Arizona Republican Gov. Jan Brewer signs the Medicaid expansion law, Monday, June 17, 2013, in Phoenix. (AP Photo/Matt York)

Matt York

In a major victory for the legislative minority, the state Court of Appeals ruled Tuesday that lawmakers on the losing end of last year's Medicaid expansion have a constitutional right to challenge the law and the levy it imposes.

In a unanimous decision, the judges rejected arguments by Gov. Jan Brewer that only the hospitals subject to the levy have the ability to argue that it is a tax and therefore can be enacted with only a two-thirds vote of both the House and Senate. The assessment got only a bare majority in each chamber.

More significant, the court rejected Brewer's contention that a simple majority of lawmakers have the constitutional power to decide when a measure needs a two-thirds vote. Appellate Judge John Gemmill said that ignores the actual language of the Arizona Constitution.

He pointed out that the voter-approved mandate for a two-thirds vote spells out that it applies to a host of changes in revenues, including the imposition of any new tax as well as the imposition of any new fee or assessment. It also applies to authorizing any state agency to set fees.

Gemmill said the plan language dictates that if a measure does anything spelled out in that provision, it can be enacted only by a two-thirds majority. He said allowing a simple majority to decide when to impose that two-thirds requirement would undermine the constitutional language.

“We reach this conclusion because the plain language of (the provision) reveals it is a limitation on the legislature's power to pass certain revenue raising measures,” Gemmill wrote. Any other interpretation, he said, eviscerates the ability of the constitutional's “ability to act as a limiting provision on the legislature's power.”

Tuesday's ruling does not end the matter – and not only because Brewer has vowed to seek Supreme Court review.

Even if the high court leaves the ruling undisturbed, that only gives the go-ahead to the lawmakers who voted against Medicaid expansion a chance to make their case that the levy – what the governor has called an assessment – is in fact a tax and therefore subject to the two-thirds vote.

“If we have to return to the trial court to litigate the hospital assessment, we're confident in its legality,” Brewer said in a prepared statement.

That question of whether the levy is legal is crucial to whether Medicaid is expanded.

If courts ultimately rule the levy is a tax, the state cannot collect the estimated $256 million this coming budget year since it did not get the required two-thirds vote. Without those funds, Brewer's entire Medicaid expansion plan falls apart as Arizona no longer has the state money necessary to tap into cash from the federal Affordable Care Act.

That possibility clearly concerns the governor.

Brewer built a coalition of Democrats and some Republicans last year to expand eligibility for the Arizona Health Care Cost Containment System, the state's Medicaid program, to everyone up to 138 percent of the poverty level, or about $27,000 for a family of three. Prior to this year, only those below the federal poverty level were eligible.

That move, coupled with restoring coverage for single adults that was slashed in 2011 in a budget-cutting move, potentially adds 300,000 to the AHCCCS rolls.

But even with federal dollars there was still a cost to the state. So the plan Brewer crafted what she called an “assessmen” on hospitals to pay that share.

“Arizonans should be concerned if the courts prevent the implementation of my Medicaid restoration plan because that would jeopardize the state's ability to restore critical, cost-effective health care to tens of thousands through AHCCCS,” she said. And Brewer said killing the program “would do so against the will of voters who twice voted to provide a health care safety net for our most vulnerable citizens.”

What Brewer did not say it she was the one who asked lawmakers to stop enrolling childless adults, ignoring those cited ballot measures which require the state to provide care to everyone below the federal poverty level. As a result, about 160,000 adults who otherwise would be eligible were denied care – people who Brewer now says will get back coverage with her plan which is contingent on that hospital assessment.

In the latest lawsuit, Brewer's lawyers argued that the only ones entitled to contest the legality of the assessment – and the lack of a two-thirds vote – are the hospitals themselves. But the hospitals did not object because AHCCCS Director Tom Betlach, crafted the levy so that the amount paid by any hospital chain would be less than what they would gain by more of their patients having health insurance.

That left the dissident lawmakers to sue to get a ruling that the levy was, in fact, a tax.

They never got that far after Maricopa County Superior Court Judge Katherine Cooper sided with Brewer, ruling only the hospitals could challenge the lack of a two-thirds vote. Absent that, she said it is up to lawmakers themselves to decide when that two-thirds vote requirement applies.

Gemmill said allowing half the legislature to decide when a two-thirds vote is needed defies logic as well as the plain language of the Arizona Constitution.

For example, he said lawmakers might want to raise income tax rates, and Gemmill said such a measure presumably would fall within the constitutional mandate for a supermajority vote.

Gemmill said lawmakers could ignore a constitutional provision that such legislation contain language which spells out that it is effective only on a two-thirds vote. But that does not make the requirement for the supermajority go away.

“Such an omission would not defect the constitution's requirement that any bill raising the state income tax rates be passed by a two-thirds supermajority of each legislative chamber,” he wrote.

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