The Senate Finance Committee Chairman recently released its draft version of the budget reconciliation bill provisions, including the sections impacting the Medicaid program on which 2 million Arizonans rely. Unfortunately, this version of the reconciliation bill would result in more draconian cuts to provider payments than the version that the U.S. House passed.
Specifically, the language would phase down the provider tax rate cap in Arizona from 6% to 3.5% through 2031, which directly reduces the ability of Arizona to utilize those tax revenues to pay for health insurance coverage for 500,000 patients and reimburse providers for billions of costs they a required by the state to incur to ensure that all Arizonan’s—regardless of income, disability, or age—have access to quality care. These provisions will reduce provider payments funded by the Health Care Investment Fund provider tax by $550 million in fiscal year 2027 alone. Those reductions would escalate each year through 2031, at which point the cuts to Arizona’s hospitals, physicians, and dentists will total $7.8 billion ($1.56 billion cut per year on average).
Additionally, the draft language would require 10% annual payment reductions after January 1, 2027, to payment and quality incentive programs that are necessary to cover the cost that hospitals and health systems incur to ensure that every community has access to timely and quality care. Even after accounting for Arizona’s largest payment program for hospitals, for example, hospitals are paid less than 90% of their costs for treating and supporting access to care for Medicaid patients. The language’s requirement of 10% pay cuts every year—which will fall disproportionately on hospitals and doctors—will take hundreds of millions of dollars out of an already struggling system in which doctor and nurse shortages are the new normal and nearly one third of hospital providers already operate at a loss each year.
Arizona’s providers cannot absorb the cuts mandated by the Senate Finance Committee Chairman’s draft language, which means that Arizona either must eliminate coverage for hundreds of thousands of Arizonans or raise taxes on Arizonans to cover a $2.6 billion budget hole between 2027 – 2031.
In short, the Senate Finance Committee draft version of the budget reconciliation bill would wreak havoc on the access to care, budget stability, and health coverage on which Arizonans rely every day for themselves, their families, and their communities.
The Health System Alliance of Arizona will continue its efforts to engage and inform legislators on our concerns about the future of healthcare in Arizona including the removal of these catastrophic provisions.