PHOENIX (AP) — The Arizona Legislature on Thursday authorized Republican Gov. Jan Brewer to seek a federal waiver allowing the cash-short state to temporarily remove nearly 300,000 people from its Medicaid rolls in the first such request by a state.
The House and Senate approved the authorization requested by Brewer amid questions about whether the waiver request would be approved by President Barack Obama's administration, and if the legislation would survive an anticipated court challenge.
Brewer wants to suspend the eligibility of 280,000 low-income adults, which would scale back the state's coverage to near that of most other states and save $541.5 million. It's the single biggest element in Brewer's plan to eliminate a projected $1.1 billion shortfall in the next state budget.
The waiver issue could set the stage for yet another health care battle between the federal government and states.
Arizona is already among states participating in a legal challenge to the federal health care overhaul. Several Republican legislators said the waiver would allow the state to chart its own course on health care and budgeting.
"All we're asking for in this situation is to try to design a program that will work for us," said Sen. Sylvia Allen, R-Snowflake.
Brewer and other Republicans contend the state cannot afford its current Medicaid program, and the eligibility reduction is necessary to avert deeper state budget cuts for education and other services.
Brewer was expected to sign the authorization bill later Thursday. The chambers approved the move along party lines, with majority Republicans in favor and minority Democrats opposed.
Arizona, which has seen its revenue drop by a third due to the recession and the collapse of the homebuilding industry, also reduced Medicaid coverage for transplants on Oct. 1. Two people who were eligible for transplants before coverage ended for some procedures have since died, with hospital officials attributing one to the coverage change.
The state also has used a temporary sales tax increase, borrowing and numerous budget gimmicks to try to close its budget gap. Federal stimulus funding previously used to prop up spending is now drying up.
"We're down to bad options and worse options," said House Majority Whip Debbie Lesko, R-Glendale. "None of us want to make difficult decisions but this is our job, and this is what we have to do."
Democratic legislators said the Medicaid eligibility cutback would hurt those who lose coverage and the state's health care industry as well as the overall economy.
"It's a poor fiscal decision for the state. It's a poor decision for those families," said Senate Minority Leader David Schapira, D-Tempe.
The Legislature considered the waiver request during a special session running concurrently with the 2011 regular session. The tactic could speed its submission to the U.S. Department of Health and Human Services.
The change would reduce enrollment in the state's Medicaid program, formally known as the Arizona Health Care Cost Containment System, by about a fifth. The bulk of those who would lose coverage are all non-pregnant, non-disabled, childless adults and also parents with incomes above 50 percent of the federal poverty level.
Monica Coury, an AHCCCS assistant director, said the state would file the request by next week under a Social Security law that gives the Department of Health and Human Services secretary broad discretion to grant waivers on Medicaid.
"We believe this waiver request will be taken seriously by the administration and at the very least will open the door to further dialogue to possible solutions to address Arizona's crisis," Coury said.
Sen. Kyrsten Sinema, D-Phoenix, who serves on Obama's health reform task force, said she doubts his administration would approve the waiver request. It conflicts with Obama's push to increase health care coverage, she said.
Mary Kahn, a spokeswoman for the HHS office that oversees Medicaid, said the agency would not comment on Arizona's proposal prior to the conclusion of a formal review that won't start until the request is received.
"We don't talk about what a state might theoretically do," Kahn said.
She said no state has yet asked to be excused from the federal health care overhaul's so-called "maintenance of effort" requirement. That mandate requires states to keep their Medicaid eligibility levels at early 2010 levels until the overhaul expands Medicaid nationwide in 2014.
A state could be subject to losing its entire federal Medicaid funding if it doesn't abide by the maintenance of effort requirement.
States typically derive about two-thirds of their Medicaid funding from the federal government, and Arizona's AHCCCS director has said the loss of federal funding would effectively kill the program.
Meanwhile, lawmakers on both sides of the issue said they anticipate a legal challenge contending the Legislature can't reduce the Medicaid population because those who would lose coverage were added under a law approved by voters in 2000.
(This version CORRECTS Corrects income level for parents. A new approach. Updates with comment from legislators, others. Corrects spelling of official's name. Restores background. Update planned with expected action by governor at unspecified time later Thursday.)
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