- Associated Press - Wednesday, July 29, 2015

PHOENIX (AP) - Lawyers will argue over the constitutionality of Arizona’s hospital “bed tax” Thursday in a case that could determine whether 350,000 residents remain covered under the state’s Medicaid expansion.

The case hinges on whether the assessment is a tax that should have been passed by a 2/3 vote in the state Legislature or a fee that can be passed by a majority vote.

The state relies on the so-called bed tax to pay its share of Medicaid expansion costs, meaning the legal challenge by a group of Arizona Republicans who oppose the Affordable Care Act puts the future of the expansion in jeopardy.

“If you chose to say this isn’t a tax, you’re going to allow a simple majority of the Legislature to determine what is and isn’t a tax,” Biggs said in an interview.

“And the reality is, a tax by any other name is still a tax,” he said. “And these guys that supported it and make a bunch of money on it, they didn’t bother to do it the right way.”

Lawyers for lead defendant, Tom Betlach, head of Arizona Health Care Cost Containment System, argue that an exemption in the law that calls for a supermajority, Proposition 108, applies to the hospital assessment.

“The sole issue remaining in this case is the interpretation of Proposition 108’s plain language, which states that the section does not apply to ‘fees and assessments that are authorized by statute, but are not prescribed by formula, amount or limit, and are set by a state officer or agency,’” attorney Douglas Northup wrote in a court filing.

The bed tax is such a fee, Betlach’s lawyers argue.

On the line is insurance for nearly 350,000 Arizonans who have gained or retained coverage under the expansion of the state’s health insurance program for the poor. Also in the mix are the state’s hospitals, which have seen uncompensated care costs shrink as they’ve paid millions to fund the expansion.

Medical centers are pleased to pay, according to a friend of the court brief filed by several hospital chains and the state hospital association.

In the nine months after the assessment went into effect in January 2014, hospitals paid $143 million to the state, but they collected $488 million in payments for caring for patients that previously didn’t qualify for Medicaid insurance, according to AHCCCS records.

Dignity Health, which runs St. Joseph’s Hospital and Medical Center in Phoenix and four other Phoenix-area hospitals, had been racking up $80 million a year in costs from treating the uninsured before the expansion, Shirley Gunther, Dignity’s vice president for external affairs, said. That number has dropped by half, she said.

“Hundreds of thousands of Arizonans no longer have to face that heart-wrenching dilemma of not having coverage in a medical facility,” Gunther said. “Without a doubt Medicaid expansion and restoration has improved lives of the enrollees all over Arizona.”

Biggs doesn’t dispute that, but argues the expansion was done illegally.

“The real heart of the question is, if you think that we should be paying for these people to have health care, and there’s not enough money, then why don’t you float a tax the right way? Where either the voters approve it or a supermajority of the Legislature does,” he said. “Right now there’s no authority to do what they’re doing.”

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