Obama administration unlikely to block Arizona plan to cut 250,000 from Medicaid rolls

By N.C. Aizenman for the Washington Post

The Obama administration would permit a controversial plan by Arizona’s governor to cut an estimated 250,000 impoverished adults from Medicaid, despite a provision in the new health-care law barring states from tightening their eligibility standards for the program, federal officials said Wednesday.

Gov. Jan Brewer (R) formally requested a federal waiver from the provision last month to make the cut. But in a letter dated Tuesday, Secretary of Health and Human Services Kathleen Sebelius wrote that no waiver is necessary, because the provision does not apply to Arizona’s somewhat unusual circumstances.

The decision could further embolden the other 28 Republican governors who recently released a letter charging that the health-care law’s Medicaid provisions impose crushing costs at a time when many states are grappling with budget shortfalls.

However, advocates for the poor noted that only about a dozen states have Medicaid programs with the particular set of features that would enable Arizona to trim its rolls. In one of those states, Indiana, the deputy chief of staff to Gov. Mitch Daniels (R) said he was not planning to follow Arizona’s example. And it is not clear that leaders of any other eligible states are interested either.

“Certainly we are keeping a watchful eye on a handful of states that might wish to go in this direction,” said Joan Alker, co-executive director of the Georgetown Center for Children and Families. “But Arizona is in a very unique situation . . . so it’s my hope that [it] continues to be an outlier.”

The state has already made some of the country’s most drastic cuts to Medicaid and other health initiatives – halting coverage of organ transplants for about 100 indigent patients on a waiting list, slashing payment rates to doctors by 10 percent, and freezing enrollment in its supplemental health insurance program for children.

At issue now is the health-care law’s Medicaid spending requirements for states. To participate in the health insurance program for the poor – and receive billions in matching federal dollars – states must cover all children and pregnant women up to specified levels of poverty, as well as various other populations, such as some parents of poor children.

For years, states could also choose to use extra federal funds to expand that coverage beyond the minimum to include, for instance, childless adults who are poor. The health-care law turns that option into a mandate. Starting in 2014, states will have to open Medicaid eligibility to all individuals who earn up to 133 percent of the poverty level – with the federal government covering nearly all the additional cost.

In the meantime, the law directs states to maintain their current level of coverage, even if it is above the old minimum standard.

In Arizona’s case, this requirement appeared to block Brewer’s proposal to save $541 million by bumping 250,000 childless adults and 30,000 parents of poor children from the state’s Medicaid plan halfway through the 2012 fiscal year. (The move would save an estimated $900 million more the following year.)

But as Sebelius’s letter noted, while the 30,000 parents fall under Arizona’s regular Medicaid plan, the childless adults are covered through a “demonstration waiver” that permits the state to run Medicaid as a managed care system, similar to an HMO plan.

Such agreements are fairly common and frequently run three to five years. According to HHS officials, the health-care law’s Medicaid eligibility freeze applies only while these agreements are still in effect. For most states, that means 2014 and beyond. But Arizona’s agreement expires Sept. 30.

This means that when the state applies for a new agreement, it can tighten its eligibility rules for childless adults, Sebelius said in her letter. Technically, HHS must still sign off on any new agreement. However, a senior official at the agency said officials had no intention of withholding approval to prevent Arizona from dropping its childless adults – most of whom earn less than $10,830 per year to qualify for the program.

“That would be pretty disingenuous of us to do, given the guidance we’ve just given the state,” the official said.

Monica Coury, a top official in Arizona’s Medicaid program, said she was very pleased with HHS’s position. “The secretary’s letter is extremely well written, and it addresses the state’s concerns,” she said. “Now it’s a question of reviewing it and determining what policy direction will work best for the state.”

Even if Arizona’s majority Republican legislature were to adopt Brewer’s plan, state Democrats would probably counter with a lawsuit. They argue that because Arizonans voted to expand Medicaid to childless adults in a referendum, state lawmakers lack the authority to roll it back.


  1. Sally G on February 24, 2011 at 11:20 am

    This is of particular concern to me because, here in New Jersey, Gov. Christie’s proposed budget eliminates coverage for those residents in the 133%–200% income level. This was exactly a specific concern I raised when PPACA was being debated. Given the high cost of living in N.J., the poor economy overall, and the governor’s propensity for cutting services to the bone, I am exceedingly worried. Federal legislation such as this should be a floor, not a ceiling. Just how specific is this letter to Arizona, and is it a temporary or permanent “nonwaiver exemption”, if I mat refer to it thus? How soon will we know implications for other states, and what can we do to uphold federal minimums? Thanks for any advice.

  2. Chet G on February 24, 2011 at 1:49 pm

    “Change you can believe in.”

    Yeah, right!?!?!?

    First you grab the only impediment we had to block these bat-crap crazy neo-nazis from creating a new Reich here in Arizona, Janet Napolitano and then you abandon us to these fascists…

    Thanks VERY LITTLE, Obama!

  3. Doc Mercer on February 24, 2011 at 8:27 pm


  4. dianne on February 25, 2011 at 1:01 am

    “The health-care law turns that option into a mandate. Starting in 2014, states will have to open Medicaid eligibility to all individuals who earn up to 133 percent of the poverty level – with the federal government covering nearly all the additional cost.”

    Re the above excerpt: What has been done to amend OBRA 1993 so that no state is allowed AND no state is required to recover assets of deceased Medicaid patients who used any or all Medicaid benefits at age 55 and up?

    Currently, states that receive federal Medicaid funding are required to have an estate recovery program that recovers estates (assets) upon death for RX and hospital but can recover for any and all medical benefits used at age 55 and up. In MA and MT, the age starts at 55 – according to a conversation I had with a CMS person, the age can be lower. (Keep in mind that this is not the same as the spend-down for granny who is going into a long-term care institution although that can also be referred to as estate recovery depending on granny’s circumstances – if grandpa is still living at home among other situations.)

    What this means is that when (or if) Obamacare goes full steam ahead in 2014, millions of Americans will be getting a mandated collateral loan. Citizens who are Medicaid eligible will not be allowed to shop at the Exchange (per a Waxman aide during the debates) or will be auto-enrolled at the discretion of the HHS sec’y of each state (per one of the Senate bills) and per another one of the bills would be autoenrolled if said citizen had not voluntarily enrolled within 180 days of implementation of the mandated health insurance law. Per the Reid text, those who are found eligible will be “encouraged” and “helped” to enroll in Medicaid.

    It is highly unlikely that there will be any plans in the Exchange that are affordable and usable for this income segment of the population. Medicaid – a consistently mediocre-to-poor plan – with people being taken off organ donor lists as we read in the article above and much, much more – will be the dumping ground for low-income Americans.

    Obama said all Americans would have choice. He left out the rest of the sentence: except those who are found eligble for Medicaid – unless by choice he meant – between Medicaid and a tax penalty.

    John Kerry’s hc aide in his D.C. office fairly recently claimed (via an intern assigned to call me back) that these folks can shop at the Exchange. When I asked if there would be any affordable plans for them, the answer was, “Well, the plans at the Exchange won’t be as cheap as Medicaid.” This is cover-up language for NO.

    His aide in the Boston office wrote in a letter that estate recovery is a state program under OBRA 1993 so Kerry has nothing to do with getting rid of estate recovery b/c he’s federal, not state.

    This is totally disingenous b/c OBRA 1993 is federal statute, and the estate recovery program is, therefore, federally mandated as stated above.

    John Olver still has not responded to questions about no choice and estate recovery that were submitted to his aides after an event at the Northern Berkshire Coalition in October 2009. (He left before the Q & A. Probably b/c he didn’t know much of anything about Obamacare which was evident by his vague presentation, his reading from the talking points Sibelius created for each U.S. rep and his response to a constituent who asked why he refused to hold a town hall – he couldn’t hold one b/c there was no bill. WTF? He also received a detailed letter about no choice and estate recovery signed by eight constituents and no answer has been forthcoming to any of the eight signees. His hc aide in D.C. knows all about this. We had a lengthy telephone conversation at one point.

    It should also be noted that this issue about estate recovery was not unknown in the halls of congress. Letters were sent, calls were made, some aides said that it was discussed. Joel Segal and John Conyers knew all about it, and both of them said in the lobby after a rally held for HR676 in Northampton, MA about two years ago that they were “working” on this. Told me and told my sister.

    Well, no one is working on getting rid of estate recovery or having some viable choices for this income segment of the population or at least one out of the 70 or so on Capitol Hill who received a detailed letter on the topic would have responded without obfuscation – either privately or publicly. Rep. Donna Edwards cut a constituent off at the knees who said at a town hall that Medicaid is a rotten plan by telling him that she wasn’t there to discuss Medicaid. I saw this on C-span. It made me sick to my stomach and very angry.

    Actually, it is one of the ways that Obamacare will be paid for. What makes this obvious is the fact that the Medicaid regs changed in order to expand Medicaid were as follows: the age and income limitations were increased (up to age 64 and up to 133 percent FPL); childless adults would be allowed and – HERE GOES – the ASSET TEST WAS DROPPED. BINGO!

    So, no (viable) choice for Medicaid eligible citizens except a tax penalty enforced by the IRS as income tax evasion if they aren’t auto-enrolled against their will AND estate recovery for those who use benefits at age 55 and up.

    This is blatant discrimination and exploitation.

    P.S. How will Gruber’s comic book about Obamacare depict all of this? He’ll probably leave it out along with many other sorry details.