Affordable Care Act Hospital Fee Upheld in Arizona

PHOENIX (CN) – A 2013 Arizona law that expanded Medicaid did not require two-thirds approval by the state legislature because it did not create a tax on hospitals, the Arizona Court of Appeals ruled.

HB 2010 expanded the Arizona Health Care Cost Containment System (AHCCCS) to comply with the Affordable Care Act.  With help from former Gov. Jan Brewer, the bipartisan-backed bill passed with a simple majority and provided health coverage for over 250,000 low-income Arizona residents.

Thirty-six Republicans who voted against the bill, led by former Senate President Andy Biggs, argued it imposed a tax on hospitals, the funds from which were then applied to the health care needs of low-income patients. And because a 1992 ballot measure passed by voters required a two-thirds majority on new taxes, the Republicans said 2010 should have required a super-majority to pass.

“H.B. 2010 delegates the authority to levy the provider tax to the unelected AHCCCS director, requiring the director to ‘establish, administer and collect an assessment on hospital revenues, discharges or bed days for the purpose of funding the nonfederal share of the costs,’” the legislators’ original complaint stated.

The appellate court’s three-judge panel disagreed. It ruled Thursday that the assessment is distinct from a tax because it benefits the hospitals directly. Some of the money collected from the assessment goes back to the hospitals; statute mandates they receive the funds for uncompensated care.

“The assessment is imposed by the director of AHCCCS, on hospitals, and it is intended to provide additional funding for hospitals caring for qualified individuals under the expansion,” Judge Paul McMurdie wrote for the panel.

The “benefit” criterion is one of three factors the court used to distinguish the hospital fee as an assessment rather than a tax. Other criterion included who was imposing the fee – if it was not imposed by the legislature, it was not a tax – and who was paying the fee.

Christina Sandefur, executive vice-president of the Goldwater Institute, represented the legislators in the case.

“This decision encourages lawmakers to evade the constitutional supermajority requirement and to ignore the will of the voters who passed Prop. 108,” Sandefur said in a statement, referring to the 1992 ballot measure. “It encourages less responsible and less accountable lawmaking, the opposite of what the voters intended.”

Sandefur said the legislators plan to appeal their case to the Arizona Supreme Court.

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