Jan Brewer signs Medicaid expansion law

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

Matt York

Republican lawmakers asked the state Court of Appeals Wednesday to give them a chance to prove that hundreds of millions of dollars being used to support an expanded Medicaid program are being collected illegally.

Attorney Christina Sandefur told the judges the Arizona Constitution is clear: Any measure that raises taxes or increases revenues can be enacted only with approval of two-thirds of both the state House and Senate.

But last year's vote to impose the levy on hospitals to finance the program – Gov. Jan Brewer calls an assessment and not a tax – did not get that margin. That, she said, makes it not only illegal but also deprives her lawmakers, who make up more than a third of both chambers, of their constitutional right to block the fee.

Sandefur is making her case to the appellate court because Maricopa County Superior Court Judge Katherine Cooper ruled last year the lawmakers who opposed the tax, who make up more than a third of both the House and Senate, have no right to sue because they had not been injured. Cooper said only those injured by the tax, meaning the hospitals, have standing to challenge it.

Sandefur, a Goldwater Institute lawyer, representing the dissidents, said that's not true.

“They were injured when the governor signed the illegal tax into law,” she said. Sandefur said their constitutional ability to block the levy was nullified.

And she also told the judges that Cooper's ruling ignores one key fact: The hospitals have no interest in suing.

“They financially benefit from it,” she told the judges.

That's because the plan crafted by the governor means more of their patients will have Medicaid coverage and be able to pay their bills. Officials from the Arizona Health Care Cost Containment System, the state's Medicaid program, structured the levy so that no hospital chain would pay more than it gains, even to the point of granting total exemptions to some hospitals.

Hanging in the balance is more than the question of whether the tax on hospitals – an estimated $256 million this coming budget year – can be collected and, by extension, whether there is money for Brewer's Medicaid expansion. There's also the question of whether a simple majority of lawmakers are free to simply decide that 1992 voter-approved constitutional requirement for a two-thirds vote does not apply, free from being challenged by the minority of lawmakers who otherwise would have been able to block the levy.

That argument, being presented by Brewer attorney Douglas Northup, clearly concerned Judge Peter Swann.

“That would sort of render the entire constitutional amendment toothless,” he said.

“If a simple majority could decide that no supermajority is required, when would a supermajority ever be required?”

But Northup said that's making an assumption the levy is, in fact, a tax. He said that has never been proven.

“Just because somebody says it's a duck doesn't necessarily mean it's a duck,” Northup said.

State law requires AHCCCS to provide free health care to everyone below the federal poverty level, $19,790 for a family of three. The federal government has picked up about two-thirds of the cost.

Last year, though, Brewer decided to take advantage of the federal Affordable Care Act which has Washington picking up most of the initial cost of extending coverage up to 138 percent of the federal poverty level. But that required Arizona to restore coverage – and pay the state's share – for about 240,000 childless adults who were excluded from the program three years ago in a budget-cutting move.

Brewer put together a coalition of Democrats and a few Republicans to enact the state funding plan. And to prove it was not a "tax,'' the legislation sets no specific amount but instead allows AHCCCS Director Tom Betlach to unilaterally decide how much each hospital should pay, if anything.

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