HEALTHCARE
Counties are required to make three annual payments towards the state’s Medicaid programs, totaling over $450 million annually. Learn more about how those contributions and how they've changed over time.
ALTCS Overview
Each year, state law requires counties to pay for a portion of the state match for the Arizona Long-Term Care System (ALTCS), for the indigent elderly and physically disabled members (EPD). Although counties originally provided indigent medical services, the state’s Arizona Health Care Cost Containment System (AHCCCS), now administers the state’s Medicaid programs and counties are only payors in the system.
The amount is then divided up across counties based on previous utilization of the program within the county. Additionally, if county contributions exceed certain thresholds the state pays for a portion of their contribution.
Impact on County Finance
Although there are some limitations on county contributions through the various circuit breakers in statute, county contributions to ALTCS have increased substantially and can be extraordinarily volatile from year to year. Combined with the various statutory and constitutional limits on county revenues, sudden or substantial changes in mandated ALTCS contributions can significantly impact county finances and put pressure on local property taxes.
Key Cost Drivers in ALTCS
Several factors influence the total cost of the ALTCS program and, by extension, the counties’ required contributions:
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Enrollment Trends: As more individuals qualify for ALTCS—particularly due to aging populations—total program costs increase.
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Cost of Providing Care: Rising costs for medical services, long-term care facilities, home-based care, and provider wages all contribute to higher expenditures.
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Service Intensity: Individuals with complex medical or behavioral health needs require more intensive and costly services, increasing per-member costs.
County ALTCS Contribution Formula History
The Original Formula
From 1989 through 1997, counties paid the entire non-federal share of the ALTCS program, creating a significant burden on county finances.1 Each county’s share of the total non-federal portion of the program was based off percentages from the Auditor General’s certified audit of FY 1987-1988 of local long-term care expenditures prior to the creation of the ALTCS program (Figure 1). Counties were responsible for these payments regardless of whether or not utilization had increased or decreased since FY 1998.
The Current Formula
Through CSA advocacy efforts H.B. 2006 was introduced and ultimately passed in the 43rd Legislature’s 2nd special session in 1997 to overhaul the way county ALTCS contributions were calculated.
Instead of counties paying the entire non-federal shared, H.B. 2006 split the future growth of the ALTCS program equally (50/50) between the state and counties. Additionally, it distributed payments across counties based on current utilization, rather than the original statutory percentages, and added in three circuit breakers for county contributions to provide relief to counties or hold counties harmless from the formula change.
1997 Circuit Breakers
In recognition of counties' limited ability to absorb substantial cost increases in ALTCS, the state created four circuit breakers that reduced county contributions if certain conditions are met. Currently those include a:
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Property tax circuit breaker
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Tax capacity circuit breaker
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Per capita circuit breaker, and a
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Formula adjustment hold harmless
Property Tax Circuit Breaker
If a county’s contribution, when expressed as a property tax rate, exceeds $0.90 the county’s contribution is reduced down to the $0.90 level, with the difference being paid by the state.
Tax Capacity Relief Circuit Breaker
Counties with a Native American population representing at least 20% of the county’s total population receive a reduction in their contribution by an amount equal to one-half the difference between the prior year’s payment and the current year’s calculated payment. For example, if County A’s prior year contribution was $1,000,000, and their current year contribution was originally calculated to be $1,500,000, then County A’s contribution with the circuit breaker is $1,250,000.
Formula Change Hold Harmless Circuit Breaker
After the reductions generated by the above circuit breakers are taken, any county that would otherwise be contributing more than if their contributions were calculated using the county’s original statutory percentage multiplied by the total nonfederal costs, has the county’s contribution set instead equal to the prior fiscal year’s contribution plus 50 percent of the difference between the county's prior year and the current year contribution if both were calculated using the original statutory percentage.
This circuit breaker has not been utilized in at least the last 15 years.
Per Capita Circuit Breaker
The “per capita” circuit breaker ensures that no county contribution is above the statewide per capita contribution for the ALTCS program. If after applying the previous three circuit breakers, a county’s per capita ALTCS contribution is above the statewide average, then the county’s contribution is reduced to the average per capita rate. For example, if after applying circuit breakers 1-3, County A’s contribution comes to $50/person and the average contribution across the state is $40/person. County A would receive additional relief equal to the difference - ($50 – $40)*(population).
Acute Care Payment
Established in 1982, Acute Care Contributions are collected for the county share of hospitalization and medical care. From the time AHCCCS was first established until 2001 counties were responsible for the first 48 hours of treatment and for providing staff to determine eligibility. In 2001, the state took over all administrative functions and eliminated the 48-hour rule.
County contributions are based off historical utilization and with the exception of a deflator for Maricopa in exchange for taking over funding for the Superior Court’s probation function, these payments have remain the same each year.
Budget Neutrality Compliance Fund Payment
In the general election of 2000, Proposition 204 (Prop. 204) passed with 63 percent of the vote, expanding the definition of an eligible person for AHCCCS to include individuals with income levels of up to 100 percent of the FPL guidelines.2 Prior to implementation of Prop. 204, childless adults were covered by AHCCCS with incomes up to 33 percent FPL.23
After the implementation of Prop. 204, two new county payments were created: the Budget Neutrality Compliance Fund (BNCF) and the Disproportionate Uncompensated Care (DUC) Pool. The BNCF helps compensate the state for taking over all the administrative functions for AHCCCS. After Prop. 204, the counties were no longer responsible for the first 48 hours of care or determining the eligibility of program participants.
Per statute, the BNCF payment is adjusted annually for inflation, and apportioned to each county based on a statutory percentage in 11-292 (O). Maricopa County’s payment was eliminated in ___ as a result of the county assuming the full cost of funding the superior court’s adult and juvenile probation programs.