- Associated Press - Friday, July 1, 2011

PHOENIX (AP) - Federal officials cleared the way Friday for Arizona to bar thousands of low-income residents from seeking Medicaid coverage in the next year as the state tries to close a budget shortfall projected at roughly $1 billion.

The partial freeze that will prevent adults without children from either enrolling for the first time or re-enrolling in the Medicaid program if they left previously is set to begin next Friday. It had initially been scheduled to begin a week earlier but the state needed federal clearance to implement the program, and federal officials weren’t yet ready Thursday to act on the latest version submitted earlier this week.

Estimates on the number of low-income Arizonans affected in the next year because of the July 8 freeze and a smaller one for parents planned to take effect Oct. 1 for another eligibility category range from 130,000 to 150,000.

The state’s Medicaid now covers approximately 1.3 million.

Cindy Mann, director of the federal Centers for Medicare and Medicaid Services, said federal officials regret the state’s decision to reduce eligibility and were only acting on the implementation plan.

The partial enrollment freeze is part of a package of eligibility reductions and other changes being implemented to save a projected $500 million to eliminate about half of a state budget shortfall that was projected for the fiscal year that began Friday.

Along with the freeze, the implementation plan approved Friday includes provisions for appeal rights, notices to beneficiaries and steps to shift people to other eligibility categories.

Monica Coury, assistant director of the state’s Medicaid program, known as the Arizona Health Care Cost Containment System, said earlier Friday that federal clearance of the implementation plan would mean the freeze will take effect July 8.

State officials need the time to make preparations that include changing computer programs, she said.

On Thursday, a judge denied a request by opponents of the partial freeze for a temporary restraining order to block implementation.

Arizona expanded its Medicaid eligibility when voters approved a 2000 law, and that is the core issue in a legal challenge to the eligibility change.

Opponents argue that the state cannot scale back eligibility because doing so violates state constitutional protections for voter-approved laws.

Republican Gov. Jan Brewer and Republican legislators contend that the 2000 law’s wording gives the Legislature flexibility to fit eligibility to available funding.

The court case remains pending despite the judge’s denial of the request for a temporary restraining order.

Tim Hogan, a lawyer for the challengers, said he knows of no legal avenue to block the July 8 start of the freeze.

However, Hogan said a new request for a temporary restraining order is planned once people are actually barred from enrolling. The judge on Thursday said it hadn’t been demonstrated that the planned freeze had actually harmed anybody.

Hogan said the challengers’ lawyers believed the enrollment freeze is barred under maintenance-of-effort requirements imposed on states’ Medicaid programs by the federal health care overhaul.

“We think the law requires them to maintain the effort that was in place and the federal government is letting them get away with it,” he said.

Mann said in her letter approving the implementation plan that the plan itself was required as a result of the state’s decision to scale back its program under a renewal of its status as a Medicaid demonstration project.

“This is a matter of state choice,” Mann wrote.

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