Arizona: Cutting Health Coverage for the Working Poor
 Financially strapped Arizona has preserved healthcare insurance for children of low-income families for now, but parents’ coverage is cut in an effort to close the state’s budget gap, reports the Arizona Republic.
The action comes despite a premium increase in the spring that generated $5.6 million annualized ($1.3 million General Fund) dollars to help offset budget reductions enacted in the 2009 Legislative Special Session, according to an Arizona Health Care Cost Containment System fact sheet.
Arizona will pay dearly for the cut. While eliminating the parents’ part of the program saves $6 million in state expenditures, it results in a loss of $18 million in federal dollars to administer the program, says the Arizona Republic – that’s $18 million that was being pumped into the state’s economy that will disappear.
Parents’ Program an Add-On
The AHCCCS fact sheet provides a thumbnail history of the KidsCare Program, which was enacted in 1997 by the Arizona Legislature shortly after Congress implemented the State Children’s Health Insurance Program. Until 2003, the program just covered children. But in 2003, a lot of things happened that caused the program to grow by leaps and bounds during a period of financial abundance for state coffers.
In 2000, Arizona voters approved Proposition 204 related to allocation of the state’s $3.2 billion share of a $206 billion settlement by 46 states with tobacco producers. Spurred by voter sentiment, the Legislature acted to expand eligibility under AHCCCS and continued to do so in subsequent years.
KidsCare is actually one of the smaller AHCCCS programs; the three major efforts target acute care for the state’s poor (typically around 90 percent of the total budget), KidsCare, and long-term care for the elderly (the latter two programs hover around 4 to 6 percent each of the AHCCCS budget).
As of February 2009, the KidsCare Program was serving 59,500 children and 9,200 parents of those children.
KidsCare coverage was extended to the parents of children in the program in 2003, as Arizona was busily expanding social services with the infusion of cash from the tobacco settlement.
But the inherent difficulty involved in needy people depending on the government for support is that oftentimes lawmakers tend to spend freely when times are good and are caught short if fortunes quickly turn south.
Arizona’s significant expansion of AHCCCS eligibility during the onset of receiving tobacco settlement funds placed the state in a dire predicament. Although initially Arizona’s managed-care Medicaid program (AHCCCS) restrained costs and put the state well below the national average for Medicaid expenditures, the expansion of the program that occurred with Proposition 204 pushed Arizona above the national average, notes Time Magazine.
Arizona lawmakers cannot entirely shoulder the blame. Medicaid is a federal block program that makes program expansion very attractive to states because it comes with a hefty increase in federal funds.
As the previously mentioned AHCCCS fact sheet points out, FY 2009 funding for the KidsCare program was about $161.5 million. But only about one-fifth of that (just under $35.2 million) came from the state’s General Fund. The lion’s share – over $112 million – came from the federal government (and another $14 million from premiums). What state wouldn’t want to spend $35 million, if it was available, in order to get another $112 million? The enticement of such programs is hard for states to resist, even when it comes with federal requirements the states may not like.
The Complication
Since AHCCCS’ establishment in 1982, costs have grown rapidly. For example, in the 20 years from 1989 to 2009, AHCCCS spending has grown from $244.3 million to $1.43 billion, according to Joint Legislative Budget Committee statistics. That’s a 484 percent growth in spending in 20 years, even though inflation was low. A Bureau of Labor Statistics inflation calculator finds that $244.3 million in spending in 1989 would have been equivalent to $424.3 million in spending in 2009. But, instead AHCCCS expenditures were $1.43 billion. Part of that increase may be attributable to population growth (Arizona has traditionally been one of the fastest growing states), and higher healthcare costs, but it’s also attributable to ongoing relaxation of eligibility requirements that have led to the program covering more and more people year after year.
During the current recession, states have experienced the worst decline in revenues in 46 years, according to the Rockefeller Institute – an average of 11.7 percent. Meanwhile, as discussed in the AOH article, “Arizona: Budget Deficit Persists,” Arizona has done two things over the last couple of decades: vastly increased General Fund spending and shifted its reliance more heavily on to the state’s sales tax, giving the state less diversity of revenue resources. (Arizona’s General Fund spending has grown by 873 percent from 1980 to 2009, the AOH article notes.)
Couple these serious trends with the federal block programs that tie an exponentially larger sum of federal dollars to state expenditures (expenditures lawmakers now find they must cut to close a budget gap) and the exceeding dire situation becomes apparent. Such programs compound the fiscal/economic blow to the state when spending is cut.
Conclusion
The Arizona Republic’s article on elimination of parent eligibility under the KidsCare program, one of three primary Arizona Health Care Cost Containment System efforts, dramatically illustrates the tough choices being foisted on state lawmakers facing budget gaps that are expected to continue as a threat for at least the next few years.
But, it also is an example of how increasing government’s responsibility for social programs (particularly through expanding eligibility to people not envisioned as recipients when the programs were first established) can come back to haunt residents when times turn tough.
It also illustrates how lawmakers’ inclination to spend – and provide all kinds of new programs to constituents in times of financial abundance – can backfire. And that inclination is the nature of the political beast for states and communities that want to provide more offerings to residents when there is an excess of funds.
Finally, the example illustrates the trap of federal block programs that can vastly multiply economic losses when state spending required for receipt of federal funds cannot be sustained. Time Magazine pointed out that health, welfare, and education account for more than 90 percent of all federal transfers in Arizona and, for several years, AHCCCS accounted for more than half of all federal funds received.
Ultimately, all signs point to the fact that just filling a momentary gap is not enough – policy makers need to assess the larger picture and decide how to build a structure with more economic resilience in tough times and, perhaps, re-think how extensive a role government should play in the lives of its citizens. |
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