Cutting AHCCCS

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A report by Arizona State University economists shows that cutting funding to the Arizona Health Care Cost Containment System, Arizona’s medical insurance for the indigent, could cost the state a lot in terms of jobs and money. ASU economist Timothy James, one of the authors of the report, talks about the findings.

Ted Simons: A report released yesterday showed that Arizona would suffer huge monetary and job losses if proposed cuts were made to AHCCCS, Arizona's healthcare plan for the poor. The report was commissioned by the Arizona healthcare and hospital association and was conducted by Arizona State University economists. Joining me now is ASU W.P. Carey School of Business economist Timothy James, who worked on the report. Tim, good to see you. Thanks for joining us.

Timothy James: Happy to be here.

Ted Simons: The idea, the proposed cut, $2.7 billion hit?

Timothy James: Indeed. It's quite a big number but it's important to explain where we get the number from. Largely, speaking, there's a big amount of leverage in this. So the state would contribute $900 million on average but on top of that, there's federal funding which raises the amount by a factor of one to two, one to three. So $2.7 billion.

Ted Simons: And that translates to job losses. 4200, according to your report? How is that number determined?

Timothy James: At ASU, we have a really good model of the way the state's economy operates and we've fed the budget cut in its entirety into that model and it then predicts for us what the economy would like look in comparison to what it would have looked like if the cuts were actually going to take place.

Ted Simons: The matching funds, fine-tune things a little bit here. The idea of reducing the number of folks on AHCCCS saves the state $765 million but you're talking about twice that much in federal matching funds.

Timothy James: And that's the real issue here, It's not just the amount we'd lose in terms of state funding of AHCCCS fund, there's a funding in federal funding and that's what makes this a really, really big effect in terms of potential job losses to the state and also in terms of the losses in terms of the size of the economy going forward.

Ted Simons: And kids care, would save the state $23 million but got 97 some odd million gone, huh?

Timothy James: We do get a lot of subsidy from the federal government in terms of AHCCCS programs in terms of healthcare.

Ted Simons: Critics will say that Arizona does not have the money to attract the matching funds.

Timothy James: This is the real rock and the hard place type of problem here. We realize we're in really difficult circumstances and what we really need do is find our ways through the woods. I'm not a politician and it isn't my job to come forward with some plan that says this is what we ought to do. But I do think it's worth pointing out this particular format way of reducing the budget deficit we face is a really difficult one to swallow.

Ted Simons: It's difficult to swallow and you're not a politician and the governor's office says all right. Give us an alternative and seems like there are a wide variety of things out there. From a distance, compare and contrast, other things get cut, hospitals and healthcare get cut or we raise taxes.

Timothy James: It's a simple equation. You either need more revenue or you have to reduce expenditure. You don't need me to tell me that you. I think that the governor is in a very, very difficult situation and they've tried lots of plans which involves some degree of revenue raising and cutting and I don't see a clear way through the woods. I think it's something that needs to be looked at again in order to maintain the fabric of what we've got here in the state.

Ted Simons: When you talk about job loss, especially, I don't know if you've done research. But when you put the numbers into your computer, does everything pretty much match up or when you talk about healthcare, does that have a particular formula and then other aspects of the economy have different formulas?

Timothy James: The thing about healthcare, most jobs are highly skilled and highly paid. So a cut in terms of expenditure there means you might not lose so many jobs indirectly in healthcare, because a surgeon gets paid a lot relative to someone in a different industry, but the effect runs through all of the factors of the economy. Less healthcare workers in the state who aren't earning what they would have before, they don't need the services and goods we provide them with and all of the other factors will suffer.

Ted Simons: And as far as the economy is concerned, the idea is if you lose people, fewer people have insurance, most of them are going to wind up in an knowledge in room one way or the other. More people in the emergency room, and higher hospital costs and they come around and get -- you know who.

Timothy James: That's for the medical experts to comment on, but they've been making that case strongly. You're diverting people's usage of the healthcare system from primary care physicians into the emergency room. And that may have cause further problems in terms of all sorts of people's access to the system. Because it might clog up the E.R. system.

Ted Simons: We take from this report, when you reduce the number of people eligible for AHCCCS and reduce programs dealing with the poor and healthcare, they're big multiplier effects.

Timothy James: This is a quite large trench of economic activity in the state and it's pervasive and almost affects every area of activity here.

Ted Simons: Very good. Thanks for joining us. We appreciate it.

Timothy James: Thank you.

Timothy James:ASU economist;

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