS services and $200 million back from the federal government under the matching program. The plan would save the state $200 million, though it would still leave $340 of the $540 million that Brewer had proposed cutting.
The AzHHA proposal doesn't solve the problem, but it's a start. As the Arizona Daily Star put it, "it's a creative idea. We see too few of those."
