Tucson Medical Center

A levy on hospitals was started to pay for an expansion of the state Medicaid program. But some say it’s a tax that did not get the required votes.

The fate of health care for 400,000 Arizonans could depend on what seven justices of the state Supreme Court believe voters said they wanted 25 years ago.

There is no question that Proposition 108, approved in 1992, requires a two-thirds vote of both the House and Senate for any new or increased tax. The constitutional amendment also applies to the “authorization of any new administratively set fee.”

What is also clear is that the Legislature voted in 2013 to allow the director of the Arizona Health Care Cost Containment System, the state’s Medicaid program, to impose an assessment on hospitals to pay for the state’s share of a federal program to provide health care to more people. But that measure passed with only a simple majority.

Republican lawmakers who opposed the assessment — and had enough votes to block it if it needed a two-thirds vote — argue that the measure was illegally enacted.

If the court agrees, that could eliminate the $290 million the assessment is expected to raise this year — the funds needed to get the federal dollars that pay for the care of 400,000 Arizonans.

As harsh as that result may seem, that’s precisely what voters had in mind in 1992 when they sought to put curbs on the power of lawmakers to extract more money from the public, said the Goldwater Institute’s Christina Sandefur, who is representing the Republican lawmakers.

“The voters wanted to place constraints on the Legislature and on the legislative process,” Sandefur said. “The voters were very clear … they wanted to change the status quo.”

Timothy Berg, who represents the state and AHCCCS, conceded that was at least part of what was behind Proposition 108.

“The people were afraid of the Legislature just continuing to raise the general level of taxes,” he told the court. “And they recognized that sometimes the Legislature might be clever and use the word ‘fee’ instead of ‘tax,’ or ‘assessment’ instead of ‘tax.’ ”

But Berg pointed out that another section of the constitutional amendment specifically exempts fees and assessments that are authorized by statute set by a state officer or agency.

“The voters were concerned about a rising tax burden,” he said. “I don’t think they were concerned that the Registrar of Contractors was going to say, ‘Instead of paying $5 to file something you have to pay $15 to file.’ ”

And Berg argued that the assessment that pays for the health care — one that is paid solely by hospitals which are subject to AHCCCS regulation — fits the latter category.

Sandefur, however, said upholding the hospital assessment as legal would set a bad precedent. She said it would provide a road map for a bare majority of legislators to raise money by simply authorizing state agencies, headed by unelected bureaucrats, to impose fees — fees that would otherwise take a two-thirds vote if lawmakers enacted them themselves.

Prior to 2013, Arizona law required the state to provide free health care for anyone below the federal poverty level.

That year then-Gov. Jan Brewer sought to take advantage of a provision in the federal Affordable Care Act where the state could increase eligibility to 138 percent of the poverty level and the federal government would pick up virtually all of the cost.

But to get those federal dollars, the state had to agree to restore coverage for single adults below the federal poverty level. Enrollment had been halted years earlier when the Great Recession slashed state revenues.

Brewer hatched a plan to have that cost picked up by hospitals. Most did not object because the amount of the assessment would be less than the losses they were incurring because of the high number of people showing up in their emergency rooms — people they could not legally turn away — who had no ability to pay.

Most of the Republicans who control the House and Senate were opposed.

But Brewer found a few who liked the idea. And with all the Democrats in support, she got the plan approved on a simple majority vote.

That led to the lawsuit by the other Republicans.

Sandefur told the justices that Proposition 108 clearly does away with the idea of majority rule. But she said that’s what voters wanted.

That argument has so far failed, with both a trial judge and the state Court of Appeals concluding that there was no constitutional violation and the simple majority vote was enough.

No date has been set for a ruling.

On Twitter: @azcapmedia