PHOENIX - The Arizona Court of Appeals on Tuesday revived a lawsuit challenging Gov. Jan Brewer's expansion of the state's Medicaid insurance plan for the poor, ruling that Republican lawmakers have the right to sue over their contention that a hospital assessment that funds the expansion is a tax requiring a two-thirds vote of the Legislature.
Republicans in the House and Senate sued last year, saying only a simple majority last June passed the expansion bill that included the assessment. A Maricopa County judge in February dismissed the case, saying lawmakers were suing over a lost political battle because the Legislature itself decides whether a supermajority vote is needed.
But the appeals court rejected that decision and sent the case back to Judge Katherine Cooper for more action. In an 11-page ruling, the unanimous three-judge panel said the 36 Republican lawmakers who sued could have defeated House Bill 2010 if the supermajority vote was required, so it was proper for Cooper to decide if the Arizona Constitution required that vote.
The ruling was a major loss for Brewer, who pushed the Medicaid bill through the Legislature by cobbling together a coalition of minority Democrats and 14 Republicans.
She is one of only a handful of Republican governors who embraced Medicaid expansion, a key part of President Barack Obama's health care law. In all, 25 states plus Washington, D.C., are moving ahead with the expansion, while 19 states have turned it down. An additional six states are weighing options.
Brewer called the ruling "wrong and problematic" and said she would appeal it to the Arizona Supreme Court.
"Ultimately, this is still a procedural ruling . not an issue on the merits of the hospital assessment," the governor said in a statement. "If we have to return to the trial court to litigate the hospital assessment, we're confident in its legality and we will comprehensively litigate it."
She noted the bipartisan nature of the Medicaid bill and said it is "supported by the public as a whole and the business community.
"Arizonans should be concerned if the courts prevent the implementation of my Medicaid Restoration Plan because that would jeopardize the state's ability to restore critical, cost-effective health care to tens of thousands through AHCCCS," she said of the Arizona Health Care Cost Containment System, the state Medicaid program. "Further, it would do so against the will of voters who twice voted to provide a health care safety net for our most vulnerable citizens."
House Speaker Andy Tobin, R-Pauldin, and Senate President Andy Biggs, R-Gilbert, led the opposing group of Republicans who brought the suit. Tobin said Tuesday that the ruling was not unexpected.
"Now it's about the merits of the issue," he said.
Christina Sandefur, an attorney for the Goldwater Institute that represented the lawmakers, said in a statement that the ruling vindicates the need for state constitutional protections like the supermajority vote requirement for tax increases.
"Thanks to today's ruling, taxpayers in Arizona are one step closer to ridding themselves of this Obamacare Medicaid expansion," Sandefur said. "Even more importantly, today's decision is a victory for the rule of law, ensuring that bare legislative majorities cannot vote to disregard constitutional limits on majority power."
The hospital assessment is expected to collect $256 million in the state's 2015 budget year to pay the state's share of expanding Medicaid to an estimated 300,000 more people. Those to be covered include people earning between 100 percent and 138 percent of the federal poverty level -- $23,850 and $31,721, respectively, for a family of four this year -- and childless adults making less than that who lost optional coverage provided by Arizona during a state budget crisis.
The federal government pays for most of the expansion costs, but restoring optional coverage required the assessment.
Hospitals strongly backed it because they expect to see a much bigger reduction in the cost of treating uninsured patients. Cooper had noted that hospitals did not sue and are the only potentially injured party with a right to oppose the assessment.
The underlying argument is whether the assessment is really a tax. Brewer's staff argued that the Republican-controlled Legislature has repeatedly increased fees and assessments in recent years without imposing the two-thirds vote requirement.
The Legislature decides whether to impose upon itself the supermajority requirement, and in this case it did not. In reviving the case, the appeals court said it was proper for a court to review whether the assessment was indeed a tax. But the court noted it was not deciding that issue.
"By deciding that the plaintiff legislators have standing
to raise the question whether their votes were given the effect to which they were constitutionally entitled, we express no opinion on the merits of whether a supermajority of each chamber was required to pass HB 2010," said the opinion by Acting Presiding Judge John C. Gemmill.