By Byron Schlomach
Ten years ago, the Arizona Health Care Cost Containment System (AHCCCS), Arizona’s free health care system for low income people, cost taxpayers $506 million, 8 percent of the state’s general fund spending. Today, AHCCCS will cost taxpayers almost $1.4 billion, more than 16 percent of the state’s general fund spending. While AHCCCS spending has almost tripled, total state spending has risen by one third.
In good economic times, one in six Arizonans was on the AHCCCS rolls. Today, it’s closer to one in five. Given the state’s budget crunch and explosive growth in this program, this year the legislature reduced spending on Medicaid (including AHCCCS) by around $500 million.
But bringing Medicaid spending back in line and righting the state’s financial ship won’t be so easy. The budget reduction is now subject to a lawsuit. Federal maintenance of effort requirements, prohibitions on co-pays and deductibles, and various other rules keep states from taking sensible steps to control costs.
The federal government has mostly had a “my way or the highway” stance on Medicaid policy. Either Arizona plays by Washington’s rules or we lose two federal dollars for every one dollar we put into Medicaid.
But there may be a way out from between this rock and hard place. Rhode Island was granted a waiver so that its federal Medicaid dollars are block granted back to the state. While Rhode Island receives a fixed amount of money, which might be bitter medicine in some years, it gets flexibility in exchange. Estimates of that small state’s savings are as high as $140 million.
Arizona should pursue a waiver similar to Rhode Island’s. Otherwise, we will be forced to choose between funding Medicaid or funding schools, or eventually opting out of Medicaid altogether.
Learn More:
McClatchy: Rhode Island’s Medicaid experiment draws raves, suspicion
Heritage Foundation: The State Flexibility Act: Moving Closer to Successful Medicaid Reform
Dr. Byron Schlomach is an economist and serves as the Director of the Goldwater Institute’s Center for Economic Prosperity. He has 15 years of experience working in and around state government. He has researched and written on tax and spending policy in two states in addition to studying transportation, health care, and education policy. Schlomach’s writings have appeared in National Review Online, Business Week online and numerous Texas and Arizona newspapers. He is a graduate of Texas A&M University. 
