text:
February 1, 1993
President John Greene
Speaker Mark Killian
Arizona State Legislature
Phoenix, AZ 85007
Mr. President and Mr. Speaker:
Submitted herewith is the Report of the Ad Hoc committee on the
AHCCCS Budget.
The report contains the minutes of the two meetings of the Ad Hoc
Committee which were held on January 21 and January 28, 1993, and
the materials distributed at the meetings for your review.
During the course of our meetings, the Executive Budget
recommendation and the JLBC Staff recommendation were both
presented and discussed. Public testimony on the budget
recommendations, as well as related materials was received.
Finally, alternative approaches were presented in various forms
before the Committee and discussed.
We appreciate the opportunity to serve on this Committee and will
be happy to answer any questions that you might have.
,,<, senator John Huppenthal
Co- Chair
Representative Bob Edens
Co- Chair
am/ ga
phoenix, Jlriaonn
January 15, 1993
Senator John Huppenthal
Arizona State Senate
1700 West Washington
Phoenix, AZ 85007
Representative Bob Edens
Arizona House of Representatives
1700 West Washington
Phoenix, AZ 85007
Re: Appointment to Joint Ad Hoc Committee on the AHCCCS Budget
Dear Senator Huppenthal and Representative Edens:
You are hereby appointed to Co- Chair the Joint Ad Hoc Committee on the AHCCCS
Budget. Your fellow committee members are:
Senator Carol Springer
Senator Ann Day
Senator Lela Alston
Representative Bob Burns
Representative Susan Gerard
Representative Herschella Horton
The committee is to review the JLBC Staff recommendations, the Executive Budget
recommendations and alternative budget proposals, within the budget parameters
established by the Appropriations Chairmen and reflected in the JLBC Staff
recommendations. The committee shall take public testimony at two meeting to be
held on January 21, 1993 and January 28, 1993.
The committee shall complete its work by Friday, January 29, 1993.
We appreciate your willingness to serve on this committee and to deal with these
difficult issues in a timely fashion.
C/ John Greene
President of the Senate
cc: Senator Springer
Representative Bob Burns
Senator Day
Representative Gerard
Senator Alston
Representative Horton
Speaker of the House
- .2 ; 7- y-,>
F o r t y - f i r s t Legislature - F i r s t Regular Session
Minutes o f Meeting
Thursday, January 21, 1993
House Hearing Room 3 - 5: 00 p. m.
( Tape 1, Side A)
Chairman Edens called the meeting t o order at 5: 07 p. m. and the attendance was
Members Present
Senator Day Representative R. Burns
Senator Springer Representative Gerard
Senator Huppenthal, Cochairman Representative Horton
Representative Edens, Cochairman
Members Absent
Senator A1 ston
S~ eakers Present
Peter Burns, Director, Governor's Office o f Strategic Planning and Budgeting
Ted Ferris, Director, J o i n t Legislative Budget Committee ( JLBC)
Linda Redman, Executive Administrator - Pol icy, Arizona Health Care Cost
Containment System ( AHCCCS)
Monty Headley, Fiscal Analyst, Joint Legislative Budget Committee ( JLBC)
James D. Bruner, President, County Supervisors Association and Chairman, Board
o f Supervisors, Maricopa County
Knox Kimberly, Inter- Governmental Relations, Maricopa County
Anthony Rogers, Hospital Director, Maricopa County Hospital
Richard Burnham, Attorney, S t . Mary's Hospital and Tucson Carondel e t Heal t h
Service, Tucson
Margaret Snider, Val 1 ey I n t e r f a i t h Project, Scottsdal e
Earl J. Baker, M. D., Arizona Medical Association ( ARMA)
Monsignor Edward J. Ryle, Executive Director, Arizona Catholic Conference
Laurie Campbell, Vice President, Government Relations, Arizona Hospital
Don Issacson, Legislative Counsel, St. Joseph's Hospital, Phoenix
Barbara Hopkins, Arizona Consortium o f Children With Chronic I1 lness
Guest L i s t ( Attachment 1)
1- 21- 93
Cochairman Edens announced that he hoped the following parameters will be
followed as testimony is taken:
1. Statements will concern long- term remedies to the health care situation
in Arizona. He stated that " quick- fix" suggestions are not
appropri ate.
2. Assume that all proposals will use the same budget restraints.
3. The AHCCCS capitation process to remain in effect;
Peter Burns, Director, Governor's Office of Stratesic Pl annins and Budsetinq
( OSPBl, addressed the Committee concerning the Governor's budget proposals
regarding the Arizona Health Care Cost Containment System ( AHCCCS) . He
distributed a fact- sheet entitled " Controlling AHCCCS Expenditures of State
General Fund ( Attachment 2). Mr. Burns discussed the various suggested remedies
on a time- frame basis as outlined in his handout. He noted his staff originally
was working to find a way to save $ 22 mill ion, but now that figure has risen to
$ 82 million.
Mr. Burns referred to a " famous memo" ( Attachment 3) del ivered to the Governor's
Office from AHCCCS that was widely distributed outlining the various items to be
considered during deliberations on the budget proposals.
Representative Gerard referred Mr. Burns to the fact- sheet ( see Attachment 2) and
asked for clarification of Item 11 on Page 3. Mr. Burns stated the items 1 isted
were used to generate the proposals. There was a brief discussion regarding
eligibility requirements and undocumented aliens.
Ted Ferris, Director, Joint Lesislative Budset Committee ( JLBCI, distributed a
handout entitled " Summary of Major Issues - AHCCCS" ( Attachment 4). He stated
both the Governor's and JLBC's budget projections used figures of $ 135 million
in new spendabl e revenues. However, unl i ke the Governor's budget, JLBC reserved
three percent or $ 111 mill ion because of uncertainties in the budget. This will
allow for a higher carry- forward to cover a reduction in the K- 12 rollover and
a tax cut; additionally, he said a commitment to fund K- 12 average daily
membership growth requires $ 75 million. He said the goal of JLBC is to have a
zero increase for the AHCCCS budget, but an additional $ 80 million was found to
be needed if nothing is done to change AHCCCS requirements.
He noted JLBC wanted to present a significant alternative to the Governor's
budget because el imination of the Medical ly Needy - Medically Indigent ( MN/ MI)
program may be too severe. JLBC used essentially the same parameters as OSPB.
Montv Headlev. Fiscal Analvst, Joint Leqisl ative Budqet Committee ( JLBC) ,
addressed the Committee regarding the issues involved in the deliberation of the
AHCCCS budget. Used the handout entitled " Summary of Major Issues - AHCCCS" ( see
Attachment 4).
Representative Gerard asked for clarification of the disproportionate share
allocation to go the counties. Mr. Headley stated it is a legislative policy
1- 21- 93
decision that must be made regarding the amount to money to be sent to the
counties, additionally, the counties will be able to collect additional sales tax
Senator Huppenthal asked if an analysis is available regarding the amount of
sales tax revenues that might be available if additional monies are received from
federal funds. Mr. Headley repl ied that to his knowledge a study of this issue
is not presently available.
Senator Huppenthal asked if the proposed changes to the eligibility of SOBRA
clients will make it more attractive for citizens with private insurance to
cancel their medical coverage. Mr. P. Burns stated that 61 percent of the SOBRA
population have inadequate or no medical coverage, and an assumption has been
made that 50 percent of the 39 percent of those SOBRA clients involved in the
increase of the poverty 1 eve1 may drop their insurance. He a1 so noted it is very
difficult to accurately measure the behavior of people.
There was a brief discussion regarding the possibility of State employees, with
dependents, dropping state- offered medical insurance under proposed guide1 ines.
Mr. Edens asked for clarification of the undocumented a1 ien issue.
( Tape 1, Side B)
Linda Redman, Executive Admini strator - Pol icy, Arizona Health Care Cost
Containment System ( AHCCCSL, stated the Qua1 i ty Control group at AHCCCS conducted
the study of undocumented a1 iens. She said that of 6200 people from the MN/ MI
group, 637 individuals were examined as to Title XIX eligibility. The case
workers went to each individual to verify eligibility and found that 18 percent
would qual ify for full services and 23 percent will qual ify for emergency
services only, such as undocumented aliens.
Representative Gerard asked for a definition of emergency services. Ms. Redman
read a definition of " emergency services" from federal statutes ( Attachment 5).
Representative Gerard observed that hospitals under the proposed guidelines
" hospitals will have to eat" the expenses of treating undocumented aliens. In
response to a question from Representative Gerard, Mr. P. Burns stated an
" emergency" will probably mean the time from the day admitted until the day
discharged from a hospital. Representative Gerard asked if this issue may be
settled by rule or if legislation is required. It was noted that this is a
legislative pol icy decision, and under the JLBC proposals all MN/ MI cl ients will
continue to be covered, while under the Executive proposal the MN/ MI patients
will be left without medical coverage.
Ms. Horton asked if federal regulations allow coverage for delivery of babies.
Ms. Redman repl ied in the affirmative.
Mr. P. Burns distributed a set of tables ( Attachment 6) comparing the differences
between the JLBC proposals and the Governor's proposals. He used several tables
from the JLBC proposals and added the Governor's figures in comparison.
3 1- 21- 93
There was a brief discussion of Table No. 13 on Page 49 entitled " Comparison of
the Impact on the Health Care System"; and Table 14 on Page 50 entitled
" Comparison of the Impact on Hospitals" ( see Attachment 4).
Senator Day asked for figures on the net impact to . hospitals. Mrs. Day was
referred to the bottom line of Table 14 showing a negative impact of $ 47.6
million under Executive proposals as opposed to a $ 37.9 million negative impact
under JLBC proposal s.
Mr. P. Burns referred the Committee to Table 16 entitled " Comparison of the
Impact On Counties" ( see Attachment 4). There was a brief discussion regarding
county residual responsibility.
Mr. P. Burns discussed several of the JLBC proposals in comparison to the
Executive proposals including acute care issues, the lack of adequate computer
systems, and the proposed implementation date of April 1, 1993. Mr. Burns noted
two elements were not addressed in the JLBC proposals which are " quick pay" to
hospitals and the mental health waivers.
( Tape 2, Side A)
James D. Bruner, President, County Su~ ervisors Association and Chairman, Board
of Su~ ervisors, Marico~ a County, spoke in support of the Governor's proposals.
Mr. Bruner spoke from a prepared text ( Attachment 7) which included several
charts, graphs and letters as attachments.
Representative Edens asked for more information regarding acute care and county
responsibility. Knox Kimberly, Inter- Governmental Relations, Maricopa County,
stated that the JLBC proposals are not consistent with county revenues. He said
county health care expenditures must be " put on the table" and studied thoroughly
because the counties cannot withstand JLBC proposals.
Senator Huppenthal asked for clarification of cost shifting under the Governor's
proposal s. Anthony Rogers, Hospital Director, Maricopa County Hospital , stated
there will significant cost shifting and an analysis of this problem has not been
Senator Huppent ha1 suggested that efforts be made to minimize 1 egal expenditures .
Mr. Kimberly said that the County has been named as a defendant in several suits
brought by private hospitals.
Richard Burnham, Attorney, re~ resentin q St. Mary's Hos~ tia l and the Carondel et
Health Service, Tucson, spoke in opposition to the Governor's proposal . He said
the JLBC proposal may be " OKn, but doing nothing is better. He said the
proposals will amount to " a tax on hospitals". He noted adult males will be
disenfranchised under the Governor's proposals. He suggested that the counties
retain the residual provisions and are doing a good job in eligibility
procedures. Mr. Burnham took strong exception to the figures regarding costs to
be shifted to private hospitals. Mrs. Gerard observed that JLBC proposals
protect hospitals and referred the Committee to Table 14, Page 50 of the JLBC
handout ( see Attachment 4. )
1- 21- 93
Marqaret Snider, Vallev Interfaith Pro. iect, spoke from a prepared text
( Attachment 8). She spoke in support of those people that may be disenfranchised
if the MN/ MI population is eliminated from AHCCCS coverage.
Earl Baker, M. D., re~ resentinq the Arizona Medical Association ( ARMA) , spoke in
opposition to the elimination of MN/ MI patients from AHCCCS coverage. He said
he is the Director of a free medical and dentaq clinic in South Phoenix where
125,000 people are in need of medical help, he noted this number rises to 340,000
in Maricopa County and 600,000 in the State. He stated strongly that adding
35,000 additional people to this number is very wrong. He said his clinic had
logged in 700 requests for dental care in two days. He urged that a way must be
found to provide basic health care to the indigent population.
( Tape 2, Side B)
Monsiqnor Edward J. Rvle, Executive Director, Arizona Cathol ic Conference, stated
he has worked with the AHCCCS program for several years, and has found it to be
a bi - partisan program which has provided needed medical benefits to many citizens
of the State. He noted AHCCCS is held up as a model for many other states across
the nation. He spoke in support of health care for the MN/ MI population and
noted that undocumented aliens are in residence in the State and have rights to
basic health care. He suggested that all parameters for establishing health care
rules be revisited.
Laurie Cam~ bell, Vice President, Government Re1 ations, Arizona Hos~ tia l
Association, spoke in opposition to' the Governor's proposal s. She noted the
present MN/ MI rules provide a safety net for the working poor. She said that
premiums for health insurance will probably be increased significantly under the
Governor's proposals. She expressed strong support for the JLBC proposal.
Don Issacson, Leqi slative Counsel, St. Jose~ h's Hos~ ital, Phoenix, spoke in
support of the JLBC proposals, and noted that one- third of services provided at
St. Joseph' s are funded through AHCCCS. He suggested that the $ 48 mill ion tax
cut proposed by the Governor be used to fund needed health care. He stated the
use of federal funds may not always provide the desired effect, and private
hospitals are will ing to study additional means of cost cutting. He agreed with
the suggestions found on Page 13 of Mr. Bruner's testimony ( see Attachment 5).
He urged the third- party liability issue be studied.
Barbara Ho~ kins, Arizona Consortium of Children With Chronic Illness, spoke in
support of retaining coverage of the MN/ MI population. She described her son' s
illness and the problems involved in providing him with medication. She strongly
urged the Committee to carefully consider the MN/ MI popul ation before el iminating
them from AHCCCS coverage. She noted that every citizen is at risk of becoming
a member of the MN/ MI group because of the state of the economy. In response to
a comment from Representative Edens asking for suggestions, Mrs. Hopkins said the
Committee should address the issues of the avail abil i ty of basic insurance and
the problems of pre- existing conditions, sliding scales for the payment of
services, more accountability from AHCCCS, and tort reform.
1- 21- 93
Representative Edens announced that the next meeting of the Committee w i l l be
held Thursday, January 28, 1993 convening at 5: 00 p. m.
Without objection, the meeting adjourned at 8: 10 p. m.
lLCCu& U1 L- 9
Barbara Williams, Secretary
( Attachments on f i l e i n the Office of the Chief Clerk and with the Committee
Secretary. Tapes on f i l e i n the Office of the Chief Clerk).
1- 21- 93
MEETING A~ CC5C Ah c ~ o * m ; h DATE 1- 31' 97
1) The List - June, 1992
Emergency Services/ Deliveries Partially Enacted
Co- Locate DES/ County Rejected
Co- Pay MNMI Rejected
EAC Conversion Administration Pursued
Recoup Maricopa Hospital Reimbursement Rejected
Increase Quick- Pay Discount Rejected
2) Other Early Issues: May - July, 1992
Shifting Cost to Categorical
Eliminate Quick- Pay Discount to Categorical and Increase Quick- Pays to State-
Pursue Higher DSH Payments
Provider Taxes
Examine LTC Rates
Eligibility Consolidation
Uniform Purchasing of Health Care
48- Hour Retroactive Repeal/ Increased County Contributions
Limit MNMI to Six Months in One Year
Teaching Subsidy to University of Arizona Medical School
Limited by P& O Dollars Available to AHCCCS and Federal Funds Effoa at OSPB
3) August 3, 1992
Rough OSPB Estimate of AHCCCS Increase at $ 65.6 Million
4) August 4, 1992: " Options for the Governor" From AHCCCS
Discontinue Medicaid
EliminateModify MNMI/ Children's Programs
Retroactive 48- Hour
Asset Test 50,000 -. 30,000
Eligibility Six Month -. Three Month
Stricter State Residency Requirements
Family Membership
Senrice Package
Co- Payments
Eliminate Spend Down
Mandatory Eligibility Application for Title XIX
Reduce Eligibility Standards
or Eliminate Optional Groups ( 1 40- 13 3) Resource Standards
Eliminate Optional S e ~ c eUs n der XIX
Eliminate Waiving Parental Income for Children In ALTCS
Limit Amount or Level of Service ( Hospitals)
Reduce ALTCS Income Level, 300 -. 100 SSI
Provider Tax
Controlling XHCCCS Expenditures
Of State General Fund
January 21, 1993
Page 2
5) August 19, 1992: FOIA Request - Arizona Hospital Association
6) September 29, 1992: Revisit Federal Medically Needy Program
7) October AHCCCS Analysis ( See OSPB Memo Dated November 2, 1992)
Turn MNMI Back to Counties, With Limited State Funding
Eliminate County Residual, With Minimum Service Package
8) November 2, 1992: OSPB Pool Funding
Discount MNMI Reimbursements ( Quarterly, Semi- Annual, Annually)
Eliminate Quick- Pay on Categorical
November 10, 1992: Lewin - Eliminate Hospital Payments ( trend in other states),
Increase Match $ 10.0 Million
November 13, 1992: AHCCCS Analysis of Budget Reduction Proposal -. Block Grant
9) Guiding Principles: November 24, 1992
Zero Growth in AHCCCS General Fund Appropriation
Minimize Impact on External Entities ( Providers, Counties, People),
Recognizing Everyone Will Get Hurt
Minimize Administrative Changes Necessary
Preserve Managed Care for Title XIX
Minimize Implementation Lead Time
Convert As Many State- Only Eligible Persons to Title XTX
Block Grant Run by AHCCCSICounty or Maricopa and Pima Counties
and Bid or Continue Rural
Limit Population, Pregnant Women & Kids, Non- Medicare, and > $ 20,000 Hospital
Controlling AHCCCS Expendibres
Of State General Fund
January 21, 1993
Page 3
10) December 4, 1992:
Focus on Undocumented
Medicare Groups
SOBRA Back to 133 %
FY 1993 Proposal
Looking at Hospital Impacts Along With Occupancy Factors
11) December 9, 1992:
Formulation of Executive Proposal
14- 18 Years to 100% FPL
< 6 Years Increase From 133 to 140% FPL, 6- 13 Years Increase From 100
to 140% FPL, 14- 18 Years to 140% FPL
Same as Above at 185% FPL
SOBRA Women to 185 % FPL
Quick- Pay
Emergency Services for Undocumented
Shift MNMI to Categorical
MNMI Eligibility Tail
MNMI Tail
Mental Health
Offset to CRS
County Savings
TO: Charline Franz
Special Assistant to the Governor
FROM: Leonard Kirschner, M. D., M. P. H., Director /,,
DATE: August 4, 1992
As requested by the Governor's Office, AHCCCS developed a series of option papers that
range from the elimination of Medicaid in Arizona to other modifications designed to save
State funds in the current .4HCCCS program. We have prepared the following summary
that follows as well as more detailed analyses on the options. When readily available, a very
preliminary and rough estimate of the fiscal impact has been provided. If you want more
detail on any of the options, please advise me and we will do further research on your
The leg4 implications of the options have not been discwed. In most cases, le_@. slation or
a rule change would be required to implement the changes. In addition, many of the
changes will require amendments to the State Plan and- approval by the ~ e a l t hC are
Financing Administration.
One issue to keep in mind in that any change in senices or eligibility groups uill require
amendments to the health plan contracts and capitation rates. Major restructuring may
impact the economic viability of some of our plans 2nd will nee6 to be czrefully weighed
in ; he discussion of options.
DISCONTIhVE PARTICIPATION IN THE MEDICAID PROGRAM ( Page 1)
In FY 92- 93, this option would eliminate the need for $ 589 million in State and county
marching iunds for 364,000 Title XIX eligiiile people. However, the Srare would lose more
than $ 875 million in Title XIX federal funds for health care. Without the federal funding,
Page 2
the State could not deliver the same level of s e ~ c e s ' t oth e same population without
additional State funding.
ELIMINATE OR MODIFY THE STATE- mTh?> ED MEDICALLY h'EEDY/ MEDICALLY
Under this option there are a number of approaches:
1) Discontinue the State- funded Medically NeedylMedically Indigent( MN/ MI)/ Eligible
Assistance Children ( EAC) and Eligible Low Income Children's ( ELIC) programs.
This option would eliminate the need for $ 174 million in State and county funds for
over 70,000 MN/ MI/ EAC/ ELIC persons. There is no federal funding for this
2) After all possible conversions to the new AFDC- Medical Assistance Only ( MAO)
category, eliminate the ELIC and/ or the EAC Program. This would discontinue
State- funded health care to approximately 15,000 children who are 13 years of age
or younger and do not quallfy for a federal category.
3) Discontinue the two day retroactive payment to counties for MN/ MI/ ELIC eligibles.
4) Lower the asset test from $ 50,000 to a lower amount. It was $ 30,000 in 1986.
5) Reduce the six month eligibility period to a three month period.
6) Impose stricter standards for State residency before a person could qualify as
7) Eliminate family household eligibility for MN/ MI.
8) Reduce the service package for MN/ MI/ EAC/ ELIC members. One example is the
EPSDT program that. with the exception of some trans~ lantsm. ental health services.
and long term care, parallels the federal Medicaid EPSDT program.
9) Impose higher copayments for MN/ MI/ EAC/ ELIC members.
10) Eliminate spend down as an option for m/ MI/ ELIC status.
Page 3
The State could require potentially eligible persons to be determined eligible or ineligible
for Medicaid at consolidated eligibility sites before the persons could qualify for a State-funded
program. This will maximize federal funds, reduce administrative costs and
streamhe the eligibility process.
Reduce the current income eligibility for SOBRA prepant women and infants up to age
one from the current 140 percent of federal poverty level ( FPL) to the minimum allowable:
133 percent of FPL.
Eliminate optional eligibility coverage such as MAO. This will include the new eligibility
group that AHCCCS will use to convert most of the 100 percent State- funded food stamp
children up to age 13 into a federal progam.
Increase resource requirements for SOBRA pregnant women and children. Currently, the
resource requirement for these two eligibility categories is zero. Resource requirements
could be increased and fewer pregnant women and children would quailfV for the program.
The State could elect to eliminate optional Medicaid services. By federal law, optional
services do not include services determined as medically necessary by an EPSDT screen for
children under the age of 21. The optional services for adults that Arizona covers that could
be eliminated are:
Respiratory Care
Nurse- Midwife
Private duty nursing
Physical, occupational, speech, hearing and language disorder therapies
Prosthetic devices
Senices in an Institution for Mental Disease for persons 65 years and older
Emergency Hospital Senices
Adult transplants ( kidney, cornea, heart, bone, bone marrow)
Medical Supplies and Equipment
" Transportation
" Case management ( Page 14)
" Home and Community Based Services ( Page 16)
" Prescription drugs ( Page 18)
" Mental health services: clinic/ rehabilitative services; other practitioner
senices such as certified nurse anesthetists and non- physician mental health
practitioners; services in an Institution for Mental Disease for persons 65
years and older ( Page 20)
" Services in an Intermediate Care Facility for Mental Retardation ( Page 22)
This will reduce the number of children with physical disabilities or developmental
disabilities who quahfy for ALTCS based on their own income and not based on a
consideration of the parental income in the household.
The State could place limitations on various services, such as the number of inpatient
hospital days, the number of outpatient visits, the amount that will be paid for physician
visits or a limitation on the number of prescriptions that a member can receive.
Arizona currently covers individuals in ALTCS with income up to 300 percent of SSI, or
$ 1266 per month income. Arizona could elect to set the income eligibility level anywhere
from 100 percent of SSI to the 300 percent level. If income levels for ALTCS are reduced,
fewer people will quahfy for Title XIX long term care services.
Although technically not a modification oi the existing AHCCCS program, a provider tax
is one mechanism the State can pursue to infuse new federal funds into AHCCCS.
DISCOhTIh'UE PARTICIPATION IN THE LMEDICAID PROGRAM
Discontinue participation in the Medicaid program after notification to the Health Care
Financing Administration ( HCFA) and determine the scope of an indigent health care
program that the State is willing to fund.
In FY 92- 93, Arizona could " save" up to $ 589 million in State and county funds currently
allocated as Title XIX matching funds for the AHCCCS program. Conversely, Arizona will
lose over $ 875 million in federal funding, which pays 65 cents on every dollar that Arizona
spends for health care for Medicaid eligible persons.
In the Title XIX and state- funded programs over 440,000 people receive acute care and long
term care services. Of these, 348,000 are Title XIX eligible for acute care senices and
16,000 elderly/ physically disabled/ developmentally disabled persons receive long term care
services under ALTCS. In the 100 percent State- funded Medically Needy/ Medically
Indigent ( MN/ MI), Eligible Assistance Children ( EAC) and Eligible Low Income Children
( ELIC) program, 76,000 persons receive acute care services. Approximately 15,000 of the
EAC children should convert to a new federal eligibility option if HCFA approves Arizona's
State Plan amendment to add this AFDC optional category.
Depending on the outcome of decisions for State funding of indigent health care coverage,
several scenarios are possible. Two options are:
1) With the $ 589 million in State and county funds that currently fund AHCCCS, the
State, each of the 15 counties or a partnership of the State/ counties could fund a
limited indigent health care program for some of the individuals who currently
receive acute care, mental health senices and long term care. Without the federal
funds, fewer individuals than currently receive services under AHCCCS would be
served in a State- funded program with the available State dollars.
2) The State could decide not to fund any indigent health care or long term care
services. This option would result in a sigmficant cost shift to public and private
hospitals as these facilities would become the only source of indigent health care for
persons in fie- threatening medical emergencies.
0 Arizona could tailor an indigent health care program free of federal mandates, such
as the Boren Amendment and Medicaid mandated eligibility requirements.
0 Depending on the scope of a new program, there may be some savings in overall
State funds for the cost of Iimited health care and the administrative requirements.
for AHCCCS.
0 Without the constraints of Medicaid law, Arizona could impose higher co- payments
on persons who receive health care at State and county expense, thereby absorbing
some of the general fund expense. However, this decision will be offset by the fact
that there is a limit on how high a co- payment can be before it becomes a barrier
to routine, preventive care and results in costly urgent care.
0 With the loss of federal funds, Arizona could not provide comparable health care
coverage, mental health services, nursing facility or home and community- based care
for the same amount of State funding.
0 If the existing program is eliminated or seriously curtailed, pregnant women and
children will be vulnerable. If prenatal care is not readily available, it is likely that
the costs for delivery will increase as will premature babies and neonatal
complications. Arizona currently ranks 40th in the nation in the provision of health
care to children; scaling- back the AHCCCS program will further exacerbate health
care problems for children.
0 Wess the Sate or counties absorb the costs of nursing facilities o: home md
community based services ( HCBS) currently paid for under ALTCS, elderly and
physically disabled persons who do not have the resources to pay for their care in
a nursing facility rnay be forced to move to cheaper settings where appropriate care
is not provided. Medicd conditions may worsen and hospitalization rnay be
necessary. Persons in HCBS may be forced to move into institutional settings if the
community- based supports are unavailable.
0 For adult mental health services, Arizona is under the mandate of the Arnold v.
- Sam l awsuit. Opting out of Medicaid will not obviate the terms of the lawsuit;
rather. it will reduce available federal funds to pay for mental health services to
persons who are covered by the terms of the settlement agreement.
0 Unless the State absorbs the cost of czre for persons with developmental disabilities
currently funded by AHCCCS, many of these individuals will go without care or
request placenem iz zz Intermediare Care Facilrty for the Mentally Retarded
( ICFIMR), such u Coolidge. Cumentiy, 97 percent of this population is senred in
the communiry at a cheaper cost than an institutional setting. In 1988, county
funding for this population was eliminated as part of the new long term care
progam. Prior to ALTCS, DES paid for care with 100 percent State funds, had a
waiting list of over 10,000 people and significantly more peopie placed in ICFs/ MR
in the State.
O If health care funding is severely limited, serious repercussions will be felt by the
health plans that contract with AHCCCS, Maricopa, Pima and Pinal counties as
program contractors, DES, ADHS, AHCCCS, the provider community and their
respective employees. This may result in health plans going out- of- business, forced
private sector lay- offs and restructuring of State and county agencies, with possible
reductions in force unless public employees can be reassigned to other areas.
0 Many rural and urban hospitals are dependent on the revenues from AHCCCS to
maintain economic viability and offset uncompensated care costs. If the AHCCCS
program is sigruficantly changed, many community hospitals may be vulnerable to
this shift in their revenue stream..
If a decision is made to opt out of the Medicaid program, legislative authorization will be
required. Significant opposition will surface from people who believe that some form of
indigent health care is a necessary public responsibility, especially when 65 percent of the
funding comes from the federal government. Groups that will oppose this legislation
include: the counties; hospitals; the tribes; the health plans; advocacy groups for all special
interest groups whose constituency benefits from AHCCCS; many State legislators; and,
probably sone members of the Congressiond delegation who have lobbied for - 4HCCCS
before Congress.
The significant opposition and the loss of $ 875 million in federal funds will make it difficult
to pass authorizing legislation. Cost shifting to either the counties or public/ private
hospitals will fuel the opposition to any proposal to opt out of Medicaid unless a
comparable health care delivery system is implemented with State funds and other entities
are held hvmless from increved expenditures.
ELIXIISATE OR MODIFY THE STATLFUhBED AMEDICALLY XEEDY/ hlEDICALLY
I~ WIGEhT'/ CHILDREN'S PROGRA'LIS
The State could eliminate the Medically ~ eed~/~ edicalIlnyd igent ( hLY/ MI), Eligible
Assistance Children ( EAC) and Eligible low income Children ( ELIC) programs or modlfy
these programs by changing the level of services, eligibility requirements, copayment
requirements or the two day retroactive period for the counties.
The following is a menu of options that can be considered. Since the principal benefit to
the State will be some reduction in State funding, only the cons specific to each option are
discussed below.
Two options are possible:
1) Discontinue the State- funded MN/ MI/ EAC/ ELIC programs. This option would
save approximately $ 180 million in State and county funding for over 70,000
MN/ MI/ EAC/ ELIC persons. It is assumed that the $ 63 million county contribution
would be returned to the respective counties and the counties would be required to
provide some level of indigent health care; and/ or,
2) Eliminate the ELIC and/ or the EAC Program. After full conversion of
approximately 15,000 EAC children to the new federally- funded AFDC- MA0
category ( if approved by HCFA), this would discontinue State- funded health care
to a projected 15,000 children who are 13 years of age or younger.
In both cases, county residual for'acute care services will increase. Even if the current
counry coctributior! is returned to the, countiesr it will be bufficient to cover the costs for
a county- operated health care program and new county funds will be needed.
Uncompensated care in public and private hospitals will increase.
Discontinue the two day retroactive payment to counties for MN/ iLII/ ELIC eligibles.
Although this will save the State approximately $ 14 to 15 million, it will result in a major
cost shift of millions of dollars back to the counties or hospitals in the form of
uncompensated care.
Each of these eligibility- reiated options will mean that either one or all of the follouing will
1) unless the county provides health care under the county residual program, fewer
people who now qualify for the MN/ MI/ EAC/ ELIC program will receive health
2) the counties could absorb the cost of care which will adversely impact county
budgets; or,
3) uncompensated health care costs will increase for public and private hospitals. The
adverse effects of implementing any of these options is discussed in the sections
The following are several eligibility options:
0 By amending AHCCCS rules, reduce the six month . eligibility period for
MN/ MI/ ELIC members to a three month period. This will reduce the number of
persons eligible for the program, make the eligibility process for members more
cmbersome and increase admir- strative costs for eligibility. Health plzn ca~ itatior?
rates may increase since the risk is not spread over a six month period and the cost
to the plans may increase as members cycle in and out of the plans.
0 Conform State residency to a federal citizenship standard before a person could
quallfv as MN/ MI/ ELIC. This option uill directly impact individuals who are not
citizens of the United States and will increase uncompensated care for public and
private hospitals. It uiLl be opposed . iigorously by many intzrest groups and may he
subject to legal challenge.
O By amending AHCCCS rules, eliminate family household eligibili~ fo r the MN/ MI
program. This will reduce the number of persons who qualify for the State- funded
programs. However, some of the children in these households may still qualify for
the State- funded EAC or ELIC programs. This may not be a cost- effective option
since the remaktder of ; he household is gece: d] t. healthy and this allows - HCCCS
to neg- otiate lower capiration rates with the heaitn plans.
Eliminate the ability of an individual to spend down medical bills for MN and ELIC
status. This will si@ cantly impact the number of persons who qualify for the MN
and ELIC progams and will result in more uncompensated care in public and
private hospitals.
Lower the asset test for eligibility for MN/ MI/ ELIC applicants from $ 50,000 to a
lower amount ( it was S30,000 in 1986). Fewer people will qualrfy for the program.
Reduce the service package for MN/ MI/ EAC/ ELIC members. One example is the EPSDT
program that, with the exception of some transplants, long term care and mental health
services, parallels the federal Medicaid EPSDT program. In 1987, Congress required all
States to provide all medically necessary services to Medicaid children under the age of 21.
Arizona provides this same level of care to children in the State- funded
MN/ MI/ EAC/ ELIC programs.
By amending AHCCCS rule, impose higher copayments on services for MN/ MI/ EAC/ ELIC
members. Currently, a copayment is imposed in the following instances: ( 1) $ 1.00 for a
doctor office visit, home visit and all diagnostic and rehabilitative x- ray and laboratory
services; ( 2) $ 5.00 for non- emergency surgery or non- emergency use of the emergency room.
Excluded from the copayment requirements are: prenatal care, EPSDT/ well- baby services
and prescription di~ gs. Clc? xer, tlq', members cannot be denied services because of their
inability to pay. However, if the copayments are too high, this will be a barrier to
preventive care and may lead to more costly emergency care. One problem with
copayments is that many physicians do not want the administrative problems associated with
the collection of copayments and do not collect them. If copayments are increased and the
administrative costs for collection of the copapents are minimal, there will be additional
dollars generated for the State.
Except as noted above, statutory changes will be required for these options. Eliminating or
modlfylng the MN/ MI/ EAC/ ELIC programs will raise a significant level of opposition from
hospitals, counties, advocacy groups and those legislators who support an indigent health
care program and realize that the counties do not have the resources to hlly hnd a
comprehensive program. Any changes to the resideiiq requirements ~ i!! be controversid
and will be opposed by some legisiarors and nay result in a legai challenge.
hL&?) ATORI' APPLICATIOSS AT COXSOLIDXTED ELIGIBILITI' SITES
Arizona could maximize federal funding by requiring all persons who are potentially eligible
for Medicaid programs to apply at consolidated eligibiliq sites and be determined eligible
or ineligible for Medicaid before receiving services in the State- funded MN/ MI/ ELIC
This will further expand the mandatory application requirement made in the 1992 legislative
session that all EAC and hospitalized individuals must apply for federal Medicaid programs
before being determined eligible for State programs. A recent study done by AHCCCS
indicated that 41 percent of the current state- funded population would quahfy for a federal
Medicaid program, either for all Title XIX s e ~ c eosr emergency services only. Currently,
there is no incentive for a person who bas been determined eligible for a State- funded
program to apply for a Medicaid program. Secondly, counties want to avoid county
exposure for health care costs; therefore, the financial incentives for the counties are to
make a person eligible for a State- funded program as quickly as possible. Two major issues
must be addressed to successfully implement this option:
1) a streamlined eligibility process consolidated at DES should be implemented to
maximize efficiency and timeliness while allowing one entity to screen for all public
benefits. This will greatly increase the opportunity to enroll individuals in Medicaid;
2) the issue of county residual and uncompensated care for hospitals in the interim
prior to an eligibility determination must be considered. A task force has been
established to make recommendations on a comprehensive eligibility system with a
plan due March 31, 1993 with a financial and statutory considerations report due
January 1, 1994. However, the State could implement this option sooner and draw
down increased federal funds.
0 The State will maximize federal funds by requiring individuals to apply for Medicaid
programs, if appropriate.
0 A. sseamked. consolidzted eligibility system will reduce admi~ s~ rativceos ts anand
make it easier for persons to apply for the federal or State programs.
0 A State agency performing the eligibility process will be more accountable for errors
since financial sanctions hill be imposed if timeliness requirements are not met.
0 Any attempt to consolidate eligibility at the State level will be opposed by the
counties unless the issue of county residual is resolved. Some hospirals will oppose
a State eligibility process because they fear delays in eligibility determinations and
the resulting uncompensated care.
0 In order for DES to implement a responsive and timely consolidated eligibility
process. additional resources must be allocated to the agency.
0 If the counties no longer perform eligibility functions for AHCCCS, some county
employees may be displaced. It is possible that county eligibility workers could be
offered the opportunity to transfer to newly created DES eligibility positions.
This has been a controversial option for several years, vigorously opposed by Maricopa
County, in particular, other counties and some hospitals. Reasons vary from dismantling
eligibility infrastructures to county residual and uncompensated care. This may be a difficult
measure to pass at the legislature but one that will maximize federal funding, streamline a
complicated system for the individuals who apply and greatly save administrative dollars.
REDUCE ELIGIBILITY STfiDAXDS OR ELI> IISXTE OPTIONAL GROLTS
Arizona could elect to decrease the income eligibility standards for pregnant women and
infants up to age one, impose a resource test for prepant women, infants and AFDC-Medical
Assistance Only ( MAO) children up to age 13 or discontinue optional eligibihty
coverage for MA0 groups.
The following are three options:
PREGNAhT WOMEN AND INFANTS
0 States are required to establish a minimum income eligibility standard for pregnant.
women and infants up to age one at 133 percent of federal poverty level ( FPL) with
an option to set a maximum of up to 185 percent of FPL. Arizona has chosen a 140
percent of FPL and could reduce it to 133 percent. This would result in the loss of
federal funding for some of the women and children in the 134- 140 percent income
range. This may not be a cost effective approach since many of these women or
children m e n $ may be MN/ MI eligible or will be once the prenatal care or
hospitalization costs spend them down to the State- only levels. Secondly, early
prenatal care has proven to be cost effective and limiting access to care may result
in more expensive deliveries and neonatal care.
0 Arizona does not have a resource test for the SOBRA pregnant women and children
( now at age 9) or the newly created AFDC- MA0 program that will convert State-funded
EAC children up to age 13 to a new federal category. By federal law, the
maximum allowable resource test that could be used is $ 1000 for a pregnant womvl
($ 2000 couple) or $ 1000 for a child. Imposing a resource test will mean that some
prepant women and children will not qualify for a Title XIX program. However,
depending on medical costs, some of these individuals will qualify for the
MN/ MI/ EAC/ ELIC program at 100 percent State costs.
The decision not to impose a resource test was based on the administrative costs
that would have been incurred to use a resource test for all pregnant women and
children versus the limited number of persons that will not qualify due to excess
resources. Sec~ nal: i~ m~ p. o sing 2 resonrce tes: ujll slow down the expedited e1igibMr)
process for pregnant women before ; hey can qualify for prenaral care.
O Arizona has some optional eligibility groups, primarily MA0 children groups.
Eliminating this coverage could save State matching funds. However, hnless 100
percent State- funded groups, such as EAC and ELIC are also eliminated, many of
the federally funded children will convert to the State- only programs at significantly
more State cost.
Discontinuing health care coverage for either pregnant women or children will generate
sig- n& cant opposition from advocates, health care professionals and some legislators who
have supported health care coverage for this vulnerable population. Unless the State- only
programs are significantly cut- back, many of these individuals will quallfy for these programs
at higher State cost. Public and private hospitals will oppose any measure that increases
uncompensated care to their facilities.
ELIMINATE OPTIONAL SERVICES USDER hlEDICAID
A State may choose to select any one of 30 optional Medicaid services. Arizona has added
18 optional services to the proBam and, with notice to HCFPL, may eliminate any or all of
The following optional senices are discussed separately in the issue papers that follow: case
management, home and community- based services, prescription drugs, optional mental
health services and services in an ICF/ MR. The remaining optional services are discussed
The remaining optional services covered by AHCCCS are: adult transplants, private duty
nursing, therapies, prosthetic devices, respiratory care, hospice, nurse- midwife, dentures,
emergency hospital services, medical supplies/ equipment and transportation. Many of these
optional services were added to the program because it was a cost effective means for the
health plans to manage a continuum of care in a coordinated care system. Others, such as
adult transplants and dentures were added in response to quality of life issues and legislative
Even if Arizona elects to eliminate optional services, EPSDT persons under the age of 21
must receive all mandatory or optional Medicaid service that are medically necessary.
Therefore, all 30 of the optional services . will be available to EPSDT persons no matter what
action a State takes to streamline the Medicaid program.
The other variable that should be considered before a decision is made on the cost-effectiveness
of eliminating optional services is the health plan bidding process. Risk is
suread across all populations and the more cost- effective alternatives to institutional care
lowers the capitation rates accordingly. Eliminating alternatives to institutional care, such
as hospice, therapies and private duty nursing services, may increase the costs to the plans
and increase bids accordingly.
0 The State may be able to save costs on some oi the optional senices to the adulr
Medicaid population.
0 Eliminating services that are alternatives to institutional care may keep a person in
a hospital setting if there are no other options in the community.
0 Health plan costs may actually increase depending on which optional service is
0 Managed care will be difficult without a full continuum of senices.
Legislation may be required to change some of these options. In other cases, a rule change
may be sufficient but subject to legal challenge if the legislature does give specific authority
to the Director of AHCCCS to cut senices. Any attempt to eliminate senices will lead to
opposition from some forum. It is expected that advocates, professional groups that deliver
or represent the various senices, health plans and some legislators will oppose changes to
the program.
ELI3IINATE OPTIOX- ilL CASE 3Li. KAGE3IEhT SERVICES
Optional case management services could be eliminated.
AHCCCS has 130 case managers funded by federal and State funds to provide case
management services to the elderly and physically disabled; DES/ DDD has 160 case
managers who provide case management to persons with developmental disabilities. Seven
tribes provide case management to Title XIX long term care tribal members. Case
management is also provided by the Regional Behavioral Health Authorities ( RBHA's) to
Title XIX eligible persons with mental health and substance abuse problems.
Case management services in the AHCCCS. program were initiated as part of the long term
care waiver. They were requested by the State to help defray the 100 percent State cost for
existing case managers in DESIDDD and to contain costs in ALTCS with a gatekeeper
determining the most appropriate and cost effective services for members in ALTCS. Due
to the federal requirement to provide all medically necessary services to all EPSDT children,
case management services were extended to children in the mental health program.
Although an optional service, 43 States have elected to provide case management services
in an effort to control costs and coordinate care. Eliminating this service for AHCCCS
members will require HCFA approval and assurances that long term care and mental health
costs will not increase. However, many of the functions that case managers perform, such
as cost- effectiveness analyses of home and colr~ nmiq- basedse rvices versus institutional care
and oversight of the appropriateness of the placements, will still be necessary and require
employees to perform those functions.
0 The State may save some zdministra~ ive funds for employees who provide case
management services.
0 Unless the affected entities redeploy personnel into other positions, this option will
require two agencies, seven tribes, and the RBHA's to lay off employees.
0 Proeram costs may increzse without the case manager acting as a gatekeeper to
detirmine appropriate and cost effective services.
O The federal match for a targeted case management system ranges from 65 to 75
percent, depending on the qualifications of the personnel, making case management
a cost effective service. Eliminating this option will still require State personnel to
perform many of the activities; however, the available federal match will be 50
percent and not the enhanced amount that is available for case management.
Eliminating this service will meet significant opposition from advocates who view case
management as a necessary service for individuals who need assistance to coordinate the
services necessary for quality care.
ELIblINATE OPTIONAL HOhIE XYD COAl3lZTSITY- BASED SERVICES
Arizona could elect to eliminate the optional home and community- based services ( HCBS)
currently provided under ALTCS.
States have an option to operate a HCBS program if HCFA approves a waiver request.
One of the key variables that must be demonstrated before HCFA will approve a waiver is
whether the HCBS program will be cost effective when compared with care provided in an
institution. When Arizona added long term care to AHCCCS, a joint decision was made
by the legislature, Governor's Office, counties and various advocacy groups to push the
federal government for a comprehensive HCBS program in Arizona. Two major factors
drove this decision: the cost effectiveness of such a approach and quality of lZe
considerations for persons who can remain in the community rather than an institution.
Therefore, a request was submitted to HCFA and, after strenuous negotiations, HCFA
approved an HCBS program with a cap of 5 percent on the program for 1988- 89.
Subsequently, AHCCCS convinced HCFA to raise that cap to 25 percent and then 30
percent of the total long term care population on October 1, 1992. As further validation of
the cost- effectiveness of HCBS, Project SUM has recommended that these senices should
be expanded beyond the present 30 percent cap.
AHCCCS currently provides HCBS to over 2,300 of the 10,500 ALTCS elderly/ physically
disabled persons. The HCBS program for persons with developmental disabilities
administered by DES/ DDD does not have any cap on their HCBS program, seqing over
4100 ( 97 percent) members in the community.
Prior to the initiation of ALTCS, the counties were responsible for long term care services,
including HCBS, for the elderly and physically disabled population and contributed over $ 2
million for the care of persons with developmental disabilities. DES/ DDD had the primaq
responsibility for persons with developmental disabilities. If the HCBS program is
eliminated, it is assumed that the HCBS portion of the $ 93 million county contribution
would be returned to the counties and each county would be responsible for senices to the
elderly and physically disabled population. DES/ DDD would assume the responsibility for
HCBS senices to persons with developmental disabilities but without federal Title XIX
For persons with behavioral problems, ADHS has the statutory responsibility for the
community care. The Arnold v. Sam lawsuit further obligates ADHS to provide mental
health sen- ices to adults. Be- ginning Februa~ 1 . 1993. the St2te uill ? ro\ iae inentz! health
services to persons 65 years and older wno qualify for ALTCS. If the State eliminates
HCBS, ADHS will need additional resources to provide the required mental heaith senices
to elderly persons who lose eligibility for ALTCS.
0 The State could cut back HCBS to persons with developmental disabilities and save
State funds.
0 The counties could not provide the same level of services to the elderly and
physically disabled with the current county contribution absent the federal Title XIX
funding. Therefore, either the counties would need to find new dollars or vulnerable
populations will lose HCBS.
0 If the only alternative for some or all of the current ALTCS members is institutional
care in a nursing facility, ICF/ MR or an Institution for Mental Disease, admissions
to these facilities will increase and costs will go up dramatically when compared with
the costs for HCBS.
0 Both ADHS and DES/ DDD will not be able to provide the same level of HCBS
without additional State funds.
0 Any reduction in HCBS will be contrary to the Project SLIM recommendation to
expand these services.
A legislative change is necessary to eliminate HCBS from statute. Strong and vocal
opposition % ill surface from the counties, advocates and . A. LTCS members. Many members
of the legislature will oppose any diminution of services to vulnerable populations.
ELIttlIKATE OR RESTRIn THE USE OF PRESCRIPTIOS DRUGS
AHCCCS could discontinue or restrict the use of prescription drugs.
Although coverage of prescription drugs is an optional Medicaid covered service, all 50
states have elected this option. Arizona could elect to eliminate prescription drugs and save
State matching funds and 100 percent State funds for the MN/ MI/ E~ C/ ELIC program.
New Mexico has restricted prescriptions to no more than three per month, with exceptions
for antibiotics, dialysis and other chronic conditions. The initial savings to the State would
be sigdicant; however, any savings will be offset by the increased cost of providing
emergency medical care or follow- up care to individuals unable to afford the cost of
prescription drugs. Costs to the counties under their residual responsibilities will increase
for prescription drugs not covered by the State.
0 The State would save State funds and the administrative costs for monitoring
prescription drug usage.
0 Quality of care will be seriously impacted if members cannot afford needed
prescriptions and medical conditions worsen or result in death.
0 Some AHCCCS members may not have sufficient funds to cover the cost of
prescription drugs and forego needed medication. The impact of this may be that
some members become sicker and will need emergency care for chronic health
0 AHCCCS health plans and program contractors will find it difficult to deliver quality
manae- e d care with an emphasis on prevention if members cannot purchase needed
prescriptions. Accordingly, emergency room and long term care costs may increase.
0 Costs to the counties will increase.
A legislative change will be required before AHCCCS could eliminate prescription drugs
as a Medicaid covered senice. Restrictions on prescriptions will require a rule change.
Strong opposition may come from a wide variety of interested parties: advocates;
pharmacists; medical- related advocacy groups, such as AIDS, diabetes, or chronic disease
organizations; family planning organizations; the health plans and program contractors who
are concerned about their long- range costs; and, legislators who may receive pressure from
their constituencies.
ELI3lINATE OPTIOSAL 3lEDICAID 1lEhTAL HEALTH SERVICES
The State could eliminate optional Medicaid mental health services such as
clinic/ rehabilitative services delivered in the community, senices in an Institution for Mental
Disease for persons 65 years and older and non- physician mental health practitioners.
The federal requirements for mental health services are minimal; individual States have .
great latitude to design a mental health program based on the available options. Arizona
choose a mental health program that emphasizes community mental health services rather
than institutional settings. In addition to covering members under the age of 21, the
legislature passed enabling legislation in 1992 which authorized the phase- in of mental
health services for Medicaid eligible adults who are seriously mentally ill and persons 65
years and older enrolled in ALTCS. Case management is the cornerstone of the mental
health program and, coupled with capitated payments, both should contain costs when
comp, ared with an institutionally- based program. If Arizona eliminated the optional
community placements, mental health services would only be available for adults in an acute
care general hospital, the most expensive level of care. Costs ulould increase dramatically
as would admissions to these facilities if they are the only source of care. The State must
still provide aIl optional community mental health senices to EPSDT children.
0 The State would save the State matching funds for the optional services.
0 The only available Medicaid service with federal participation would be inpatient
hospitalization for persons over the age of 21 years. care is not cost
effective and will cost the State more than care in community settings.
0 Institutionally based services will build an incentive to place persons in restrictive
settings since that will be the only source of federal funding. Quality of care will be
an issue since the emphasis in this State has been to provide services in the least
restrictive setting and use institutions as the 1st resort.
* Eiiminating ; he optioral mental health sen- ices would no; relieve the Slate from the
sawtory requirements nor legal obligations under Arnold v. Sam for a communitv
mental health program. The State would be required to pay for these services with
100 percent State funds.
Legislation would not be required to eliminate the optional mental health services; however,
rules would need to be amended. It will be difEicult to scale back this program without
encountering significant opposition from some ie@ slators, advocates, consumers and the
court monitor for the lawsuit.
ELI3fIXATE SERVICES IS . AS IhXERMEDUTE CAFE FACILITI'
FOR THE hlEhTALLY RETARDED
The State could elect to drop the optional coverage of services in Intermediate Care
Facilities for the Mentally Retarded ( ICFs/ MR).
Currently, the State has five I C F / m facilities with a total of 250 Title XIX certified beds.
Federal financial participation is approximately $ 12 million for the costs in these facilities.
If Arizona dropped this optional service, federal funds would be lost and the State would
be forced to pay the costs of the facilities with 100 percent State funds for any persons
residing in an ICF/ MR. The State could elect to close one or more ICF/ MR facilities,
thereby saving sipficant State costs; however, this is a dficult political process with strong
opposition coming from various advocates and family members of persons who reside in
these facilities.
0 In the absence of federal funds, the State may have more leverage to move more
individuals from the ICFs/ MR into appropriate and less restrictive community
placements at a cheaper cost.
0 The loss of federal funds would be significant for those individuals who are Title
XIX eligible and reside in an ICF/ MR.
Any overt move to close the ICFs/ MR or curtail funding to those institutions will lead to
sigmficant opposition from a small, but extremely vocal, group of parents and advocates.
Therefore, the reality is that the State probably will need some institutional beds and losing
federal funding for those beds does not make sense.
ELIMINATE THE WANING OF P; UIEhTAL IXCO3fE FOR CHILDRES
The State could discontinue the federal option which allows parental income to be waived
when determining the income level for long term care eligibility of disabled children.
Persons may quaTlfv for ALTCS if their income does not exceed 300 percent of SSI ($ 1266
per month), resource limitations are met and the person is at risk of institutionalization in
a nursing facility, an Institution for Mental Disease ( IMD) or an Intermediate Care Facility
for the Mentally Retarded ( ICF/ MR). AHCCCS waives the parental income for children
who apply and quahfy for ALTCS since Medicaid does not allow the imposition of a sliding
fee scale on families who have excess income.
If this option is selected, many children will not quahfy for ALTCS and will lose home and
community- based services or residential placements unless parental income is sufficient to
pay the cost of care. If these children do not qualify for ALTCS they will also lose their
health care benefits under AHCCCS.
There are at least four options that should be considered to address the needs of children
who lose ALTCS coverage:
1) DES/ DDD could provide ICF/ MR and the full range or limited home and
communitv- based senices to children with developmental disabilities at 100 percent
State COS~*( ADHfoSr children with behavioral health problems);
2) the counties could provide services to children with physical disabilities with county
funding or county/ State funding;
3) a sliding fee scale can be imposed on the families with the difference made up in
State funding; or,
4) neither the State or counties provide any services.
For children with developmental disabilities, the majority are now served in home and
community- based settings, either living with their families or in group homes. If DES/ DDD
absorbs the cost of care, the impact to their State budget will be significant depending on
whether individuals are served in an ICF/ MR or c o m i u ~ r yp lacement. Even ui: h the
imposition of a sliding fee scale, the amount collected may not equzl the current federai
Title XIX funding for these individuals; therefore, more State funds would be required to
serve the same number of children.
In 1988 with the passage of the ALTCS legislation, counties were held harmless for any
funding of services for persons with developmental disabilities. Unless that provision is
changed by statute, the counties do not share in these costs. Lf the counties are required to
pay for placements in a nursing facility or provide home and community based services to
children with physical disabilities or developmental disabilities in excess of the current
ALTCS contribution to the State, this will have a siwcant impact on county budgets.
Unless legislation is enacted that will relieve ADHS and the counties of the responsibility
to provide mental health senices to children, they & ill continue to be responsible for
funding these services, with or without Title XIX funding.
0 The State could save State matching funds depending on the level of services that
would be available in lieu of ALTCS.
0 A sliding fee scale could be imposed on persons who can afford to pay, and
currently do not under ALTCS, and the State will recoup some of the costs from the
0 The health care system will be more equitable and save limited resources if those
that can afford to pay for services share in the cost of care.
O Children who are seriously emotionally disturbed, physically disabled or
developmentally disabled will lose health care services, which may worsen their
medical conditions and lead to much higher emergency room costs.
0 If emergency room costs increase and there is no alternative payor, hospitals will
absorb these costs in uncompe~~ atecdar e.
0 If parents or legal guardians are faced with the loss of services for their children, it
may lead to a request for termination of parental rights. In that event, the State will
be faced with providing services at 100 percent State cost if the child does not
become eligible for Medicaid due to the dependency status.
- Requests for a ~ s i o itoi ICFs/ S, fR or IMD's may increase if rhe State c-~ nzds
home and communiry- based senices and parents do not have suficient resources to
keep their children at home. .4ny increase in institutional admissions due to
children who had been served in the community will sipificantiy increase costs to
the State.
AHCCCS' policy will need to be changed and legislation may be needed to implement this
change under the following conditions:
1) the legislature requires the counties to share in the cost of s e ~ c efso r persons with
developmental disabilities or expands their responsibilities for the physically
2) the county funding formula for ALTCS is changed; or,
3) DES/ DDD or ADHS require additional appropriations to absorb the cost of care.
Any move to curtail services or make eligibility requirements more stringent for disabled
populations will meet with sigruficant opposition from families, advocates and various
legislators who have supported efforts to ensure a strong home and community- based
program for disabled children. If the counties or the hospitals are required to absorb any
additional cost for services, they will also oppose this option.
LIZtiIT THE k% lOCXI' OF SERVICES OR FZNDING LEVEL OF SERVICES
AHCCCS could set a limitation on various services: the number of annual inpatient hospital
days, number of visits for outpatient services and federally qualified health centers, or a cap
on the dollar amounts that the State will pay for services in accordance with federal law.
AHCCCS could save State funds by limiting the amount of various services or setting a cap
on services. Any decision to limit hospital reimbursement must adhere to the funding cap
will be constrained by the requirements of the Boren Amendment that payments made to
a hospital or nursing home are reasonable and adequate to meet the costs incurred by
economically and efficiently operated facilities. If this option is adopted, either counties will
absorb the cost of care once the individual reaches the limitation or there will be sigdicant
cost shifts to public and private hospitals. Capping the number of days for Title ICIX
reimbursement will undermine the agreements made in the new hospital reimbursement
legislation which passed the legislature in 1992.
0 This will reduce State costs, including administrative costs for prior authorization
that would no longer be necessary.
0 This approach is contrary to a managed care model. Individuals may go without
necessary senices, avoid preventive care so as not to use exhaust their benefits and
emergency room costs will increase.
0 A limitation on inpatient hospital stays may result in some individuals being
discharged from a . in patient hospital setting prematurely.
0 Providers may disagree with arbitrary stay limitations that could adversely affect
continuity of care for members.
0 Health plans may face difficulty in securing contractual arrangements with hospitals
or nursing homes if these entities are at- risk for the period beyond the iimitation.
County residual costs & ill increase.
0 I£ the new hospital reimbursement provisions passed in the 1992 legislative session
are changed, the controversy about quick pay discounts and the sufficiency of
reimbursement levels that surrounded this issue will resurface.
To ensure that there is no legal challenge, it is recommended that a statutory change be
done to implement these options. Strong opposition will come from the Arizona Hospital
Association and the counties concerned about cost shifting to them. Advocacy groups will
oppose any curtailment in senices.
REDUCE THE ALTCS ISCO3lE ELIGIBILITY LISIIT
The State could reduce the current ALTCS income eligibility limit.
As part of the eligibility process for a long term care program, States may elect to establish
the income eligibility Limit at 100 percent of SSI or up to 300 percent of SSI. In order to
maximize federal funding for the long term care services, Arizona chose to establish the
income eligibility at the maximum level of 300 percent of SSI or $ 1,266 per month. The
income level allowed the State to convert the most number of people previously served in
the county programs. Currently, 27 States have their income eligibility standard at 300
percent of SSI.
By reducing the income eligibility limit, fewer individuals will q u w for ALTCS and also
will lose their acute care benefits under AHCCCS. Two variables that should be considered
for this option are whether to:
I) impose a new income limit only on new applicants; thereby, reducing the growth of
the program while grandfathering in all current members; or,
2) redetermine the eligibility for all current members based on the new eligibility level
and reduce the current population accordingly.
Prior to the ALTCS program, the counties were responsible for locg tern care for the
elderly and physically disabled. The counties could assume the responsibility for the
individuals which no longer qualify for ALTCS; however, this will require additional county
funds without the federal matching funds. If the county does not assume responsibility for
the members, the persons who are no longer eligible for ALTCS will have to find residential
placements or home and community- based services kith their own resources. This may lead
to inappropriate placements of vulnerable populations in the settings they can afford.
The only savings to the State will be in the state match for administrative funds to operate
ALTCS since the $ 93 million county contribution for long term care provides the
progra. mmatic state match for the program.
0 The State will be able to curb the growth of the long term care program and reduce
the number of individuals eligible for the program. .
0 If counties are required to assume responsibility for the individuals who lose ALTCS
eligibility, it is unlikely that they can sexve the same number of individuals without
increased cost to the counties.
0 There will be siwcant quality of care issues if persons in nursing facilities lose
their ALTCS services and have insufficient funds to pay for appropriate services,
either in a residential setting or in the community. Choices will be driven by
financial considerations rather than medical conditions which may lead to serious
health problems or death for some of these individuals.
0 Individuals who lose health care benefits will increase indigent health care costs for
the counties or uncompensated care to the public or private hospitals.
0 DES/ DDD and ADHS will have increased State costs in order to serve the same
number of individuals without federal funding.
A legislative change will be required to reduce the income eligibility limit. Many legislators,
the counties, advocates, and hospitals will be strongly opposed to this proposal.
Overall Size of Budget
NeedyIMedically Indigent
( MNIMI) and Eligible
Low Income Children
( ELIC) Programs
Coverage for Pregnant
Women and Children
( Table 11, p. HW- 46 and
Table 1 la, attached)
County Funding of
AHCCCS Acute Care
( Table 4, p. HW- 36)
Disproportionate Share
$ 1 million decrease in General
Fund Budget from FY 1993.
Eliminates both programs;
35,000 lose coverage.
Assumes 18% ( 1 1,000) will
convert to Federal groups. '
Funds emergency services for
federally- qualified
undocumented aliens ( 14,000).
Expands coverage for 69,000
pregnant women and children
under age 6 to 185% of the
Federal Poverty Level.
Maintains current $ 65 million
county contribution.
Makes no change to allocation.
$ 1.8 million decrease in
General Fund Budget from FY
Retains bulk of program.
Does not count on
conversions, but would point
out possible savings from
transferring eligibility to the
Funds only emergency
services for all undocumented
aliens ( 18,000), including
25 % not federally- reimbursed.
Rolls back SOBRA coverage
for pregnant women and
infants from 140% of FPL to
the minimum level of 133 %,
affecting 1,500 women and
Restores county acute care
contribution to 1/ 3 of total
state match; increases by
$ 34.5 million, saving General
Fund a like amount.
Eliminates county in- lieu
payments and restricts the
number of private hospitals
receiving payments; directs
greater funds to counties
where state can better recoup
some portion.
( Continued)
General Fund Impact
( Table 12, p. HW- 48)
Impact on Health Care
( Table 13, p. HW- 49)
Impact on Hospitals
( Table 14, p. HW- 50)
Impact on Counties
( Table 16, Attached)
Impact on AHCCCS
Health Plans
Net savings to the State of $ 88
nullion in FY 1994 and $ 190
million in FY 1995.
Estimated health care system
losses of $ 16 million in FY
1994 and $ 68 million in FY
Estimated hospital losses of $ 7
million in FY 1994 and $ 47
million in FY 1995.
Eliminates county residual
responsibility, but recommends
that counties be held to some
" maintenance of effort" ;
county MNIMI eligibility
function no longer needed;
counties could have $ 27
million gain in FY 1994 and
$ 16 million gain in FY 1995.
Loss of MNIMI revenue may
force some health plans out of
the provider network, though
difficult to predict how many;
loss of plans hurts competition
and could drive capitation rates
Loss of MNIMI revenue may
induce health plans to bid
higher for remaining groups to
help recoup lost MNIMI
Net savings to the State of $ 81
million in FY 1994 and $ 103
million in FY 1995.
Estimated health care system
losses of $ 33 million in FY
1994 and $ 61 million in FY
Estimated hospital losses of
$ 20 million in FY 1994 and
$ 38 million in FY 1995.
Maintains county residual
responsibility; eligibility stays
with counties, but would again
note potential savings from
transfemng eligibility to the
state; counties could see $ 40
million loss in FY 1994 and
$ 49 million loss in FY 1995,
most of which is through the
increased Acute Care
Could be a negative impact on
health plans, but not as
significant since JLBC
proposal maintains most of
MNIMI program.
Joint Legislative Budget Committee - Fiscal Year 1994 Budget - Analysis and Recommendations
DEPARTMENT: Arizona Health Care Cost Containn~ ent System
PROGRAM: Acute Care
The JL- BC Staff recommends a total General Fund appropriation of $ 4 l2,110,000 ( GF) and $ 1,195,040,800 ( TF) -- a decrease of $( 3,190,100) (<; F), or ( 0.1) % , and an increase
of $ 109,093,400 ( TF), or 10.3 % , to the FY 1993 appropriation.
JLBC Staff Recommended Changes from FY 1993
It~ troductiorr
This section of the JLBC Staff recommendation provides estimates of FY 1994 expenditures for medical care in the AHCCCS Acute Care program, as well as
JLBC Staff budget reduction proposals and our analysis of the Executive's recommendations for AHCCCS. The analysis begins with Staff estimates of FY 1994
funding needs based on current statutory requirements. ' This analysis will, in other words, look at how much the state would need to budget in FY 1994 for
AHCCCS Acute Care if no program changes were made. Included in this discussion of FY 1994 is our assessment of a possible current year shortfall for
Following our estimates for FY 1994 are JLBC Staff budget reduction proposals that are estimated to hold spending to an amount just below the 19' 1993 General
Fund appropriation. These proposals include conforming with the federal policy regarding undocumented aliens by funding emergency services only and restoring
the county share of Acute Care funding to about one- third of the overall FY 1994 Acute Care and Long Term Care statewide funding requirement. Conibind,
these proposals yield an estimated $ 82.1 million in General Fund savings in FY 1994. Included in this discussion is the Staff's assessment of the impact of tliese
proposals on the statewide health care system and clients served by AHCCCS.
Following the discussion of the JI- BC Staff proposals is an analysis of the Executive's proposals for AHCCCS. The Staff analysis includes an explanatiou of
the Executive proposals, as well as Staff estimates of the irnpact of these proposals on the statewide health care system and AHCCCS clients. ' The Staff analysis
attempts to estimate this inrpact beyond FY 1994 since certain one- time costs in FY 1994 tend to understate the impact as compared to later years.
I d e x to JLBC Stufl Acute Cure Recommenclution
Acute Care Increase Based on Current Law . . . . . . . . . . . . . . . . . . . . . . . HW- 21
Current Year Shortfall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HW- 28
FY 1994 Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H W- 28
JLBC Budget Reduction Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HW- 33
ZJndocurnented Aliens Emergency Services . . . . . . . . . . . . . . . . . . . . . . . H W- 33
Restore County Acute Care Contribution to Earlier Share . . . . . . . . . . . . . . 11W- 35
" Roll Back" SOBRA Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I4 W- 38
Revise Disproportionate Share Allocation . . . . . . . . . . . . . . . . . . . . . . . . HW- 38
Analysis of Executive Recornrnerrdation . . . . . . . . . . . . . . . . . . . . . . . . . . H W- 4 1
Comparison of Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H W - 47
Other Acute Care Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H W- 52
Joint Legislative Budget Committee - Fiscal Year 1994 Budget - Analysis and Recommendations
Acute Care Increase Rased on Current Law $ 78,928,300 GI:
Curre~ rr Year Shortfall
The $ 78.9 million General Fund increase represents spending growth over the original FY 1993 appropriation. However, using a revised I; Y 1993 estiniate of
AHCCCS General Fund expenditures as a base, the increase for FY IW4 is actually $ 62.7 million, due to an estimated $ 16.2 rnillio~ i sllortfall in I; Y 1993.
The Executive has estimated the shortfall at $ 20 million.
The shortfall appears to be largely the result of certain federal funds initiatives failing to materialize as expected. As a reminder, the AHCCCS I: Y 1993 Gerleral
Fund appropriation was reduced by $ 22.5 million in anticipation that several federal funds initiatives would be irnpleme~~ tedei, t her through legislative cltanges,
or by administrative means. Three such initiatives, the conversion of most Eligible Assistance Children ( EAC) to federal eligibility, federal rein~ bursernent for
emergency deliveries by undocumented aliens, and required federal eligibility applications for hospitalized Medically NeedytMedically Indigelit ( MNIMI)
applicants, are being implemented, with varying degrees of success. Combined, though, these three initiatives were estinlated to produce only $ 13 ttrillion in
General Fund savings. A means to realize the remaining $ 9.5 million of the $ 22.5 million in expected savings was not provided through legislative clra~ iges.
While the conversions of EACs appears to be progressing well, determining eligibility for federal reimbursement of deliveries by undocumented aliens started
off well below expectations. While experience from recent months has been encouraging, the early eligibility problems and the timing of the state's receipt of
federal reimbursement for emergency deliveries will limit FY 1993 savings. Since the hospitalized MNJMI application change was implemented October 1, i t
is too early to estimate if significant FY 1993 savings will accrue.
Problems with the federal funds initiatives appear to explain much of the current year shortfall. However, population growth is still a factor. Enroll~ nent in
AHCCCS health plans overall is growing as expected, but expenditures in the areas of Fee for Service and Reinsurance have continued at levels nearly double
that of two years ago. This growth has been largely the result of an unexpected surge in the MNIMI population that began in early FY 1992 and was the cause
of a $ 25 million FY 1992 shortfall.
In recent months, MNJMI growth appears to be slowing, but, as experience would show, future growth is difficult to predict. The Staff's current sIiortfilIl
estimate of $ 16.2 million will be refined in the conling months as more enrollment and expenditure data becomes available. We will be focusing on tht:
implementation of the federal funds initiatives, as well as expenditures in Fee for Service and Reinsurance.
FY 1994 Budget
The AHCCCS Acute Care budget contains the following elements: Capitation, Fee for Service, Reinsurance, Deferred L, iability, Medicare Premiu~ i~ Qs,~ ralifi~ d
Medicare Beneficiaries, EPSDT Mental Health, Adult Mental Health, and Disproportionate Share Hospital Paynients. ' Ibis narrative sectiori will address
Capitation, Fee for Service, Reinsurance, and Deferred Liability, which together make up 95% of the Acute Care General Fund budget.
Capitation represents monthly payments made by AHCCCS to contracted health plans for the medical services of enrolled AtiCCCS members. [) ifferellt
capitation rates are paid for different groups within the AHCCCS population, and that rate is generally based on an actuarial assessment of medical care u t i l i ~ t i o I i
by pmple in the various groups. Current Capitation rates are displayed in Table 1, as well as the share of costs paid by the state a~ idfe deral goverglrltel1t. f: or
fderal groups, the state pays 34.1 % of the cost, while state groups such as the MNIMI are funded entirely with state furlds.
Joint Legislative Budget Committee - Fiscal Year 1994 Budget - Analysis and Recommendations
Table 1
Federal Eligibility Groups Capitation Rate
Aid to Families with Dependent Children ( AFDC) $ 111.91
Supplemental Security Income ( SSI) with Medicare 118.99
SSI without Medicare 301.88
SOBRA Women 1 10.85
SOBRA Children 90.96
SOBRA Delivery Amount ( one time payment only) 4,180.36
State Funded Groups
Medically Needy\ Medically Indigent
( MNIMI) with Medicare
MNIMI without Medicare
Eligible Assistance Children
Eligible Low lncome Children
State Cost
$ 38.16
3 1.02
Fee for Service includes payments made by AHCCCS for members' medical bills incurred in varying periods prior to enrollment in a health plan. Keinsurance
and Deferred Liability represent payment programs that assist in limiting health plan liability in cases involvingcatastrophic ~ nedical costs or when the AHCCCS
applicant is hospitalized at the time of e~~ rollnient.
The following sections explain the factors behind the growth in the Acute Care budget and includes the Executive's estiinates as well.
Dettlogruphic Growth
The JLBC Staff estimates overall population growth of 9.8% over the FY 1993 appropriation. This level of growth accounts for $ 50.2 million of the total General
Fund increase for Acute Care. Table 2, on the following page, details the population estimates by the various groups within the AHCCCS populiition.
Populations are expressed in member months instead of a headcount figure, since Capitation is based on monthly payments per n~ ernher. SOHKA i) eliveries
is listed on the bottom because this amount represents actual deliveries, not n~ e~ nbemro nths. ' Ihe last colunu~ in this table also indicates each group's sl~ arao f
the total AHCCCS population.
.- P E m w - - 5 2 a p
E .. 4 g ; .
3 0.0
* g c
r e
% c j ; ii
~ e g
$ 85
$ 03
3 g. 3 "'
$ i E g
Q a 9 .:
5 0 .- a & be
.; A, m
c. -) ,. 3Y. nz? a2
Joint I~ gislaitv e Budget Committee - Fiscal Year 1994 Budget - Analysis and Recommendations
A state's federal matching rate is based on the relationship between state per capita income and national average per capita income. l'his almost ~ legligibleF Y
1994 change in Arizona's matching rate apparently indicates that the gap between Arizona's per capita income growth rate and the national average is stabilizing.
Sture kgulizution 1mpuc. t Assistunce Grunts ( SLIA G)
This item represents federal reimbursement for state costs of providing services to individuals granted legal U. S. residency under the federal anlnesty progranl.
SllAG funds have been used in FY 1992 and FY 1993 to offset the AHCCCS General Fund appropriation by $ 5 nlillion and $ 7.8 elillion, respectively. ' l'he
5 year SWAG progranl will near completion in FY 1994, thus lowering state reimbursement. The JLBC Staff recommendation for FY I994 includes a SWAG
offset of $ 3 million, thereby making $ 4.8 of the Acute Care increase due to lower SLIAG funding. The Executive recommendation reflects $ 2 n~ illionin S1. IAG
Miscelluneous Funds Oflset
Interest earnings, third party collections, and sanctions against counties for eligibility errors have been used in the past as an offset to the Acute Care General
Fund appropriation. For FY 1993, the total offset was assumed to be $ 6.6 million, nearly half of which was interest earnings. Given that AHC'(-' CS may no.
longer retain interest earnings in the AHCCCS Fund, the Staff believes the Miscellaneous Funds Offset should be adjusted accordingly. For FY 1994, the Staff
has used an offset of $ 3.6 million, which increases the General Fund requirement by $ 3 million. The Executive has niaintained a $ 6.6 million offset.
Acute Cure Summury
The following summarizes the components of the JLBC Staffs estimated FY 1994 " current law* Acute Care increase:
Demographics $ 50.2 million
Capitation and lnflation Increases 21.1 million
Lower SWAG Reimbursement 4.8 million
Lower Misc. Funds Offset 3.0 million
Other Acute Care Changes ( 0.2) million
Total $ 78.9 million
1-. ram this current law basis, the JL- BC Staff recommendation would add $ 78.9 nrillion to the Acute Care General Fund budget. The Executive wo~ rldi ~ dd$ 86.6
naillion to fund this program, aside from any changes contemplated for FY 1994. This difference is relatively minor as, in fact, the J1. BC esti~ natei s 98% of
the Exmutiva's FY 1994 Acute Care total. Table 3 summarizes the Executive and JLBC estimates for Capitation, Fee for Service, and Keinburance, by ' I'otal
Funds md Slate Matching Funds. As with the member month table, this table also displays each group's share of overall dollars.
These indepndently derived estimtes indicate some consensus regarding expected FY 1994 growth in the AHCCCS program. With these growth estinlates in
mind, as well as other fiscal concerns such as slow revenue growth, the upward spiraling cost to the state of fully funding the K- 12 Basic State Aid t: ormula,
plus calls for tax reductions and larger carry forward balances, the JLBC Staff has developed a set of proposals that, together, produce General Fund reductio~~ s
for AHCCCS equivalent to the estimated growth for FY 1994. The next section explains in detail the Staffs proposals.
Joint Legislative Budget Committee - Fiscal Year 1994 Budget - Analysis and Recommendations
Table 3
Federal Eligibility
SOBRA Women
SOBRA Children
SOBRA Deliveries
Federal Subtotal
State Funded Groups
State Subtotal
Grand Total- All Groups
( Capitation, Fee for Service, Reinsurance, and Deferred Liability)
Total Funds
Share of Total
Exec. Rec. JLBCRtx. Funds
Total Total JLBC Est.
$ 376,752,800 $ 363,967,400 33.3 96
172,146,700 182,630,900 16.7
State Match Funds
Exec. Rec. JLBC Rec.
Total Total
$ 125,030,100 $ 1 18,392,000
56,816,700 58,883,300
10,38 1,400 9,879,900
Share of State
Joint Legislative Budget Committee - Fiscal Year 1994 Budget - Analysis and Recommendations
JLBC Budget Reduction Proposals
The JLBC Staff budget reduction proposals are comprised of the following elements;
General Fund
Conform with Federal Policy by Funding Only Emergency $( 43,575,800)
Services for Undocumented Aliens
Restore County Acute Care Contribution to One- Third of ( 34,565,000)
Overall State Matching Requirements
" Roll Back" SOBRA Coverage to 133% of the Federal ( 2,377,600)
Poverty Level
Revise Disproportionate Share Allocation fl. 600.000)
The following explains each point, including assumptions that were nude in producing the estimated savings amounts.
Corrfom will1 Federal Policy by Furlding Ordy Emergericy Services for Uridocumented Alieris
This JLBC Staff proposal would restrict AHCCCS coverage for undocumented aliens to emergency services only. Ilndocumentd aliens, also referred to as illegal
aliens, are individuals residing in the United States but lacking proof of U. S. citizenship or legal U. S. residency. An estimated 18,000 uridocuri~ entetla liens
are currently served by AHCCCS in the MNIMI and EUC programs. As enrolled members, these individuals now receive the full range of AHC'CCS- covered
services, just as any other AHCCCS member. Undocun~ ented aliens are allowed to enroll in the state funded MNIMI arid ELlC programs because 1J. S.
citizenship or legal U. S. residency is not required for enrollment.
The JLBC Staff proposal is consistent with the federal policy of funding only emergency services costs for certain undocun~ ented aliens. Federal Medicaid law
requires states to provide irratching funds for the emergency services costs of undocumented aliens who would otherwise qualify for a federal Medicaid group
such as AFDC for SSI, if not for the lack of U. S. citizenship or legal U. S. residency. This is an important point to stress: states rriust pay the non- fderal share
of the cost ( for Arizona, 35%) of cnwrpency services received by federally- qualified undocumented aliens. I'he implication of this is that federal law will riot
allow the complete exclusion of undocumenld aliens from Medicaid services. .
According to AHCCCS, between 28% and 33% of the MNIMI and ELlC populations are undocumented aliens. 1: urthermore. an Aprtl 1992 AHCCCS study
of the MNIMI and EUC populations estimated that 23% of the MNIMI and ELlC populations could be eligible for federal reirnburse~ nento f emergency services,
meaning implicitly that at least 23% of the these populations are undocumented. For purposes of calculating a savings estimate, the Stafl has assulnetl tl~ ut' 3 0%
of MNIMls and EWCs are undocuoientd. ' fie Staff estimates the FY 1994 state matching cost of federally- reimbursed emergency services to be $ 8,957,500.
Ihis amount represents funding for the 23% of the MNIMI and ELlC populations AHCCCS estirrutes would be eligible for fderal reimburse~ nent of enlergerrcy
Joint I~ gislativeB udget Committee - Fiscal Year 1994 Budget - Analysis and Recommendations
The remaining undocumented aliens ineligible for federally- reimbursed emergency services would, under the JLBC Staff proposal, be eligible for 100% state-funded
emergency services. Funds for these services have been included after consulting with legislative attorneys who have advised that if the state were to
adopt an emergency services only program for undocumented aliens, the state should also fund emergency services for those undocumented aliells who would
not qualify for federal reimbursement. The JLBC recommendation includes $ 7,994,700 for this portion of the undocumented population.
Implementing this proposal will require a change in the current county MNIMI eligibility process. Individuals who apply at county offices for MN/ MI or EIJC
eligibility would need to provide proof of U. S. citizenship or legal U. S. residency before being accepted into AHCCCS. Persons not having proof of U. S.
citizenship or legal U. S. residency would be referred to the Department of Economic Security ( DES) for a determination of " emergency services only" eligibility.
Again, this would be a person otherwise eligible for a federal group such as AFDC or SOBRA, if not for their lack of U. S. citizenship or legal U. S. residency.
Some undocumented aliens ( about 25%) referred to DES would not qualify for federal emergency services reimbursement. The Staff proposes that for this
segment of the undocumented applicants, DES would be responsible for determining eligibility for 100% state- funded emergency services based on current MNIMI
and ELlC income and resource standards. Once eligibility is determined, either for federally reimbursed or state- funded emergency services, AHCCCS would
begin paying claims on a Fee for Service basis.
? he estimated FY 1994 savings from this proposal would not equal the total cost of the undocumented population in AHCCCS minus the state cost of emergency
services. FY 1994 savings would be lowered by two factors: prior year bills, and the cost of guaranteed enrollment. Bills incurred by the undocumented
population in FY 1993 and other years prior to FY 1994, but not yet paid, would amount to an estimated cost of $ 12,116,200 in FY 1994. Current law
guarantees new MNIMI enrollees 6 months of eligibility in AHCCCS, so even though full AHCCCS eligibility were to end at some point for undoci~~ rlented
aliens, those eligible at the " cut o f f point would still be fully eligible for periods ranging from one to six months. The Staff has assumed the cost of guarantd
enrollment in FY 1994 to be $ 7,432,700, based on a implementation date of April 1, 1993. The Staff is proposing that statutory changes needed to convert
undocumented aliens to " emergency services only" status be made effective retroactively to April 1, 1993, if needed.
The net savings calculation from this proposal is summarized as follows:
Est. FY 1994 Cost of llndocumented $( 80,076,900)
Aliens in AHCCCS ( 30% of MNIMI and
ELlC populations)
State Match for Emergency Services 8,957,500
100% State Funded Emergency Services 7,994,700
Prior Year Bills (" Tail") 12,116,200
Guaranteed Enrollment 7.432.700
Total General Fund Savings
~ o i n Lt egislative Budget Committee - Fiscal Year 1994 Budget - Analysis and Hecommendations
Resture Coutity Acute Care Cutitributiutr to One- Tlrird uf Overall State Matchi~ igR equiremet~ ts
The JLBC Staff recommends an increase in the amount counties currently contribute to the state for the AHCCCS Acute Care program. The increase represents
an adjustment to bring the county share of program costs up to a level more in line with the counties' share in the earlier years of the AHCCCS program. The
recommended county Acute Care contribution for FY 1994 would be $ 99,641,100, or an increase of $ 34,565,000 over the current contribution of $ 65,076,100.
As Table 4 demonstrates, the counties' share of the overall state matching costs of both the Acute and Long Term Care programs has been declining. County
support of Acute Care has been relatively fixed over the past 10 years, whereas state General Fund expenditures have grown over 450% since FY 1984. Further,
even with the addition of Long Term Care, for which counties pay the entire state match, the counties' share of the overall state match raluirement has dropped
to 26.7% in FY 1993. The recommended increase would restore the county share of overall state match requirements to approximately one- third of the total
state match for FY 1994. From FY 1985 to FY 1987, during the first 3 full years under AHCCCS, the county contribution averaged 33.3 % of the total ~ natching
Joint I~ gislativeB udget Committee - Fiscal Year 1994 Budget - Analysis and Recommendations
The JLBC Staff would consider this increase an equitable means of allocating growth in the AHCCCS program across state and county goverr~ nlznt and also
believes it to be reasonable that the counties would continue to fund a third of overall state matching costs in future years. The Staff proposes that the new
contribution be spread among the counties according to the current formula. Table 5 provides the breakdown by county. In terms of the ability of the counties
to fund this increase, the JLBC Staff estimates that counties will receive an additional $ 25 million in sales tax distributions in FY 1994 above the amoilnts
budgeted for in FY 1993. Should this increased Acute Care contribution violate county expenditure limitations, the Staff proposes that the $ 34.6 million increase
be reflected under the state appropriation limit, as are current county contributions, given that the state has an estimated $ 600 million of excess appropriation
limit capacity.
Table 5
La Paz
Santa Cruz
Y avapai
Y uma
- Share
3.321 %
$ 262,257
$ 401,554
3,309,08 1
3 16,859
72 1,402
From Current
$ 139,297
Joint I~ gislativeB udget Committee - Fiscal Year 1994 Budget - Analysis and Recommendations
Roll Buck SOBRA Coverage to 133% of the Federal Povetty Level
This proposal would reduce the income eligibility level for SOBRA Women and Infants from the current 143% of the Federal Poverty Level ( 1: PL.) to 133%
of FPL. States are required by the federal government to provide medical care to pregnant women and infants under age 1 with household incomes below 1' 33%
of FPL. As an option, states may also cover pregnant women and infants up to 185% of FPL. Arizona chose 3 years ago to increase the incolne eligibility liniit
to 140% of FPL. This " roll back" of SOBRA coverage would affect approximately 5% of the current SOBRA population, or 1,500 women and illfarlts. Savings
from this proposal are estimated to be $ 2,377,600 GF and $ 6,972,400 TF.
Revise Disproportionute Share Allocation
The JLBC Staff proposes that the methodology for allocating disproportionate share funding be revised to allow for the state to retain a greater share of that
revenue. The Staff proposes the elimination of county in- lieu payments and changes to the methodology for allocatirig disproportionate share revenue to hospitals
to reduce the number of private hospitals receiving payments. General Fund savings from this proposal would be $ 1,600,000.
The FY 1993 disproportionate share legislation provides for county in- lieu payment totalling $ 91 1,200, with payments to each county ranging fro111 a rl~ irlilnulll
of $ 54.300, to a maximum of $ 108,600, with the actual payment depending on the level of payments to private hospitals in the respective counties. ' rile original
disproportionate share payment plan introduced by AHCCCS would have made payments to 16 private hospitals and two county- operated hospitals in Mirricopa
and Pima counties. During negotiations on the legislation, the number of private hospitals to be paid was expanded to 28. The JLBC Staff proposes that the
number be restricted to the 16 designated in the AHCCCS plan. Such a reallocation of disproportionate share revenue would allow for a greater diversion of
funding to the county- operated hospitals in Maricopa and Pima counties, thus providing the state with enhanced opportunities to recoup a portion of that revenue
from the county governments.
Joint Legislative Budget Cornlittee - Fiscal Year 1994 Budget - Analysis and Recommendations
lmpact of JLBC Roposals
This section attempts to quantify the impact of the JLBC Staff proposals on the statewide health care system, private hospitals and counties, and clients served
by AHCCCS.
lmpucr on the Heulth Cure System
This level of analysis looks at how the statewide health care system would fare if: 1) the AHCCCS program provided emergency services only to undocumented
aliens, and 2) additional revenue was lost through the SOBRA " roll back". Table 6 provides the Staff's estimates of how these revenue losses might impact the
health care system, lessened to some extent, however, by revenue added back to the health care system.
Table 6
IMPACT OF JLBC STAFF PROPOSALS ON HEALTH CARE SYSTEM I JLBC Est. JLBC Est.
Health Care System Revenue Losses Year l Year 2
State Funding for Undocumented Aliens $( 80,076,900) $( 92,088,400!
in the MNIMI & EUC Programs
" Roll Back" SOBRA Coverage ( 6,972,4001 ( 8.018,300]
Subtotal- Revenue Losses $( 87,049,300) $( loo, 106,700]
Revenue Added Back to System that Lessens Impact
Federally- Reimbursed Emergency Services 26,268,300 30,208,600
State Funded Emergency Services 7,994,700 9,193,900
6 Month Guaranteed Enrollment 7,432,700 0
Prior Year Bills (" Tail") 12.116.200 0
Subtotal- Revenue Added $ 53.81 1,900 $ 39,402,500
Net Impact on Health Care System $( 33,23 7,400) $( 60,704,200) I
In net terms, the health care system could see a loss of $ 33.2 million in revenue in the first year of implementation of the JI- BC Staff proposals. With the loss
of additional state revenue in FY 1995 as the MNIMI program is phased out, the net FY 1995 revenue loss could grow to $ 60.7 million.
Joint Legislative Budget Committee - Fiscal Year 1994 Budget - Analysis and Recommendations
lmputl on Itospituls
Undoubtedly, questions will arise regarding the impact of these proposals on hospitals alone. Table 7 summarizes the Staffs estirnates of how reverlue losses
might affect just hospitals, including both county- operated and private hospitals.
Table 7
JLBC Est.
Hospital Revenue Losses Year l
State Funding for Undocumented Aliens in the MNIMI & $( 52,050,000)
ELlC Programs
" Roll Back' SOBRA Coverage ( 3,137,600)
Subtotal- Revenue Losses $( 55,187,600)
Revenue Added Back to Hospitals that Lessens Impact
Federally- Reimbursed Emergency Services 17,074,400
State Funded Emergency Services 5,196,600
6 Month Guaranteed Enrollment 4.83 1,300
Prior Year Bills (" Tail") 7,875,500
Subtotal- Revenue Added $ 34,977,800
Net Impact on Hospitals $( 20,209,800)
Share Private Hospitals ( 73 %)
Share County Hospitals ( 27 %)
JLBC Est.
Year 2
s ( 5 - 5 0 0 )
( 3.608.20)
$( 63,465,700)
$ 25,6 1 1,600
$( 3 7,854,100)
$( 27,633,500)
( 10,220,600)
These estimates are built upon a number of assumptions regarding the allocation of revenue losses to hospitals, either county- operated or private. Based on
information from AHCCCS, the Staff has assumed that 65% of the costs currently incurred by the MNIMI population are for inpatierit hospital care. l'hus, 65 R
of the revenue loss from eliminating services for undocumented aliens would be absorbed by hospitals. The allocation of lost revenue between private luld county-operated
hospitals was based on AHCCCS data showing that Maricopa and Pima county hospitals ( the only 2 county hospitals) account for 27% of Medicaid
inpatient days.
While these represent out " best estimates," they must be viewed with considerable caution since we have no way of knowing where undocumented aliens will
present themselves for emergency services, assuming that, under the Staff proposal, they would no longer be enrolled in AHCCCS health f~ lans. The share of
revenue loss borne by county hospitals may actually be higher because many undocumented aliens may be more inclined to utilize the local 11uhlic liealtll systenl
instad of private hospitals. With these caveats in mind, hospitals could see $ 20.2 million in revenue losses in FY 1994, and $ 37.9 ~ nillio~ lois t irk 1: Y 1995.
Joint Legislative Budget Committee - Fiscal Year 1994 Budget - Analysis and Recommendations
Impact on Courtties
The above analysis suggests that county hospitals may also see a net loss in revenue from the JLBC Staff proposals. The most significant i~ npact will be,
however, through an increased county contribution to the state for the Acute Care program. Estimates of expected sales tax distributions in FY I994 indicate
that an additional $ 25 million in revenue will be available to counties to help fund such an increase. While counties may wish to direct this additional revenue
to other priorities, the Staff would again note the declining share of county support for the AHCCCS program as justification for restoring that share to a level
more in keeping with earlier county support of AHCCCS.
Itripact on Clierrts
The proposal to fund emergency services only for undocumented aliens will affect about 18,000 people now in the AHCCCS MNIMI and ElJC programs. llrider
the Staff proposal, these individuals would no longer be enrolled in AHCCCS health plans. Possible outcomes of this change would be that undocumented aliens
may no longer have access to preventative care or other forms of routine care. These individuals may forego seeking medical attention until an illness reaches
a more critical stage, thereby requiring possible emergency room care.
The outcome for pregnant women no longer covered under SOBRA could be much the same. Without AHCCCS coverage, pregnant women may forego prenatal
care, resulting possibly in premature births or infants with low birth weights and related medical problems.
Analysis of Executive Recommendation
Summary of Executive Recommeridatiotr
The Executive's AHCCCS Acute Care recommendation calls for the elimination of the state- funded MNIMI and ELlC programs and the expansio~ o~ f fctleral
coverage for pregnant women and children under age 6. The nlajor points of the Executive recornmendation are sunmiarid below:
Eliminate MNIMI and EUC programs
Expand SOBKA coverage for pregnant women and infants to those with incomes below 185% of the Federal Poverty lxvel
Expand federal coverage for children under age 6 with incomes below 185% of FPL ( uses same federal provision that is now
allowing for the conversion of most EACs to federal eligibility)
Eliminate county residual responsibility for providing indigent health care, but keep some " maintenance of effort" at county level
Increase hospital reimbursement levels by eliminating the 10% quick pay discount from the AHCCCS hospital reiniburseme~ it systeni
Fund the stale match for the emergency services of undocumented aliens who qualify for federal reimbursement
Fund prior year bills and a guaranteed enrollment period after the MNIMI program is terminated
Provide state match funding for former MNIMls and ELlCs who could convert to federal eligibility
Table 8 provides the associated costs of each element of the Executive and JLBC proposals, which in turn lead to the total General Fund dollar change fro111 the
FY 1993 appropriation. An examination of this table demonstrates that both proposals would produce comparable " bottom line" results. Both cssentiitlly hold
the AHCCCS General Fund budget to no growth in FY 11994. This point may appear incorrect given that the Executive has recommended the coniplete
elimination of the MNIMI and EWC programs, whereas the JLBC Staff limits undocumented aliens to emergency services only arid irrcrzases the county acute
care contrib~ ttion, t hus leaving most of the MNIMI and ELlC programs untouched. However, as our analysis attempts to show, the Executive's savings would
grow by $ 100 ~ rnillion in the second year as certain costs associated with phasing out the MN/ MI prograni are elinninatzd.
Joint Legislative Budget Committee - Fiscal Year 1994 Budget - Analysis and Recommendations
Table 8
FY 1994 Estimated AHCCCS Acute Care Increase- Current Law E$ 8x6ec, 5u6ti2v, e3 00 J$ L7B8C, 9 2S8ta, f3f0 0 I
FY 1994 Cost of MNIMI and EUC Programs
FY 1994 Cost of Undocumented Aliens
Prowsed Federal Elinibilitv Expansion Costs and Other Costs
SOBRA Expansion ( Women, Infants, and Children Under 6 to
185 % of the Federal Poverty Level)
Prior Year MNIMI & EWC Bills (" Tail")
6 Month Guaranteed Enrollment for MNIMI & ELlC
Categorical Conversions ( 18% should be categorical)
Eliminate Quick Pay Discount on Categorical Bills
State Match for Undocumented Aliens Emergency Services
Subtotal- Expansion Costs, Other Costs
Other OptionsIAdministrative Changes
100% State Funded Emerg. Services for Undocumented Aliens
" Roll Back* SOBRA Coverage for Women & Infants to 133%
of FPL Shift MNIMI Eligibility to the State
Revise Disproportionate Share Allocation
Non- SMI Adult Mental Health
Administrative Changeslother Misc.
Increase County Acute Care Contribution so that Acute
Combined with the Long Term Care Contribution will equal
One Third of Overall State and County Funds for AHCCCS
Net General Fund Change from the FY 1993 Appropriation $( I ,000,000) $( I ,779,900) l
F Y 1994 Suvings from Proposuls $ 87,562. j00 $ SO, 7OS, 200 I
Joint Legislative Budget Committee - Fiscal Year 1994 Budget - Analysis and Recommendations
In the next section, the JLBC Staff provides estimates of possible outcomes of the Executive's recommendation. This analysis examines the Executive's proposals in
the same way the impact of the JLBC Staff proposals was described: first, from the perspective of the statewide health care system, secondly, looking at the impact on
hospitals and counties, and third, assessing the impact on AHCCCS clients.
Analysis of Executive Recomme~ dation
Impuct on the Health Cure System
The Executive's AHCCCS proposal is indeed complex and carries with it fiscal impacts that could take 2- 3 years to be fully realized. As noted earlier, both the Executive
and JLBC proposals have similar bottom line first year General Fund impacts, but as our analysis will show, the second year reveals dramatic differences in savings
and resulting impacts on the statewide health care system. Again, we define the statewide health care system to include both the public ( mostly, county) and private
health care networks currently in existence throughout the state.
Table 9 below quantifies the impact of the Executive's proposals by looking at the expected reduction in state expenditures for the MNIMI program and new or continued
revenue sources that offset this reduction. The column titled " Governor's Plan OSPB EST Year 1" reflects estimates from the Governor's Office of Strategic Plllnnirlg
and Budgeting ( OSPB). The remaining two columns represent JLBC estimates of the Executive's plan during the first and second years of implementiition.
Table 9
Executive's Plan Executive's Plan Executive's Plan
Health Care Svstem Revenue Losses OSPB Est Year I JLBC Est Year I JLBC Est Year 2
Estimated Dollar Value of Care No Longer $( 267,148,900) $( 266,923,100) $( 293,615,400)
Provided by State for MNIMI & EUC
Revenue Added Rack to Svstem hat Lessens Impact
Prior Year Bills (" Tail") 70,000,000 5 1,053,500 0
6 Month Guaranteed Enrollment 39,270,000 38,669,900 0
Conversion of MNIMI to Federal Groups 48,059,000 17,595.300 2 1,700,900
Elinunate Quick Pay Discount 4i. 900.000 49,540,500 56,97 1,500
Undocumented Aliens Emergency Srvices 26,268,400 26,268,300 30,208,600
SOBRA Expansion 67,589,100 67,589.100 116.824.600
Net lmpacl on I[ lealfk Care System $ 31.93 7.600 $( Z6.206.500) $ j67,909.800)
Joint Legislative Budget Committee - Fiscal Year 1994 Budget - Analysis and Recornmendations
The OSPB estimate for the first year of implementation suggests that the health care system will actually experience a net gain in revenue, largely due to tile expansion
of eligibility for pregnant wornen and children. This expansion could bring an additional $ 67.6 million in revenue into the statewide health care systelll in 1:)' 1994.
The JLBC Staff estimates, however, that the statewide health care system may actually experience a net loss of revenue in the first year. The Staffs estinlilte is lower
due to differences in estimates of revenue from the payment of prior year bills and the conversion of MNIMIs to federal groups.
Apparently, the Executive's estimate for prior year bills builds in a considerable margin for error, while the Executive's estimate of conversions to fdzral, or
" categorical" groups generally assumes that nearly all MNIMls potentially eligible for federal groups will actually convert in the first year. The Staffs estinrate for
conversions assumes that the first year effect will be more limited.
The JLBC estinlilte for the second year shows that the revenue loss to the health care system could increase substantially. As prior year bills are paid offa~ ldM N/ MI
enrollment is completely eliminated in FY 1995, nearly $ 90 million in state revenue would no longer flow into the health care system. Even with the reverlue fro111
eligibility expansions, the revenue loss could grow to $ 67.9 million in FY 1995.
Impucr on Ilospiruls
This section isolates the impact of the Executive's proposals on hospitals alone. Table 10 follows the format of Table 9 but shows the share of costs or revenues d i r ~ t a l
at hospitals.
Table 9
Executive's Plan Executive's Plan Executive's Plan
Hospital Revenue Losses OSPB Est. Year I JLBC Est. Year I JLBC Est. Year 2
Estimated Dollar Value of Care No Longer $( 173,646,800) $( 173,500,000) $( 190,850,000)
Provided by State for MNIMI & EUC Programs @ 62% of Total a 6 5 1 of Total @ 65 5% of Total
Revenue Added Back to Hos~ italsth at Lessens Impact:
Prior Year Bills (" Tail") 43,400,000 33,184,800
6 Month Guaranteed Enrollment 24,347,400 25,135,400
Conversion of MNIMI to Federal Groups 29,796,600 1 1,436,900 14,105,600
Eliminate Quick Pay Discount - 47,900,000 49,540,500 56,97 1,500
( 100% goes to Hospitals)
Undocumented Aliens Emergency Services 16,286,400 17,074,400 19,635,600
SOBRA Expansion 30.415.100 30,415,100 52.571,1( M)
Net Impact orr Hospitals $ 18,698,700 $( 6,712.900) $( 47,566,200)
Share Private ( Exec. @ 83 % , JLBC @ 73 %) $ 15,353,900 $( 4,900,4() 0) $( 34,72J, 700)
Share County - Operated ( Exec. @ 17 %, JLBC @ 27 %) 3,144,800 ( I ,812,500) ( 12,842,') 00)
Joint 1, egislative Budget Committee - Fiscal Year 1994 Budget - Analysis and Kecommendations
The Executive has assumed that if costs were allocated between private and county hospitals, 83% would be borne by private hospitals, and 17% would be shifted to
county hospitals. I'he JLBC Staff has assunled that a higher share, or 27%, of costs would be the responsibility of county hospitals. The Staff derived this percentage
from AHCCCS data which indicated that Maricopa and Pima county hospitals account for 27 % of hospital days utilized by Medicaid patients. As we n~ eritioneci in the
analysis of the JLBC proposals, these, or any assumptions regarding the share of costs to be borne by either private or county hospitals must be viewed with considerable
caution, since the location where those without MNIMI coverage choose to seek medical care is difficult to predict. llsing the JLUC Staff estinlates from Table 10
suggests that $ 6.7 million in costs will be shifted to private hospitals in FY 1994, and by FY 1995, that number could grow to $ 47.6 millio~ t. If private hospitals and
providers are to bear the bulk of the shift in costs, then a portion of these costs will undoubtedly be passed on to patients who pay " out of 1) ocket" or else have health
insurance. The portion that is not absorbed by paying patients may show up as increased charity care or uncollectible debt.
lmpu~ ol n Counrirs
The analysis of the impact on hospitals shows that some costs may be shifted to the county- operated hospitals as charity care or uncollwtible debt and may ~ tltimately
become the responsibility of county general revenue sources. The estimate of increased costs borne by county hospitals may in fact be low. and this point was 111ade
in the analysis of the JLBC Staff proposals. Not knowing where newly disenfranchised MNIMls and EUCs will present themselves for lndical care is probably the
greatest problem in producing an estimate. One might conclude that people no longer covered by the state would most likely seek care at the county level, either through
county medical centers in Maricopa wd Pima counties or county health clinics. However, there are undoubtedly limits on the ability of county facilities to physically
handle sharp increases in patients.
To lessen the impact of ending the MNIMI program, the Executive has proposed to eliminate county residual responsibility. Counties are now reqi~ irdh y state law
( A. R. S. Title 11) to maintain indigent health care programs that were intact prior to the development of AHCCCS in 1983. Title I I further designates cc> unties as being
ultimately responsible for medical care of the indigent sick. While the elimination of county residual responsibility nay not affect people's decisio~ lsr egarding where
to seek medical care, it will shift some of the responsibility for funding indigent health care away from counties to, in all likelihood, private hospitals and providers.
The fiscal implications of Title I I are that county governments must often pay for medical services of indigent persons incurred for some period prior t o the
com~ nencement of AHCCCS coverage. These bills would be either incurred directly through the county- operated hospitals or received from private hospitals that have
provided care to an indigent patient. Other costs are incurred by a few counties who have more generous eligibility standards or services than currently available in
the AHCCCS MNIMI program. The Executive has estimated these county residual costs to be $ 10-$ 20 n~ illiona nnually. The JLBC Staff is aware that staff of the
County Supervisor's Association is studying the residual issue and will make available to the Legislature estimated residu; J costs.
The Executive has, however, suggested that even though county residual responsibility should be eliminated, counties should still be held to some "~ nai~ rte~ r; uof~ ecfef ort."
The Staff would assume that the Executive is implying that counties should be required to maintain some form of public health system, such as county hosl) itals and
Another factor that could lessen the impact on counties would be savings achieved through the elimination of the MNIMI eligibility function. Counties now ~~ erforrn
MN/ MI and ELlC eligibility determinations for the AHCCCS program. According to information from the County Supervisors Association, counties as a whole now
spend approximately $ 13.8 million on MNIMI eligibility, employing about 600 people. With the proposed elimination of the MNIMI progranl, all AHCC'CIS Acute
Care eligibility work would be performed by the Departn~ ento f Ecorro~ nicS ecurity ( DES), with the exception of federal SSI coverage.
The Staffs estimate of the impact of the Executive's proposals on hospitals alone indicates that county hospitals could see a $ 1.8 million loss in revenue, aside fro111
changes resulting from the elimination of residual responsibility or the county eligibility function. Assuming, however, that county residual costs are $ 15 111illio11i~ lid
county eligibility costs are $ 13.8 million, the proposed elimination of these two costs could produce a net gain of $ 27 millio~ tt o counties in I'Y 1494. As sti~ ter evellue
declines in FY I995 due to the final phase- out of the MNIMI program, that gain would Ix: lower4 to $ 16 nill lion.
Joint Legislative Budget Committee - Fiscal Year 1994 Budget - Analysis and Recommendations
Summury of Analysis
Conceptually, the Executive's proposal is relatively straightforward: eliminate the MNIMI program, expand coverage for pregnant women and children, eliminate county
residual responsibility, and increase hospital payments by eliminating the quick pay discount. Sorting through a quantitative analysis is, however, a more daunting matter.
In the Staffs view, substantial costs will ultimately be shifted to other sectors of the health care system. Exactly how those costs will be distributed is unclear, though.
While the health care system as a whole may not experience a net loss of revenue during FY 1994, further reductions in state revenues in FY 1995 could result in a
net loss of $ 68 million to the health care system. The proposed elimination of county residual responsibility, plus the fact that a majority QF hospital capacity resides
in the private sector suggests that most revenue losses will be felt by the private sector, including private hospitals, physicians, and other private practitioners. However,
this impact on private providers may be ameliorated to some extent because many newly disenfranchised MNlMls may instead seek care through the county public health
The allocation of lost revenues is highly speculative, but the impact on AHCCCS clients is somewhat clearer. An estimated 35,000 individuals will be left ~ rncoverd
by the AHCCCS program, and another 14,000 will be covered for emergency services only. However, some 69,000 women, infants and children wo
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