In a letter to Arizona Gov. Jan Brewer earlier this week, U.S. Department of Health and Human Services Secretary Kathleen Sebelius informed Brewer that the state does not need an HHS waiver for its plans to remove more than 250,000 people from its Medicaid rolls.
The state passed a resolution in January authorizing the Brewer administration to seek the waiver, as Arizona struggles to close one of the most severe state budget deficits in the country. The state sought the waiver as a means to protect its federal matching funds, which could have been jeopardized if the state did not meet Medicaid "maintenance of effort" (MOE) requirements for program eligibility.
[See also: Arizona governor seeks to drop 280,000 from state Medicaid rolls.]
But the letter from Sebelius indicated that the 280,000 people affected were also added to the state rolls as a result of a Medicaid demonstration waiver set to expire Sept. 30 this year.
"The MOE provision in the Affordable Care Act does not require Arizona to renew its demonstration as is, beyond its expiration date of September 30, 2011," the Sebelius letter noted. "Waivers are time-limited commitments – both for a state and for HHS – and neither the Affordable Care Act nor Medicaid law or regulations prior to its enactment require a state to renew a demonstration beyond its expiration. Any reduction in eligibility associated with the expiration of your demonstration for individuals whose eligibility derives from the demonstration (for example, the childless adult population) would not constitute an MOE violation."
Those losing coverage under Arizona's plan would be roughly 250,000 childless adults. Another 30,000 who are parents of children, but whose incomes exceed $10,830 annually that the state also wanted to drop from the program must continue to receive coverage. Both groups were added to the state's Medicaid program early last decade by a voter referendum, which earmarked Arizona's share of money from the landmark tobacco industry settlement in the late 1990s to fund their healthcare.
According to figures released by the state, Arizona could expect to see savings of $540 million in fiscal 2012, which would take a hefty bite out of the state's anticipated $1.1 billion budget shortfall.
Reacting to the letter from Sebelius, Brewer said it "is an encouraging development for Arizona as we seek flexibility from the federal government under the Affordable Care Act. Secretary Sebelius' letter clearly indicates that Arizona may take the steps it requires to manage its Medicaid program and balance its budget, without violating MOE requirements."
But Democratic lawmakers in Arizona aren't happy with the proposed cuts to Medicaid, which come on the heels of cuts in 2010 that included reducing the number of procedures covered under the program, as well as Brewer's controversial decision to eliminate funding for transplants.
[See also: Second patient removed from Arizona transplant list dies.]
"Gov. Brewer no longer can place unwarranted blame on President Obama or the federal government for the difficulties the state faces or the broken system she refuses to fix," said state Sen. Kyrsten Sinema, (D-Phoenix) in a prepared statement. "She's the only one who can be held accountable for the massive cuts to health care for Arizonans that she plans to make."
State Democrats and advocacy groups have indicated the potential to challenge whether Brewer has the constitutional authority to drop the coverage since it is counter to voter approved Prop. 204, which expanded coverage to this population.