Arizona Supreme Court Permits Challenge to Medicaid Expansion to Be Heard

Phoenix (12/31/2014)—Today the Arizona Supreme Court ruled that state lawmakers have legal standing to challenge the hospital provider tax that is being used to fund a Medicaid eligibility expansion. The Court’s decision does not mean the hospital tax is legal or illegal; the decision simply allows the case to move forward and be heard on the merits.

“After a year and a half of stalling tactics by the Brewer Administration, state lawmakers will finally have their day in court to challenge this illegal tax,” said Christina Sandefur, a senior attorney at the Goldwater Institute.

At stake in this lawsuit is a critical voter-enacted state constitutional protection that requires two-thirds of the legislature to approve tax or fee increases. Arizona’s Medicaid expansion was funded by a new provider tax on hospitals, and it was not approved by the required super-majority of the legislature.

The Brewer Administration is arguing the assessment is not subject to the super-majority requirement because it is an “administrative fee” that will be set by the director of Arizona’s Health Care Cost Containment System, not lawmakers per se. Three-dozen lawmakers, represented by the Goldwater Institute, argue that the super-majority voting requirement should, in fact, apply because the legislature must authorize all new taxes or fees before they can be adjusted by an agency administrator.

A Maricopa County Superior Court judge decided state lawmakers didn’t have standing to sue over the expansion, but the Court of Appeals disagreed and reinstated the case. Today’s Supreme Court’s decision that lawmakers do have standing to sue allows the case to move forward. The case will now go back to Maricopa County Superior Court where a judge will decide if the tax itself is legal.

“Regardless of how the case ultimately comes out, today’s decision means that lawmakers can’t vote to ignore the Constitution,” said Sandefur. “More than 20 years ago, Arizona voters enacted Prop 108 to curb taxes and government growth. Thanks to today’s decision, the dozens of lawmakers who voted against dramatically transforming Arizona’s Medicaid program, putting the state on the hook for billions of dollars, and ceding the legislature’s taxing power to an unaccountable administrator will get to defend this important legacy.”

Twenty-eight states and the District of Columbia have expanded Medicaid as part of the Affordable Care Act; and 22 states have decided not to make the expansion. Originally, the federal health care legislation required all states to expand Medicaid or lose all federal funding. The U.S. Supreme Court struck down that piece of the federal law as unconstitutional, saying states cannot be forced to accept new rules to keep funding that was given to them under previous rules.

If the Goldwater Institute is ultimately successful in court, Arizona will be the first state in the country to have its expansion struck down by a legal challenge.

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