KidsCare repeal said to jeopardize federal Medicaid funding

A controversial decision by Arizona lawmakers to eliminate a health insurance program for poor children puts it at risk of losing billions of dollars in federal Medicaid funding under the historic health care bill approved by Congress.

Arizona last week became the first state to eliminate its Children's Health Insurance Program, removing an estimated 38,000 kids from the rolls starting in June in a budget-cutting move by Gov. Jan Brewer and the Republican-led Legislature.

State officials said Monday the move could have devastating consequences because of the health insurance plan in Washington.

Rep. Kyrsten Sinema, D-Phoenix, told Brewer and House Speaker Kirk Adams in separate letters that eliminating the state's KidsCare program on June 15 would violate a "maintenance of effort" requirement of the Senate health care overhaul bill approved by Congress.

The state's Medicaid program, the Arizona Health Care Cost Containment System, now provides coverage to approximately 1.3 million Arizonans.

Monica Coury, an AHCCCS assistant director, confirmed that the overhaul bill requires Arizona to keep its current eligibility intact and hinges all of the state's federal funding for Medicaid on it.

"That's what the language says," Coury said.

Arizona expects to receive nearly $7 billion in the current fiscal year, according to the legislative budget office.

"I cannot believe that this Republican legislature would be willing to forfeit every federal Medicaid dollar that Arizona receives, once they understand the implications of doing so," said Sinema, the House Democrats' assistant leader and their point person on health-care funding. "Arizona cannot afford to give up that care."

Earlier Monday, Brewer spokesman Paul Senseman said state officials were trying to determine the implications and requirements of the federal health care legislation, but said there was a potential for a "gigantic hole" in the state budget.

However, federal officials "haven't made any threats to us yet" to cut off funding, Senseman said.

Adams, R-Mesa, said legislative analysts were reviewing the federal health overhaul legislation's requirements and that he did not immediately know whether Sinema was correct.

Sinema released copies of e-mails in which federal officials said over the weekend that the health care overhaul legislation requires a state to maintain current programs, including a CHIP, to remain eligible for Medicaid funding.

Sinema and other House Democrats want Adams, R-Mesa, to permit late legislation to expand the state sales tax to raise the $22 million needed to keep KidsCare. The Democrats suggested applying the tax to retail sales of extended warrants on products such as televisions.

Apart from the KidsCare elimination, a separate funding cut included in the state budget signed by Brewer would drop 310,000 people from AHCCCS coverage in January unless new federal funding is provided.

Brewer had urged the state's congressional delegation to vote against the overhaul, complaining that the Senate bill would inflate costs to the already financially struggling state.

However, a last-minute change provided Arizona and 11 other states with additional funding under the federal legislation because their Medicaid programs were more generous. U.S. Rep. Harry Mitchell, D-Ariz., said the increased funding "was a critical factor" in his decision to vote for the bill.

According to a chart released by Sinema, the new federal funding for three years starting in 2014 will pay 100 percent of Arizona's costs for people newly eligible for coverage, with the reimbursement level dropping to 90 percent by 2010.

The state now receives reimbursements ranging from 66 percent to 75 percent.