Tax Vs. Fee: Court Interpretation Impacts 400,000 Arizonan's Healthcare

By  Holliday Moore, Howard Fischer
Published: Tuesday, October 3, 2017 - 8:59am
Updated: Tuesday, October 3, 2017 - 9:00am

State Republicans, past and present, are in a war of semantics in a last ditch effort to kill Arizona’s expanded Medicaid system currently helping about 400,000 residents.

Adi Dynar with the Goldwater Institute confirms new legal filings presented to the Arizona Supreme Court argue the $264 million levy placed on hospitals is a “tax,” and therefore illegal.

Hospitals see it as a “levy,” as do Democrats, and former Republican Gov. Jan Brewer, who cobbled together bi-partisan support for it in 2013.  he wanted to maximize the federal subsidies offered through the Affordable Care Act.

In order to take advantage of the ACA funding, the state had to first restore coverage for childless adults below the federal poverty level. Arizona had stopped covering single adults in a budget cut years earlier.

Unable to find the funds within the state budget, Brewer reached out to hospitals after the director of Arizona Health Care Cost Containment structured a sort of hospital co-operative allowing each chain to pay a fee to off-set growing losses of uninsured people who were showing up in emergency rooms unable to pay.

The hospitals have supported the fee, but if the Supreme Court agrees to call it a “tax,” it would be deemed illegal. In 1992 voters passed Prop 108, which requires any proposed tax must have a two-thirds majority vote and could technically nullify the hospital levy.

Dynar admitted it is a decision with major consequences.

"Whatever the ultimate decision of the Arizona Supreme Court, this is going to have huge consequences for any kind of net increases in state revenues in Arizona going forward," Dynar said.

Assuming it is a tax, Dynar said, “This is not just a Medicaid expansion issue. This is an extremely important issue for the taxpayer public's health in the future in Arizona."

However, the Goldwater Institute has not convinced the Court of Appeals in the past.  A Judge wrote that “the Constitution has a clear exception for fees set by a state agency,” which would be legal.

The state Supreme Court will hear the case on Oct. 26.

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