- Associated Press - Thursday, March 16, 2017

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 that allowed the expansion. The proposal would lower 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-by-state analysis, but the measure would likely have major impacts on Arizona.

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 said she was disappointed in the ruling and promised an appeal to the state Supreme Court. She said it essentially guts a 1992 Constitutional amendment known as Proposition 108 that requires a supermajority to enact tax increases.

“This ruling now really does allow a bare majority to vote to get around Prop 108,” Sandefur said. “It’s a very serious ruling with potentially disastrous consequence for future revenue-raising measures.”

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 praised the ruling, which came from judges appointed by her, current Republican Gov. Doug Ducey and former Gov. Janet Napolitano, a Democrat.

“It can’t get any more bipartisan than that,” Brewer said.

She has said expanding Medicaid insured the most vulnerable, brought money into the state and helped steady the finances of hospitals.

“I am so deeply grateful for the Arizona Court of Appeals for affirming the state’s decision to restore and expand Medicaid coverage through a hospital assessment that very carefully complied with the law,” she said.

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