Appeals court rejects Arizona Medicaid expansion challenge

PHOENIX (AP) - The Arizona Court of Appeals on Thursday rejected a challenge from Republican state lawmakers to the Medicaid expansion pushed through the Legislature four years ago by former Gov. Jan Brewer.

The unanimous three-judge panel ruled that a hospital assessment that pays the state costs of insuring more than 400,000 low-income residents is constitutional.

Brewer battled fellow Republicans in the Legislature for months in 2013 over the expansion, finally calling the Legislature into special session to push through the measure.

Republican lawmakers who sued said the fee funding expansion was really a tax requiring a two-thirds majority vote to pass under a provision in the state Constitution. The measure didn't meet that threshold, netting only a slim majority in the House and Senate as a handful of Republicans joined with minority Democrats to pass the law.

The court flatly rejected that argument.

The court's ruling comes as Congress considers legislation that would vastly change former President Barack Obama's Affordable Care Act health law that allowed the expansion. The proposal would change the expansion law, lowering payments to states in 2020 in a change the non-partisan Congressional Budget Office said earlier this week would lead to the an estimated 14 million Medicaid recipients losing coverage by 2026. The CBO analysis didn't do a state-b7y-state analysis, but the measure would likely have major impacts on the state and its expansion.

A trial judge in 2015 sided with Brewer and state Medicaid director Tom Betlach, with a judge ruling the assessment was not a tax. The Goldwater Institute, representing 22 GOP lawmakers, appealed.

The Court of Appeals agreed with the trial court, with Judge Paul J. McMurdie writing that because Betlach sets the hospital assessment rate, it is a fee, not a tax.

The appeals court held a hearing in mid-February that appeared to show the challenge was in trouble.

McMurdie got nods from the other two judges when he said the argument brought by the Goldwater Institute lawyer appeared illogical. Christina Sandefur had argued that the exception for fees in the Constitution's requirement for a two-thirds vote to pass a tax increase rarely applies.

"You wouldn't need the exception if they did it by a supermajority," McMurdie said. "That is the most circular argument I think I've ever heard."

Sandefur issued a statement saying Goldwater was disappointed in the ruling, saying the court's interpretation "allows lawmakers to give unelected bureaucrats virtually unlimited power to impose taxes on Arizonans simply by calling them "assessments."" She promised an appeal to the state Supreme Court.

Brewer's law restored coverage for childless adults earning less than 100 percent of the federal poverty level who had been covered in Arizona before the Great recession sapped state revenues, and extended coverage to all Arizonans legally in the country who earn up to 138 percent of the poverty level.

Brewer surprised many when she embraced the expansion, and angered many other Republicans with her efforts, which included calling the special session after Republican legislative leaders stalled a vote on the measure for weeks.

Brewer didn't immediately respond to a request for comment Thursday. However, she was in court for the arguments last month and said she's proud of the achievement.

"I don't regret today anything that I did in regards to this," Brewer said. "I think it was right thing to do, it saved lives, it insured more people, it brought money into the state, it kept rural hospitals from being closed down. And today there are tens of thousands of people that are very, very grateful."

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