HHS Threatened Arizona Over $7.8 Billion in Medicaid Funding

Published July 25, 2016

In response to questioning from Justice Breyer during the third day of hearings concerning President Obama’s health care law – particularly concerning the Medicaid funding mandate within the law – attorney for the states Paul Clement mentioned a letter from the U.S. Dept. of Health and Human Services to Arizona. Clement noted the letter as a document establishing that the idea the federal government would consider stripping the entire Medicaid budget from a state which defied the commands of Obama’s law was not hypothetical, but reality.

The letter Clement referenced, sent in April 2010 from the Centers for Medicare and Medicaid Services, warns Arizona that should they back out of the relatively small Children’s Health Insurance Plan (CHIP), they could lose the entirety of their federal Medicaid funding. It reads, in part: 

Specifically, it appears that your request would result in a loss of Medicaid funding for Arizona under section 2105(d)(3) of the CHIP statute, as amended by sections 2101 and 10203 of the Patient Protection and Affordable Care Act of 2010, which was enacted by March 23, 2010. Arizona currently receives about $7.8 billion in Federal Medicaid funding per year and this funding is potentially at risk as a result of eliminating the CHIP program.

Here’s the relevant section of the transcript:

JUSTICE BREYER: And I said — I said because it could be, you know, given the complexity of the act, that there is some money that would be saved in the program if the States take the new money, and if they don’t take the new money there is money that is being spent that wouldn’t otherwise be spent. There could be some pile like that. It might be that the secretary could show it was reasonable to take that money away from the states, too.


JUSTICE BREYER: But my point is, you have to show reasonableness before you can act.

JUSTICE SCALIA: — do you agree — do you agree that the government has to act reasonably? Do we strike down unreasonable statutes? My God!

MR. CLEMENT: And, Justice Scalia, I mean –

JUSTICE SCALIA: The executive has to act reasonably, that’s certain, in implementing a statute; but, if the statute says, in so many words, that the secretary can strike the whole — funding for the whole program, that’s the law, unreasonable or not, isn’t it?

MR. CLEMENT: That’s the way I would read the law, Your Honor.

JUSTICE BREYER: Yeah, but I have a number — all right.

MR. CLEMENT: And if I could just add one thing just to the discussion is the point that, you know, this is not all hypothetical. I mean, in — there was a record in the district court, and there is an Exhibit 33 to our motion to summary judgment. It is not in the joint appendix. We can lodge it with the Court if you’d like.

But it’s a letter in the record in this litigation, and it’s a letter from the secretary to Arizona, when Arizona floated the idea that it would like to withdraw from the CHIP program, which is a relatively small part of the whole program.

And what Arizona was told by the secretary is that if you withdraw from the CHIP program, you risk losing $7.8 billion, the entirety of your Medicaid participation.

The letter Clement cited is available to read here, as Exhibit 33.