Medicaid Expansion Suit

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A hearing was held on the merits of a lawsuit that is seeking to stop the expansion of Medicaid in Arizona, an expansion that allowed hundreds of thousands of indigent people to get health insurance. The suit went forward after courts determined that state lawmakers had the right to sue over whether funding for the expansion was legally implemented. Howard Fischer of Capitol Media Services will discuss the hearing.

TED SIMONS: Coming up next on "Arizona Horizon," we'll get a report on today's court hearing involving Medicaid expansion in Arizona. Also tonight, we'll hear about an effort to help innovators see their ideas come to life. Those stories next on "Arizona Horizon."

VIDEO: "Arizona Horizon" is made possible by contributions from the Friends of Eight, members of your Arizona PBS station. Thank you.

TED SIMONS: Good evening and welcome to "Arizona Horizon." I'm Ted Simons. A federal judge today denied a pretrial preliminary request by community and environmental groups to block construction of the South Mountain Freeway in Phoenix. The judge ruled that the freeway would not cause imminent and irreparable harm to the environment. The judge also combined the group's lawsuit with a separate suit filed by the Gila River Indian Community, which is opposed to the planned freeway's impact on sacred and cultural resources.

TED SIMONS: A hearing was held today on the merits of a lawsuit that looks to stop recently enacted Medicaid expansion in Arizona. The suit challenges the hospital assessment used to fund the expansion. Here to bring us up to date on today's hearing is Howard Fischer of Capitol Media Services. Good to see you. What was heard today?

HOWARD FISCHER: The issue is when is a tax not a tax? When is a fee not a fee? This goes back to 2013; Governor Brewer wanted expansion of Medicaid, wanted it to happen with Obamacare and needed a certain amount of state money. She couldn't get a two thirds vote, which is what you need for a tax increase so instead they crafted the thing to say we're going to give Tom Betlach the head of the Arizona healthcare cost containment system, the state's Medicaid program, the authority to levy an assessment, quote/unquote, a fee on hospitals. We're going to give them total discretion as to how much each hospital pays, we're going to allow him to go ahead and decide who gets exempt and therefore, it's a simple majority, which is, in fact, the way it passed. Well, there were enough lawmakers who could have blocked it if it were a tax and last year the state Supreme Court said they have standing to challenge the question of is it a tax or a fee?

TED SIMONS: That took quite a while to get that. The reason that this took so long is because of that standing issue.

HOWARD FISCHER: Exactly. Governor Brewer argued well the only people that have standing to sue are the hospitals. Well, the hospitals are not interested in suing because they're getting more money back from uncompensated care through this than they are in the fee. So we went to court today, Judge Gerlach in superior court asked a lot of questions and said how do I determine what's a tax and what's a fee? Is it who pays it? Is it how it's enacted? And the problem is this is an issue of first impression. We have a 1992 constitutional amendment, the one approved by voters on the two thirds vote. Nobody, to date, has taken to the Supreme Court the question of when is it a tax when is it a fee?

TED SIMONS: And we've had some 40 odd instances where agencies have set fees and/or assessments and the legislature has had no problem with it, correct?

HOWARD FISCHER: Correct, the opponents of this one say this one's different, A. because of the size, $270 million is more than we're going to let you go ahead and put a $5 fee on hunters or something like that and B. they say, even if we did it wrong in the past, do you realize the loophole you're opening here? If you allow the legislature with a simple majority to tell any agency head go out and levy a fee, department of education, levy a fee for teacher salaries. You've basically gutted the 1992 constitutional amendment, and that becomes the heart of it.

TED SIMONS: And that was the Goldwater institute's argument is that this is basically a way to get around prop 108, 1992 two thirds requirement. As far as the other side, I know that there was a mention of the Board of Regents. Here's an example. The Board of Regents doesn't have to go to the legislature to get a two thirds majority every time they want to increase tuition.

HOWARD FISCHER: Yes. And the issue there was whether it's tuition or fees by the board of regents, the state argued well wait a second, the fact is the regents had the authority pre-1992 and everyone admits if you've already had the authority to levy to fee, nothing in the 1992 measure changed that. It's a question of a new authority to go ahead and do it. Now, you get into the legal weeds that only a lawyer could love. They say what makes it a fee? It affects only 97 hospitals as opposed to 6-1/23 million people. The amount is set by the director. The director has discretion. And the hospitals benefit. And since the hospitals are paying it and they benefit, even though perhaps, you know, 370,000 Arizonans also benefit, that constitutes a fee. I'm not sure if the judge is buying that but we'll have to see.

TED SIMONS: Does it matter how much? The judge himself called this a spring training game because we know it's going to go to higher courts.

HOWARD FISCHER: That's very clear. The fact is whoever loses and the judge could decide next week, will go to the Court of Appeals. The Court of Appeals will rule, we will go to the Supreme Court and sometimes, perhaps by the end of the year, we will get a conclusion on this.

TED SIMONS: We'll get a conclusion on this. And that conclusion could very possibly mean 370 some odd thousand folks who have insurance now will be kicked off. Is the state -- are these Republican lawmakers who brought this suit, are they ready to win?

HOWARD FISCHER: I don't think they thought it quite that far. They say we'll do something because you're right; you have three possibilities if the challengers win. One you go back and try to get a two thirds vote for this. There aren't the votes for that. Number two, you try to find $270 million somewhere in the cushions of the couch. We've got a cash-carry-forward; we're trying to settle an education lawsuit. Or number three as you point out, we tell 370,000 Arizonans, you know the insurance you were getting, never mind. That's not a politically popular thing to be doing.

TED SIMONS: We were talking before the show; Governor Ducey has an interesting position in all of this.

HOWARD FISCHER: It's wonderful because if you remember, he campaigned that A., Obamacare is a bad idea and these funds are coming from Obamacare and B., we shouldn't have expanded Medicaid. All of a sudden, first week of January I'm the governor. If the challengers win, which is what he originally wanted had he not become governor, he's the one stuck with making the decision so he's now in the funny position of having his access as director defend a law he never wanted in the first place.

TED SIMONS: He never wanted in the first place but he will responsible for finding an answer to if his side, I'm all switched around here, his side which isn't really his side wins. Is there a plan B. out there?

HOWARD FISCHER: I don't think there is. I talked to Dan Scarpinato the governor's press aide yesterday and said what's the plan, what does the governor think about this position that he's in? And all I could get was the governor will obey the court ruling. Well, duh! I mean, I don't think anybody's really thought this one through.

TED SIMONS: So you're thinking by the end of next week we could get a result as far as this particular hearing, this particular court is concerned and then immediately this thing goes up the chain?

HOWARD FISCHER: Immediately. What's going to be interesting is we have to look at what the judge decides is his reasoning because he knows, Judge Gerlach knows, that the Court of Appeals will look at what basis he had for his reasoning and they will look and say well, you know, he didn't have a bad idea on why this is a fee versus a tax.

TED SIMONS: And real quickly before you go, the argument that this guts prop 108 and guts that requirement, the two thirds majority, if that doesn't hold and AHCCCS wins, do you think any other agency, any other attempt, you know what goes on down there at the legislature, is anyone else going to say let's try this with education, let's try this with transportation? Do you think that could possibly happen?

HOWARD FISCHER: I think everybody is looking at different possibilities. I'll give you one related one. John Kavanagh is sitting in the courtroom today and the judge asks one of the attorneys, could the joint legislative budget committee sweep back the funds? And, all of a sudden, I hear Kavanagh going oh, gee. Everybody's looking at this in terms of what this will allow them to do.

TED SIMONS: Very good. Good to have you here Howard, appreciate it

Howard Fischer : Capitol Media Services

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