The bullet state Medicaid won’t be able to dodge

The state’s Medicaid program, the Arizona Health Care Cost Containment System, has dodged a couple of bullets recently. But there is a bullet inevitably coming that it will not be able to dodge. The first dodged bullet was legal.

In 1992, voters approved Proposition 108, requiring that “a net increase in state revenues” be approved by a twothirds vote in both chambers of the Legislature.

In 2000, voters approved Proposition 204, expanding Medicaid coverage to childless adults up to 100 percent of the federal poverty level.

In 2013, the Legislature approved a new assessment on hospitals, to be calculated by the director of AHCCCS, sufficient to cover state costs associated with the Prop. 204 population and the expanded Medicaid population (100 to 133 percent of the federal poverty level) under “Obamacare.” The bill passed with less than a two-thirds margin in either chamber.

The Goldwater Institute sued on behalf of Republican legislators who opposed the assessment.

I supported the assessment and the Medicaid expansion. But there is no question that it was unconstitutionally enacted. Legally, it’s not even a close call.

The institute, however, made a strategic error in its litigation strategy, placing way too much emphasis on getting what the hospitals pay dubbed a tax, rather than an assessment or fee.

Under Prop. 108, it doesn’t matter. The ballot measure plainly requires a twothirds vote for “the authorization of any new administratively set fee.” That’s clearly what the Legislature enacted. It was new. It is administratively set.

Prop. 108 also exempts “fees and assessments authorized by statute” and “set by a state officer or agency.”

The only way to give meaning to both provisions, as judges are supposed to do, is to find that establishing a new administrative fee requires a two-thirds vote. But after that, administrative increases do not.

The recent appellate-court decision upholding the assessment is an excellent illustration of why respect for the judiciary, and support for its independent role in our system of government, is evaporating, particularly among conservatives.

In its decision, the court cites the language of Proposition 108 that requires a two-thirds vote for “the imposition of any new state fee or assessment.” But it doesn’t cite the perfectly on-point language requiring a two-thirds vote for “the authorization of any new administratively set fee,” even though it is in the very same sentence of Prop. 108. The opinion is written as though that specific language doesn’t exist.

The second bullet dodged was the failure of “Ryancare,” which would have capped federal funding for Medicaid and reduced the federal share for the childless adult population.

AHCCCS came out with dire predictions about what that would do to Medicaid enrollments in Arizona, but there was more than a little Congressional Budget Office math in the figures. AHCCCS assumed large increases in enrollment prior to the cap, and calculated reductions from there.

In reality, enrollments in the system, after an initial big boost, are growing slowly or declining.

The other reality is that the hospitals would likely still be willing to pick up the state’s share, even in the context of a federal cap and lower reimbursements. It would remain a cost-effective way of covering their fixed costs and reducing uncompensated care. There might not be any effect on enrollment.

The third, unavoidable, bullet is that, despite the failure of Ryancare, some similar reform of Medicaid is inevitable. The current system — in which states drive costs and the federal government picks up the lion’s share of the tab — is unsustainable.

From 2000 to 2010, before the enactment of Obamacare, federal Medicaid spending more than doubled. Since Obamacare, it has increased another 40 percent. And it is projected to increase another 67 percent over the next decade.

In response to an inquiry from House leadership about shaping Ryancare, the Ducey administration provided some thoughtful and thorough ideas about increased state flexibility in a capped federal contribution environment. They included greater state ability to impose premiums and copays, and provide narrower networks and formularies.

If the Trump administration opens the window for states to innovate, chances are that the Ducey administration will advance some of these ideas even in the absence of Ryancare.

That will produce the usual expressions of outrage from the usual sources. But it shouldn’t.

Substantial Medicaid changes are inevitable. The sooner the state prepares for them, the better.