Taking a Stand for Arizona(ns)

As we wait to hear the fate of the GOP health care bill that is expected to be voted on by the House of Representatives today, the Arizona Hospital and Healthcare Association is urging our state’s congressional delegation to oppose the bill as currently drafted. Below is a letter from AzHHA President and CEO Greg Vigdor detailing the hospital association’s position. We would love to hear your feedback on the bill and on the letter. Thoughtful discussions with our health partners is a critical piece of our long term goal to one day make Arizona the Healthiest State in the Nation!

On behalf of the Arizona Hospital and Healthcare Association (AzHHA) and our Board of Directors, I write to you to express our opposition to the American Health Care Act (AHCA) in its current form. AzHHA is a statewide association of more than 80 hospitals, healthcare and affiliated health system members and one of the foremost leaders in promoting a robust and resilient healthcare delivery system in Arizona. We do not take our position lightly, nor should it be construed as a political statement. We simply cannot support the legislation as currently drafted due to the consequences it would have on patients, system infrastructure, and our state’s economy.

Of utmost concern are the proposed changes to Medicaid and the impact these will have on patients served by the program. Arizona has recent experience with such impacts. In 2011, the state legislature froze enrollment of childless adults in Prop. 204 in response to state budget deficits resulting from the Great Recession. During the freeze, patients who needed routine care for chronic illnesses or treatment for serious conditions such as cancer often went without care until they were forced to seek treatment in emergency departments. Cutting coverage did not eliminate the need for medical care. It merely delayed care while medical conditions deteriorated, making treatment costs more expensive.

By almost all accounts, Arizona’s decision to restore Prop. 204 coverage, which was only possible by drawing down enhanced federal funding for expanding Medicaid, has been a major success in Arizona. For example, nearly 400,000 Arizonans have obtained coverage through Medicaid Restoration, many of whom are elderly or have behavioral health and substance abuse diagnoses. The state has successively been able to target interventions addressing chronic disease management and high-risk populations. This has resulted in reduced hospital readmissions and generated cost-savings. Enhanced coverage from the Arizona Health Care Cost Containment System (AHCCCS) has also allowed the state to be more strategic toward improving healthcare outcomes, rather than reactively addressing poor outcomes through hospital emergency departments.

AHCCCS estimates 134,000 individuals will lose Medicaid coverage in Arizona in 2020 if enrollment in the Prop. 204 and expansion categories are frozen as a result of losing enhanced federal funding. The number increases to 383,000 in 2023. As mentioned previously, the cost of caring for these patients will not go away. They will simply be shifted elsewhere.

We agree that many improvements can be made to the Medicaid program, and welcome the opportunity to engage with you on these. However, we are concerned that restructuring the Medicaid program into a capped federal funding model as conceived of in the AHCA, will simply result in reduced federal support, which will thwart true systemic transformation. Financial risk will merely be transferred to the states, and ultimately to providers like hospitals, who by mission and federal mandate, are responsible for providing emergency medical screening and stabilizing treatment regardless of a patient’s ability to pay. Bending the Medicaid cost curve will not be achieved by simply cutting federal support. Rather, providers, state policymakers and the federal government must collaborate as equity partners in developing solutions that improve the health of Medicaid recipients and incent value.

We are also very concerned about the broader implications that a reduction in coverage will have on the healthcare system and the state’s economy. Prior to enactment of the previous Prop. 204 enrollment freeze, hospital uncompensated care as a percent of hospital revenue hovered around 3.9 percent. It more than doubled to 8 percent in 2013, before dropping to 4.9 percent after the freeze was lifted and enrollment under the ACA implemented. In 2015, uncompensated care came down to a pre-recession level of 3.4 percent. Overall, restoration of Prop. 204 coverage and expansion eliminated more than $500 million in uncompensated care cost, bringing greater economic stability to the hospital sector and directly corresponding to improved access to care for all Arizonans, not just AHCCCS beneficiaries.

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If coverage is lost as a result of the AHCA, we would expect uncompensated care to spike just as it did under the Prop. 204 enrollment freeze. These costs will be passed on to other payers, mostly the Arizona business community, but will also be partially absorbed by hospitals and healthcare institutions. When this happened prior to Medicaid Restoration in 2014, lost operating revenue seriously weakened the financial condition of Arizona’s hospitals, forcing eight hospitals to file for bankruptcy protection and twelve others to undergo various mergers in 2013-14.

We are also concerned about the impact that the AHCA will have on the state’s economy. Medicaid Restoration was a key factor in stabilizing the healthcare sector after the Great Recession. According to the American Hospital Association, Arizona hospitals supported more than 190,000 Arizona jobs directly or indirectly in 2014 and contributed more than $27 billion in state economic activity. This would not have been possible without restoration of Prop. 204 coverage. The AHCA threatens to undermine this recent recovery. George Washington University estimates Arizona will lose 20,300 jobs, gross state product will shrink by $10.8 billion, and business output will decrease $17.9 billion during the first five years of eliminating Medicaid expansion.

While our greatest concerns with the AHCA relate to the Medicaid provisions, we also see a need to improve other sections of the legislation. For example, fixing the exchanges through the principle of tax credits rather than subsidies is amenable, yet the level of the credits in the proposal must be increased to ensure accessibility for individuals and families to maintain or add healthcare coverage. Tax credits for vulnerable populations must receive special consideration.

AzHHA finds further concern that the AHCA does not repeal the Medicare cuts to hospitals that were used to finance the ACA. These amounted to $155 billion nationally, and we estimate a $4.8 billion impact on Arizona’s hospitals. Virtually all of the tax increases that were approved to fund the ACA are repealed in the proposed bill, but the cuts to hospitals are left in place. Without these also being repealed, hospitals in Arizona will have even less ability to manage the cost and payment shortfalls that were our circumstance during the Great Recession. Again, this greatly increases the likelihood of a dramatic reduction in hospital services and, quite possibly, facility closures.

As we have shared before and after the election, we are prepared to work with Congress and other policy makers on building a better way for America’s and Arizona’s healthcare delivery system. Only by working together can we achieve our Association’s vision of “Making Arizona the Healthiest State in the Nation.” Now is the time for a new commitment to better healthcare, and presumably through a new blueprint from Congress that we can build upon in our great state. We are ready to do so and have communicated this directly to Governor Ducey, the Arizona business community, and other leaders.

The current proposal, however, is not a blueprint through which we can advance this improvement in Arizona. We ask you to join us in building a better future by first voting No on the AHCA, and then working to create a better alternative in legislation that can be the roadmap to better healthcare—and better health—for all Arizonans.

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