Arizona Prepares to Radically Scale Back Its Medicaid Program

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September 30, 2011; Source: Cronkite News | Here in the U.S. we spend twice as much on healthcare as any other rich industrialized nation, and yet our health outcomes are no better, and in many cases, worse. Our healthcare spending is on an unsustainable path. At some point, the law of gravity will kick in and healthcare spending will start to bump up against an immovable ceiling. That moment is happening now in Arizona.

The state is currently negotiating with the feds to cut about $500 million a year from its Medicaid program, weirdly called the Arizona Health Care Cost Containment System. But because of the way Medicaid funds are shared between the federal and state levels, that $500 million in cuts will be compounded two times over by the loss of $1 billion in federal matching funds. So in all, health care for the poor in Arizona is about to take a massive annual hit of $1.5 billion.

State officials argue that they can no longer maintain Medicaid at the current level of generosity, and they do seem to have a point there. Arizona is one of only a few states that covers all low-income residents with its Medicaid program, including childless adults.

If healthcare costs are ever going to be brought under control, someone—patients, doctors, hospitals, insurance companies—is going to have to give something up. That’s beginning to happen now in Arizona. The state is requesting to reduce by 5 percent the share of medical fees it pays hospitals. If approved, this would be the second rate reduction in as many years for Arizona hospitals. We don’t have data yet on who ultimately is paying for these cutbacks. Is it the doctors? The hospital administrators? The insurance company executives or their shareholders? Or is it the nurses, the nursing assistants, the orderlies, the janitors? Or the patients?

If experience is any guide, the weakest clients, even those with the strongest claims, will suffer. That’s how Reagan budget director David Stockman put it 30 years ago: Weak claims trump weak clients. Get ready, Arizona.—Chris Hartman