Medicaid Expansion/Hospital Assessments

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Governor Jan Brewer has proposed allowing the director of the state’s health care plan for the poor to assess a levy on hospitals to pay for an expansion of Medicaid in Arizona. Byron Schlomach of the Goldwater Institute and John Arnold, Governor Brewer’s Budget Director, will discuss the pros and cons of the idea.

Ted Simons: A hearing was held this afternoon to get public input on expanding access, the state's Medicaid program. The Governor wants to grow the plan to cover 300,000 more people. That expansion would be paid for by an assessment on hospitals and other health care providers. We'll hear the pros and cons of the expansion plan in general and the proposed assessment in particular, but first, some comments at today's public hearing.

Maria Lopez: I have a 21-year-old that was just in the emergency, and we're without insurance. It cost me $800 a month if I put them on my insurance. He's a college student. Works part-time. And it hurts me that he's going to end up with a $50,000 bill.

Beverly Leyvas: People that have diabetes that have complications with diabetes, and amputations. We see it all there at The Homeless Health care center. And they come there because they are desperate. And they need help. And we cannot get them on. And this is huge. And we have seen the increase year after year. So, I'm here to say that it is needed. And I hope that, that people do, do support this plan.

Allen Gjersvig: I just want to make one comment because it makes me so angry. Some of the people that are opposed to expanding Medicaid, they are inventing arguments. And the argument that makes me, what should I say, makes me a little bit crazy is, when I hear the argument that access, if we expand it, we will be sentencing more people to second class, low quality Government-manage insurance with limited medical options. Now, on the face of it, that's a silly argument because you know what, if I have no access to coverage, I will take second class rather than none. So, the argument falls apart right there.

Harry Garewal: So I applaud the Governor. She and I have been on opposite ends of the spectrum on lots of different issues. But in this particular one, I think that she hit a home run. Now, I would like for you to relay that to her and let her know that I'm in total support, and I will do all that I can through my organization, through my networks, to ensure that, that we contact our elected officials to make sure that we get this pass.

Ted Simons: And here now to speak in favor of the proposal, to expand Medicaid is the Governor's budget director, John Arnold and speaking against the plan is Byron Schlomach of the Goldwater institute. Thank you.

Ted Simons: We just heard, we should mention, we did not hear anyone speaking against, this that's why we had everyone speaking for it. We heard their ideas. Why do you think that this is the part thing for Arizona to do?

John Arnold: Thank you, Ted. And Medicaid expansion in Arizona is related to Federal health care reform. Obama care. When Obama care pass, the Governor was not a supporter, she was an opponent of Obama care, and continues to be an opponent of Obama care, and we litigate it, but, we lost and, and, you know, the President won reelection so we had to take a look at, at what are the changes that Federal health care reform puts on -- how it affects our state, and what does that mean for our state? And we were really left with one of three options. Federal health care reform puts us in a position where if we do nothing, we're going to have to terminate coverage for about 50, 60,000 people so we can do nothing, and terminate coverage for, for some 60,000 people. And put that many more people into the unensured population, which drives up uncompensated care in our hospitals. And we think that uncompensated care would likely double if we go down that road. And number two, if we don't expand, we lose Federal support for that population, try to fund that population that's 50, 60,000 people with just state moneys. And it's cost prohibitive, 400, 500 million per year, and we don't have that kind of revenue. And three, do this expansion. The voters back in 2000, have already voted to expand our Medicaid coverage. The difference between what the voters have mandated that we do, and what the Federal Government is asking us to do, is just about 57,000 people. So, add an additional 57,000 people, and that brings almost 2 billion dollars in Federal money into the state to provide the coverage for this existing population, and we add more people on. And it was just -- again, opposed Federal health care reform, but that's the law of the land. And so, that's the will you of the land, and how does it impact our state and what's the best course for the state moving forward? And the Governor, you know, with knows, those options in front of her, said we really need to expand.

Ted Simons: With those options in front of Arizona that, being the decision made, why is that wrong?

Byron Schlomach: Well, number one, I think that, that the Roberts' decision, in several places, talks about the state's roles, vis-a-vis the Federal Government, and our Government exists mainly to secure the blessings of liberty for people. And I'm just not sure that, that includes forcing people to, to, basically, contribute the charity through, through a Medicaid system or any other that the Government chooses to tax us for is the way to do it. And but, but the biggest reason is cost. Cost of the state. I know that there is there issue about hospitals, putting up the money, fronting up the money, and supposedly this isn't going to affect taxes or anything else for, for our health care costs. I'm not sure I completely believe that, but we are dealing with a Federal Government that's bankrupt. It's not a very good partnership. I think that we can count on, and initially, by the time that, that this program is it fully implemented, we don't know what it will cost. The projections don't go out to the point where, where we're, we're completely covering our full 10%, but, just based on where costs are today, that would cost about $330 million dollars. By the time that we covered 80%, which the Governor is setting the circuit breaker on, it would be 530 million. Now, that's this, there's a 6% Federal limit on, on net patient revenue on this hospital bed tax scheme. And that would cover, that would cover that cost level. However, the Federal Government already has been talking about rolling that back from 6% to 3.5%. And been talking about a different match rate, as well, so, the Federal Government already is looking at these things as very costly, and looking for savings. And, and we're going to end upholding the bag in the general fund if they do these things.

Ted Simons: And we hear about a trigger, and the circuit breaker or whatever you want to call it there, that if the Federal doesn't uphold it's end of the bargain the deal off. Those are big numbers, over hundreds of millions. Did they jive with you, a, and b, how do you respond?

John Arnold: There is no question, that, that the state is going to have to put up some money. To drawdown the Federal dollars. And, and you can think of it as, as an, as an economic investment, to some degree, show me another economic investment where you put up $1, and you get $10 back into your economy. And, and, and that's what we're talking approximate, is a 90% Federal match. We also agree, you know, I certainly agree that the Federal budget out of control. They need to get their budget under control, and that's a reason why we oppose Federal health care reform. Because, because it does cost money, but again, that's the law of the land today and, and we need to look at how we, we protect Arizona. One of the Governor's chief concerns was, was that the state would be left holding the bag in the long-term. And this would be a Federal bait and switch, and so she's proposed a circuit breaker that if the Federal share, you know, that match rate drop that this whole program is repealed. And, and the way I like to think of it is the Federal Government has called us up and said, hey, Arizona, we would like to fund the Medicaid program in your state. And we're going to say ok, and when they are done funding the Medicaid program in our state, it will go away, but, he's right, the state cannot afford to take that on. And so, we have put in that protection so we won't have to.

Byron Schlomach: My concern about that, though, is that, is that at the point when say, well, we have hit that, that threshold, and we're going to, to get rid of this expansion, you are not just talking about, about the 57,000 people that the Governor talks about us covering over and above the proposition 204 population. You are also having to talk about the proposition 204 population. And that's, that's nearly half a million people, by the time that, that this thing is pulling, fully implemented, and so, it's very difficult for me to see, to see politically how that works out in the future, and whether a future Governor, a future legislature is going to have the courage to, to follow up on that.

Ted Simons: Is there much of a choice? When Arizona can't say this is necessary, Arizona can't afford tens of thousands of uninsured. The hospitals are pushed into the brink, and we're seeing that --

Byron Schlomach: I don't believe that.

Ted Simons: don't believe some hospitals are seeing costs quadrupling as we speak?

Byron Schlomach: No. There is, there is this excellent article in "Time" magazine. It is 28 pages. It has example after example after example. Charges. Hospitals do around this country. Uncompensated care is a tiny percentage of their total revenues. And they mark up the prices unbelievably. And I mean, really, it is unbelievable. And this $2,000 per family of uncompensated care, I don't buy the number. Where does it come from? It's what the hospitals tell us. And, and they are swimming in money, and the way that I know it is because they keep putting up new ones. So, you know, it says they are doing well, resources don't flow into a market where people are losing money.

Ted Simons: Are you comparing capital costs to operating costs there?

Byron Schlomach: Well, I'm not sure what your question there is, the fact is they fund their capital costs out of their operating billings, so.

Ted Simons: It sounds like the hospitals are a wash in money right now, and they don't need any help with uncompensated care.

John Arnold: You know, I'm not an expert in hospital finances. What we looked at was the impact on individuals and the impact on a state. And it was the state total economy, and then these individuals and, and you are weighing the hypothetical in the future, are we going to have to kick some people off, health care reform, off Medicaid if the Federal Government doesn't come through. Or are we going to actually have to kick them off, you know, ten months from now. And, and you weigh the hypothetical versus the reality, and we'll take on the hypothetical, and roll with changes in the laws as it comes down the pike, and you look at the total economy, and you know, our state's economy, and he gives examples of hospitals and you know, I think that there is a balance when, when somebody comes through the door and needs assistance and they cannot pay, and it's uncompensated care, I don't think the hospital is eating all of that uncompensated care cost. Clearly they are passing it onto the other payers. Who are the other payers. It's me and you and businesses in our economy. So, you look at California is expanding. New Mexico is expanding. Colorado expanding. Nevada is expanding, and they are effectively taking that cost and shifting it onto the Federal Government. And so, as we compete with these states around us, the companies are going to look at the health care environment and state, are they going to have to bear that cost of uncompensated care? Or is it going to be shifted off, as it has been in California and the other states?

Byron Schlomach: The Federal Government is us, and what we have are the states, basically, participating in schemes that, that spread around the cost among different Government, governmental levels and where the buck never quite stops. Somehow or another it's worth it for the Federal Government to do it because the state has put up money and it's worth it for the state to do it because the Federal Government puts up money, and we're all paying the cost. We're all going to suffer. We're all shifting the costs on to the future generations, and through the, the terrible deficit spending at the Federal level. And ultimately what it's doing enriching a particular industry, that's got nearly 20% of the gdp and they are not satisfied with that much.

Ted Simons: So last question we heard from the woman who has a college kid, which is tens of thousands of dollars, the insurance is 800 a month already.
She needs to contact some of these people that mentioned in the article to scrub those bills.

Ted Simons: And if they don't?

Byron Schlomach: Well, she save 50%.

Ted Simons: The fact is it sounds like this program addresses someone like that, the homeless people we heard.

Byron Schlomach: Right, the taxpayers paying the full rate.

Ted Simons: What do you tell them?

Byron Schlomach: I will tell them what I have told many people. That, that the, the biggest problem that we have in this country that we're in a catch 22. Health care expensive because we don't pay for it ourselves. But, of course, we don't want to pay for it ourselves because it's so expensive. And, and at some point, we have to get out of this cycle that we have gotten into, and are participating in, with the Federal Government. And that's the part that I object to so much with, with this Medicaid expansion. We're just participating in this round-robin.

Ted Simons: Last point, this is, as Byron mentioned, this is just theoretically fundamentally wrong.

Byron Schlomach: I think that the, the, the chief concern from opponents I have heard is the cost to the Federal Government and the deficit spending, and we agree with this wholeheartedly. The Feds have got to get their budget under control, and we think that we can help them to do that. Arizona's Medicaid program is the best Medicaid program in the country. Our costs are somewhere around 85, 87% of the national average, so, we're 15% less expensive than the average program in the United States. We have injected competition. And choice and, and privatization into our program that, that other states have not done. And we think that we can nationalize those issues. And save the Federal Government a whole lot more money than we can save them by, you know, closing our eyes and turning our back and walking away.

Ted Simons: We need to stop it right there. Good discussion, good to have you both here and thanks for joining us.

John Arnold: Thank you.

Byron Schlomach:Goldwater Institute; John Arnold:Budget Director, Governor Jan Brewer's Office;

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