PHOENIX (By Robbie Sherwood and
Amanda J. Crawford, Arizona Republic) January 1, 2004
- An unexpected surge in enrollment in the state's health care program for
the poor presents a $75 million problem for the new Legislature and points
to troubling trends in the system that serves more than 1 million Arizonans.
The four-month enrollment spike of 93,000, which ended in November, came despite a growing economy producing new jobs. Officials with the Arizona Health Care Cost Containment System blamed the surge on a backlog that was created by the Legislature in changing eligibility requirements.
Beyond the short-term budget hit are bigger worries.
Growth in AHCCCS has no end in sight, and rising costs loom for fiscal 2004-06. The $3 billion program covers about one out of every five people in the state. About 400,000 or more uninsured Arizonans are eligible for AHCCCS programs and just haven't signed up.
Employer-sponsored health insurance is becoming more expensive and less available in the Arizona workplace. Fewer than six out of 10 employees are covered, a rate below the national average. Newly created jobs, many of them low-paying, temporary or part-time, are widening the pool of workers less likely to have benefits. Arizona's explosive population growth brings with it more needy people, and the state faces issues common across the country as the population ages and costs of care increase.
By law, the state program must pick up the slack by covering all those who are eligible for coverage. Those Arizonans whose income falls at or below the federal poverty line are eligible, with pregnant women and children age 5 and younger having to qualify under less strict standards.
The increased expense will take away funds from other programs as legislators work to balance the budget during the session that begins Jan. 10.
Arizona is not alone.
"Medicaid being a major issue is not just an Arizona phenomenon," said Tom Betlach, AHCCCS' deputy director.
He warned that the federal government is considering action to address Medicaid costs that could further affect Arizona and other states.
"It is being discussed at every state legislature and at the congressional level in terms of the federal government looking for ways to control it," he said. "Congress is facing huge deficits, and they can't cut defense spending, they can't cut Social Security and they can't cut Medicare. The single largest program that leaves is Medicaid."
Roger Hughes, executive director of St. Luke's Health Initiatives, a Phoenix-based health care policy foundation, said, "State Medicaid programs are like a train wreck waiting to happen."
Arizona's largest employers have changed from high-paying manufacturers to low-paying retailers and service industries, which are less likely to offer benefits. The rising costs of health care have made it more difficult for businesses, especially small businesses, to offer benefits to employees. Higher premiums have put coverage out of reach for some workers. As a result, employer-based health care has declined.
According to St. Luke's Health Initiatives, the number of people covered by employer-sponsored health insurance fell in Arizona to 54.8 percent in 2004 from 59.1 percent in 2000 for a bigger drop than the national decline to 60.4 percent from 63.6 percent in the same period.
Aide Reyes, an assistant preschool teacher and mother of two, has been on AHCCCS since she was pregnant with her son two years ago. Her previous employers, a day-care center and a school district, didn't offer her coverage. Her new employer does, but the cost to cover her children would eat up more than half of her take-home pay. She says AHCCCS has been a vital assistance to her family.
"I work, I am single and I can't afford to pay for insurance," Reyes said. "And you never know when an emergency can come up. I know if that happens, me and my kids are covered. With AHCCCS, I am protected."
House Speaker-elect Jim Weiers, R-Phoenix, said he is concerned about the cost of the enrollment spike as well as the growth of AHCCCS.
"This is causing lots of concerns for a lot of people because this is $75 million we don't have," Weiers said. "Right now, I don't have a clear understanding of what all the challenges and problems are at AHCCCS. But I think this year, we're probably going to find out more about AHCCCS than we ever have."
The shortfall has been blamed mostly on an administrative backlog caused by changes lawmakers made to the program's eligibility requirements in the past two legislative sessions. Drops in employer-sponsored health care also may have contributed. And a push by the federal government to get more people on food stamps, which included Phoenix-area radio commercials, also may have increased AHCCCS rolls. The state qualifies applicants for all programs for which they are eligible if they apply for one.
AHCCCS' Betlach said that, by changing the program's redetermination period, the Legislature essentially doubled the workload for the state employees handling enrollment without giving them any new money or staff. Before 2004, a person who qualified for AHCCCS was given 12 months of coverage before being required to reapply. In 2004, lawmakers changed the period to every six months to save money by weeding out those whose income may push them over the line.
Caseloads reached a plateau last spring. That led lawmakers and the Governor's Office to believe a growth spurt in AHCCCS finally was over. The spurt had started in 2000 when voters approved a measure to extend coverage to those with income up to the federal poverty line.
But even as AHCCCS officials were making budget recommendations based on declines in the program, a backlog was building in the Department of Economic Security, which handles most of the enrollment work.
DES employees began working Saturdays, staff members were moved between offices and eligibility interviews for multiple programs were combined to address the increased workload, spokeswoman Liz Barker said.
When lawmakers, lobbied by family and health care advocates, changed the redetermination period back to 12 months in the 2004-05 budget, which took effect in July, DES employees finally had time to catch up, triggering the spike.
Already some conservative lawmakers say they want to change the redetermination period back to six months again because of the enrollment spike. AHCCCS officials insist this will mean more in administrative costs than it saves because most people who fall out of the program end up coming back within a few months.
So there is little lawmakers can do about the spike except cut the agency a $75 million check and seek ways to reduce expenses.
The state is still facing a $126 million revenue shortfall for next year. That could put bull's eyes on programs within AHCCCS that don't enjoy voter or federal protection, like KidsCare and KidsCare Parents, two insurance programs for the working poor and their families. Both programs were targeted in the previous two budget fights but spared both times, partly because they bring in so much federal money.
Some advocacy groups are concerned that lawmakers will use the expensive AHCCCS spike to look for places to cut the program or increase fees. Last year, the Legislature raised AHCCCS co-pays, a move halted by a federal court, and raised premiums for KidsCare, an AHCCCS program for children in families who make twice the federal poverty line or less.
Dana Naimark, director of special projects for Children's Action Alliance, points out that 3,000 families ended their coverage from July to October because they didn't pay the higher premium. At the same time, cost savings were minimal because the state must turn over most of its premiums to the federal government.
"For some legislators who are only looking at the dollar bottom line, their goal might be to cut costs and reduce the rolls," Naimark said. "But the goal of most voters and most legislators is to give people access to health care, people who otherwise wouldn't get it."
AHCCCS is seen as a national model, a managed-care program that allows the state to negotiate rates and set standards for providers.
But it faces the pressures of rapid population growth in the state plus the same national trends that are ballooning Medicaid programs around the country: a decline in employer-provided insurance and rising costs that put insurance out of reach of many working families.
President Bush has pledged to cut the national deficit in half over the next four years, and that has sparked fear among governors that Medicaid will be a chief target.
Gov. Janet Napolitano recently joined others in the National Governor's Association in calling for no cuts to Medicaid.
In Arizona, cuts to the federal portion could result in automatic increases to the state's portion because funding levels have been voter-approved.
"We're feeling the same pressures as every other state in terms of increases to AHCCCS," said George Cunningham, Napolitano's top budget adviser.
The four-month enrollment spike of 93,000, which ended in November, came despite a growing economy producing new jobs. Officials with the Arizona Health Care Cost Containment System blamed the surge on a backlog that was created by the Legislature in changing eligibility requirements.
Beyond the short-term budget hit are bigger worries.
Growth in AHCCCS has no end in sight, and rising costs loom for fiscal 2004-06. The $3 billion program covers about one out of every five people in the state. About 400,000 or more uninsured Arizonans are eligible for AHCCCS programs and just haven't signed up.
Employer-sponsored health insurance is becoming more expensive and less available in the Arizona workplace. Fewer than six out of 10 employees are covered, a rate below the national average. Newly created jobs, many of them low-paying, temporary or part-time, are widening the pool of workers less likely to have benefits. Arizona's explosive population growth brings with it more needy people, and the state faces issues common across the country as the population ages and costs of care increase.
By law, the state program must pick up the slack by covering all those who are eligible for coverage. Those Arizonans whose income falls at or below the federal poverty line are eligible, with pregnant women and children age 5 and younger having to qualify under less strict standards.
The increased expense will take away funds from other programs as legislators work to balance the budget during the session that begins Jan. 10.
Arizona is not alone.
"Medicaid being a major issue is not just an Arizona phenomenon," said Tom Betlach, AHCCCS' deputy director.
He warned that the federal government is considering action to address Medicaid costs that could further affect Arizona and other states.
"It is being discussed at every state legislature and at the congressional level in terms of the federal government looking for ways to control it," he said. "Congress is facing huge deficits, and they can't cut defense spending, they can't cut Social Security and they can't cut Medicare. The single largest program that leaves is Medicaid."
Roger Hughes, executive director of St. Luke's Health Initiatives, a Phoenix-based health care policy foundation, said, "State Medicaid programs are like a train wreck waiting to happen."
Decline in benefits
Nationally as well as locally, more of the burden for health care appears to be shifting to the states.Arizona's largest employers have changed from high-paying manufacturers to low-paying retailers and service industries, which are less likely to offer benefits. The rising costs of health care have made it more difficult for businesses, especially small businesses, to offer benefits to employees. Higher premiums have put coverage out of reach for some workers. As a result, employer-based health care has declined.
According to St. Luke's Health Initiatives, the number of people covered by employer-sponsored health insurance fell in Arizona to 54.8 percent in 2004 from 59.1 percent in 2000 for a bigger drop than the national decline to 60.4 percent from 63.6 percent in the same period.
Aide Reyes, an assistant preschool teacher and mother of two, has been on AHCCCS since she was pregnant with her son two years ago. Her previous employers, a day-care center and a school district, didn't offer her coverage. Her new employer does, but the cost to cover her children would eat up more than half of her take-home pay. She says AHCCCS has been a vital assistance to her family.
"I work, I am single and I can't afford to pay for insurance," Reyes said. "And you never know when an emergency can come up. I know if that happens, me and my kids are covered. With AHCCCS, I am protected."
House Speaker-elect Jim Weiers, R-Phoenix, said he is concerned about the cost of the enrollment spike as well as the growth of AHCCCS.
"This is causing lots of concerns for a lot of people because this is $75 million we don't have," Weiers said. "Right now, I don't have a clear understanding of what all the challenges and problems are at AHCCCS. But I think this year, we're probably going to find out more about AHCCCS than we ever have."
Deep in the hole
Before lawmakers can begin to explore the long-term pressures on the state health care system, they must plug the $75 million gap for fiscal 2004-05.The shortfall has been blamed mostly on an administrative backlog caused by changes lawmakers made to the program's eligibility requirements in the past two legislative sessions. Drops in employer-sponsored health care also may have contributed. And a push by the federal government to get more people on food stamps, which included Phoenix-area radio commercials, also may have increased AHCCCS rolls. The state qualifies applicants for all programs for which they are eligible if they apply for one.
AHCCCS' Betlach said that, by changing the program's redetermination period, the Legislature essentially doubled the workload for the state employees handling enrollment without giving them any new money or staff. Before 2004, a person who qualified for AHCCCS was given 12 months of coverage before being required to reapply. In 2004, lawmakers changed the period to every six months to save money by weeding out those whose income may push them over the line.
Caseloads reached a plateau last spring. That led lawmakers and the Governor's Office to believe a growth spurt in AHCCCS finally was over. The spurt had started in 2000 when voters approved a measure to extend coverage to those with income up to the federal poverty line.
But even as AHCCCS officials were making budget recommendations based on declines in the program, a backlog was building in the Department of Economic Security, which handles most of the enrollment work.
DES employees began working Saturdays, staff members were moved between offices and eligibility interviews for multiple programs were combined to address the increased workload, spokeswoman Liz Barker said.
When lawmakers, lobbied by family and health care advocates, changed the redetermination period back to 12 months in the 2004-05 budget, which took effect in July, DES employees finally had time to catch up, triggering the spike.
Already some conservative lawmakers say they want to change the redetermination period back to six months again because of the enrollment spike. AHCCCS officials insist this will mean more in administrative costs than it saves because most people who fall out of the program end up coming back within a few months.
Access vs. cost
AHCCCS is federally and voter mandated to cover every eligible person who applies, and the federal government pays $2 for every $1 the state spends.So there is little lawmakers can do about the spike except cut the agency a $75 million check and seek ways to reduce expenses.
The state is still facing a $126 million revenue shortfall for next year. That could put bull's eyes on programs within AHCCCS that don't enjoy voter or federal protection, like KidsCare and KidsCare Parents, two insurance programs for the working poor and their families. Both programs were targeted in the previous two budget fights but spared both times, partly because they bring in so much federal money.
Some advocacy groups are concerned that lawmakers will use the expensive AHCCCS spike to look for places to cut the program or increase fees. Last year, the Legislature raised AHCCCS co-pays, a move halted by a federal court, and raised premiums for KidsCare, an AHCCCS program for children in families who make twice the federal poverty line or less.
Dana Naimark, director of special projects for Children's Action Alliance, points out that 3,000 families ended their coverage from July to October because they didn't pay the higher premium. At the same time, cost savings were minimal because the state must turn over most of its premiums to the federal government.
"For some legislators who are only looking at the dollar bottom line, their goal might be to cut costs and reduce the rolls," Naimark said. "But the goal of most voters and most legislators is to give people access to health care, people who otherwise wouldn't get it."
AHCCCS is seen as a national model, a managed-care program that allows the state to negotiate rates and set standards for providers.
Pressures of growth
That means Arizona may be better off than some states, which are working to create managed-care models of their own, said Donna Folkemer, program director for the National Conference of State Legislatures.But it faces the pressures of rapid population growth in the state plus the same national trends that are ballooning Medicaid programs around the country: a decline in employer-provided insurance and rising costs that put insurance out of reach of many working families.
President Bush has pledged to cut the national deficit in half over the next four years, and that has sparked fear among governors that Medicaid will be a chief target.
Gov. Janet Napolitano recently joined others in the National Governor's Association in calling for no cuts to Medicaid.
In Arizona, cuts to the federal portion could result in automatic increases to the state's portion because funding levels have been voter-approved.
"We're feeling the same pressures as every other state in terms of increases to AHCCCS," said George Cunningham, Napolitano's top budget adviser.
