Free Statement - District Court of Arizona - Arizona

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ELLEN SUE KATZ, AZ Bar. No. 012214 WILLIAM E. MORRIS INSTITUTE FOR JUSTICE 202 E. McDowell Rd., Suite 257 Phoenix, AZ 85004 (602) 252-3432 [email protected] JENNIFER L. NYE, AZ Bar No. 019230 ARIZONA CENTER FOR DISABILITY LAW 100 N. Stone Ave., Suite 305 Tucson, AZ 85701 (520) 327-9547 [email protected] JANE PERKINS NATIONAL HEALTHnd LAW PROGRAM 211 N. Columbia St., 2 Floor Chapel Hill, NC 27514 (919) 968-6308 [email protected] Attorneys for Plaintiffs UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA ) ) ) ) ) ) ) ) ) ) ) ) Plaintiffs, ) ) v. ) ) Anthony Rodgers, Director of the Arizona ) ) Health Care Cost Containment System; and Michael O. Leavitt, Secretary of the ) ) United States Department of Health and ) Human Services, in their official ) ) capacities, ) ) Defendants. ) ) Sharon Newton-Nations; Manuela Gonzalez; Cheryl Bilbrey; Donald McCants; Hector Martinez; Anne Garrison; Dawn House; Dana Franklin; Edward Bonner; D.H.; Jack Baumhardt; Manuel Esparza; and Patricia Jones, on behalf of themselves and all others similarly situated,
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No. CIV 03-2506 PHX EHC

PLAINTIFFS' SUPPLEMENTAL STATEMENT OF UNDISPUTED FACTS IN SUPPORT OF PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT

(Assigned to Hon. Earl H. Carroll)

Filed 03/10/2008

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Plaintiffs submit the following Supplemental Statement of Undisputed Facts in Support of Plaintiffs' Motion for Summary Judgment. 48. In an e-mail dated June 28, 2004, from Joan Peterson, Project Officer of the

Center for Medicare and Medicaid Services ("CMS") program to Lynn Dunton, Assistant AHCCCS Director, Ms. Petersons stated that in discussing the Newton-Nations lawsuit, "we have realized that your current waiver ... needs to be revisited." Specifically, Ms. Peterson noted that AHCCCS had imposed a $5 copayment on state plan populations for the non-emergency use of the emergency room, which exceeded the nominality amounts in the Medicaid Act. Ms. Peterson acknowledged that "some individuals in the Medical Expense Deduction (MED) program are actually in the State plan (although the majority are 1115 expansion folks"). Ms. Peterson informed Ms. Dunton that AHCCCS needed to file a request for a "waiver of nominality" and establish the requisite criteria in order to obtain the waiver. Exhibit 22 to the Supplemental Declaration of Ellen Sue Katz ("Katz Supp. Decl."). 49. AHCCCS did not file a request for the waiver. Instead, in October 2004,

AHCCCS amended Administrative Rule R9-22-711(D) to reduce the non-emergency use of the emergency room copayment to $1.00. 50. Congress passed the Deficit Reduction Act of 2005 ("DRA"). The DRA

contained provisions concerning cost sharing under Medicaid. While the DRA allows states to impose cost sharing on beneficiaries, only nominal costs sharing is allowed for individuals whose income is below 100 percent of the federal poverty level and the state may not condition the receipt of services on the payment of the copayments. 42 U.S.C. § 1396o-1. 51. In 2006, AHCCCS submitted a Section 1115 demonstration waiver to the

United States Department of Health and Human Services ("DHHS"). DHHS approved the five-year waiver to begin on October 27, 2006. In the waiver, DHHS approved the copayments set forth in R9-22-711(E) and challenged in this litigation. DHHS did not

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require AHCCCS to use or implement the copayments through a state plan amendment or waiver. Exhibit 16 to Katz Supp. Decl. 52. Defendant Rodgers in an e-mail to his staff dated February 21, 2007, stated

"Cost sharing works against the notion of managed care. ..." Exhibit 24 to Katz Supp. Decl. More recently, Defendant Rodgers has stated: Cost sharing works against the notion of managed care. Cost sharing is imposed to change beneficiary behavior or to make the beneficiary financially responsible for the service choices "they" make (like overuse the emergency room). . . . If you are going to put co-payments and co-insurance on AHCCCS MCO [managed care organization] members it will work against the health plans medical management programs. The reason that AHCCCS has one of the lowest PMPM [per member per month payments] of all state Medicaid programs is our managed care model. Health plan[s] manage the utilization of members better than any cost sharing program would do. Cost sharing is for States that don=t have Medicaid managed care. Exhibit 23 to Katz Supp. Decl. 53. Leighton Ku, Ph.D., M.P.H., Professor of Health Policy at the George

Washington University School of Public Health and Health Services in Washington, D.C., and a nationally recognized expert on cost sharing and low income persons, stated that over the last 35 years, a number of studies have looked at the effects of cost sharing on the poor, and of all forms of costs sharing, copayments have been the most heavily studies. Second Declaration of Leighton Ku, ¶9. According to Dr. Ku: A substantial and rigorous body of research has consistently concluded that low-income individuals--those with income below 100 percent of the federal poverty level--are more vulnerable to the adverse effects of copayments than other groups. . . . For example, multiple studies have concluded that higher copayments for medical services or prescriptions cause low-income people to use substantially fewer essential and effective medical services or medications. Id. at ¶ 10. There is an accumulated and consistent body of research concluding that low-income people cannot financially bear copayments as easily as those with higher incomes. This is
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because low income people are in a difference economic position. Data show that low income people already have substantial out-of-pocket medical care expenses than do higher-income individuals with private insurance. Increases in copayments will exacerbate their financial burdens. Id. at ¶ 16. Studies show that those with incomes below the poverty line already experience hardships, such as running out of food or having difficulty paying rent or utility bills. Elevated copayments for low-income people force many of them to choose between healthcare and other basic needs. Id. at ¶ 17. Dr. Ku concludes: [T]here has been ample research about the effects of copayments in Medicaid. The research predominately shows that copayments generally reduce the utilization of essential health care services and of medications by low-income people. Some of the studies demonstrate that there were adverse health consequences for those who were required to make copayments. I am not aware of any "unique or untested" aspect of cost-sharing or copayments that would be examined under this project; other states have imposed copayments of a similar nature for the same services (prescription drugs, physician office visits, non-emergency use of emergency rooms). Neither Arizona's waiver application nor the federal approval letter delineates any unique or untested uses of copayments in this section 1115 project. Id. at ¶ 24. Dr. Ku finds that: Instituting or increasing copayments is not an efficient way for states to lower their expenditures for Medicaid because they lose a substantial portion of any savings generated ... because this approach reduces federal matching funds. For example, consider a prescription drug that costs $60. Under Medicaid matching rules, the federal government will pay $39.72 (or 66.2 percent, the federal Medicaid matching rate for Arizona in 2008), while the state of Arizona pays $20.18 (33.8 percent total). If there is a $10 copayment, the total cost to Medicaid for the drug is reduced to $50, so the state share will fall to $16.90 (33.8 percent of $50) and the federal

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government will pay $33.10. Even though a poor state resident has paid $10 of his or her limited income for that prescription, the state of Arizona saves only $3.32 (33.2 percent of $10), while the great majority of savings accrues to the federal government. That is, the state has imposed a $10 regressive user fee or tax, which falls only upon low-income residents, but the state only saves one-third of that amount. From a public finance perspective, this is both regressive and fiscally inefficient. Id. at ¶ 18. Respectfully submitted this 10th day of March 2008. ARIZONA CENTER FOR DISABILITY LAW WILLIAM E. MORRIS INSTITUTE FOR JUSTICE NATIONAL HEALTH LAW PROGRAM By /s/Ellen Sue Katz Ellen Sue Katz William E. Morris Institute for Justice 202 East McDowell, Suite 257 Phoenix, Arizona 85004 Attorneys for Plaintiffs

ORIGINAL of the foregoing electronically filed with the Clerk of the Court this 10th day of March 2008. COPY of the foregoing emailed via Electronic Case Filing System this 10th day of March 2008 to: Logan Johnston Johnston Law Office PLC One North First Street, Suite 250 Phoenix, Arizona 85004-2359 Attorney for Defendant Rodgers

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COPY of the foregoing mailed this 10th of March 2008, to: Vesper Mei U. S. Department of Justice Federal Programs Branch Civil Division ­ Room 7316 20 Massachusetts Avenue, N.W. Washington, D.C. 20001 Attorney for Defendant Leavitt COPY of the foregoing mailed this 10th day of March 2008, to: Honorable Earl H. Carroll United States Senior District Judge United States District Court District of Arizona Sandra Day O'Connor U. S. Courthouse 401 West Washington Street, SPC 56, Suite 621 Phoenix, Arizona 85003-2156

By /s/ Gaynell Carpenter

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