Modernizing Arizona Medicaid: Building a bridge to personal independence

doug ducey
Doug Ducey


Reform is headed to Arizona’s Medicaid program — providing a new national gold standard for how states

can transition more citizens out of economic welfare programs and into work.

On Friday, September 30, the Centers for Medicare and Medicaid Se

rvices (CMS) approved Governor Doug Ducey’s request to reform Arizona’s Medicaid program. Under the reformed program, called AHCCCS CARE, eligible members will now make contributions to a Health Savings Account that can be used for services like dental, vision, and weight loss that currently are not covered by Medicaid and can be used to build members’ own personal safety nets for when they transition back to the commercial insurance market.

Traditionally, Medicaid has served children, pregnant women, persons with disabilities and the elderly. Today — with more than 1.8 million members — the newly-approved AHCCCS CARE program seeks to transition able-bodied individuals off of government assistance, promoting personal responsibility, providing tools for managing one’s own health, and preparing adults to transition out of Medicaid and into private coverage.

“Arizona can do better than Washington, D.C. when it comes to delivering quality and affordable health coverage and taking care of our most vulnerable citizens. With these one-of-a-kind, first-in-the-nation reforms, Arizona has provided a template for the rest of the country to follow.” 

– Governor Doug Ducey – 

Pathway to personal responsibility and independence from government

Governor Ducey’s goal is to transition able-bodied adults off of economic welfare programs and into work and career opportunities.

The key to this is a portable account similar to a Health Savings Account that requires premiums, encourages healthy behaviors and promotes independence and personal responsibility. The central pillars to transitioning individuals to independence include:

  1. Getting medicaid recipients healthy and able to work:
    AHCCCS CARE contains several incentivizes to promote healthy behaviors. For instance, program members can defer their premium payments for six months if they meet healthy targets that include: (1) meeting preventive health targets like getting a wellness exam, flu shot, mammogram or cholesterol screening; or (2) managing chronic illnesses like diabetes, asthma or tobacco cessation. Meeting these healthy targets also allows members to roll over unused funds into the next year and to unlock funds in the AHCCCS CARE account to be used for non-covered services.
  2. Engaging citizens in looking for work:
    All members will be automatically enrolled in job-seeking programs in order to provide individuals with opportunities for economic mobility. The AHCCCS Works program is designed to offer AHCCCS CARE members a connection to employment opportunities, job training, resume assistance and other services often needed to obtain employment.
  3. Introducing recipients to elements of the commercial market:
    AHCCCS CARE does a number of things to introduce program members to life after Medicaid. Copays and premiums aren’t traditionally a part of Medicaid but are part of every commercial plan. By reintroducing these elements, we’re readying individuals for the transition and increasing their health literacy. AHCCCS CARE also encourages health literacy, empowering members with the knowledge and confidence needed to successfully navigate the commercial market.
  4. Eliminating the economic welfare cliff:
    As part of the Health Savings Account, adults over 100% of the Federal Poverty Level will be required to pay a monthly premium at 2% of household income or $25, whichever is lesser. This eliminates what is often called the “welfare cliff.” Someone who is on Medicaid and otherwise has no copays faces a welfare cliff as soon as their income increases above eligibility threshold. The governor’s plan takes away this harmful disincentive and, instead, encourages members to earn a better income.
  5. Transitioning Arizonans to a personal safety net:
    By giving Arizonans more control over their own health, AHCCCS CARE will free its members of the existing, sometimes-rigid Medicaid system. The flexible spending arrangement in AHCCCS CARE offers members a more personalized health care network, acknowledging that individuals are better equipped to create their own personal safety nets than being stuck in a system managed from the top-down.

The governor’s plan will also allow individuals who move off of the Medicaid program to take the leftover money from their savings accounts with them, which will ease the transition off of Medicaid and help them acclimate to deductibles and copays in the commercial market.

Additionally, the governor is instituting a modernized communications approach to Medicaid through the use of mobile apps, texts and more. With the use of innovative technology, patients will be able to receive reminders about upcoming appointments, access chronic disease management tools, find primary care doctors or urgent care locations and manage all aspects of their account at the touch of a button. These features will ensure patients get the timely care they need in order to better manage their illnesses — while protecting taxpayers from shouldering the costs of missed appointments, unnecessary emergency room visits and avoidable hospitalizations.

How the reforms work

Who is required to participate?

Required Participation: Adults over 100% FPL in the New Adult Group are required to participate in the AHCCCS CARE program.

Exceptions: The following individuals are exempted from participation:

  • Persons with serious mental illness
  • American Indian/Alaska Natives
  • Individuals considered medically frail
  • Hardship exemptions for members who experience an out-of-pocket expense, such as health expenses, repairs to the home or transportation, or a death in the household.

Voluntary Participation:

Adults over 100% FPL that are otherwise exempted and New Adult Group members below 100% FPL may opt in to the AHCCCS CARE program. Opting in allows the member to open and maintain an AHCCCS CARE Account funded by a third party, such as a charitable organization, or contribute their own funds. Contribution amounts and timing from members opting in are at the discretion of the member; no other program requirements apply.

Member Contributions

Premiums: Premiums serve as contributions into the member’s AHCCCS CARE Account. The payment is the lesser of 2% of household income or $25.

Strategic Coinsurance: These payments are applied retrospectively for services already received, rather than at point of service. This unique approach ensures members are not denied services and providers are not burdened with administrative hassle and uncompensated care. Coinsurance is required for the following services:

  • $4 for opioid prescriptions or refills, with the exception of members with cancer or in hospice care.
  • $8 for non-emergency use of the emergency room. This strategic coinsurance requirement is designed to help steer members to lower levels of care that are more appropriate in non-emergency situations.
  • $5 or $10 for specialist services without a PCP referral, to support the medical home model.
  • $4 for brand name drugs when generic available, except when the physician determines the generic drug is not as efficacious as the brand name drug.

Failure to pay: Members have a two month grace period to make payments. Members who do not make timely premium payments will be disenrolled, but may re-enroll at any time. There is no lockout period.


The Account is styled as a flexible spending arrangement. The Account will hold only member premium payments and/or any contributions made by employers or charitable organizations. The Account will not hold strategic coinsurance payments as these monies will be returned to the State to offset program costs. The Account will be managed by a third party vendor to be selected by the State.

Using AHCCCS CARE Account Funds For Non-Covered Services

AHCCCS CARE members in good standing may withdraw funds in the Account for the purchase of the following noncovered benefits: Dental services; Vision services; Chiropractic services; Nutrition counseling; Recognized weight loss programs; Gym membership; Sunscreen.

To be in good standing, the AHCCCS CARE member must: (1) make timely payments into the AHCCCS CARE Account for premiums and coinsurance liabilities; and (2) meet at least one Healthy Arizona Target. Members in good standing can also roll over unused funds from year to year.

Incentivizing healthy behaviors

Members meeting a Healthy Arizona target can choose to defer their AHCCCS CARE payment requirements for 6 months or roll their funds over into the next benefit year. Reporting of completing a healthy target is done through member self-attestation. The Health Arizona Targets include:

Preventive Health Targets: Annual well exam; Flu shot; Mammogram; Glucose screening

Managing Chronic Disease:

  • Tobacco cessation defined as having quit smoking or use of tobacco for at least 6 months.
  • Diabetes management, which requires that the AHCCCS CARE member has developed a care management plan with their PCP that includes exercise, steps to help follow a proper diet, maintaining blood sugar levels, adherence to medication and managing blood pressure.
  • Asthma management, which includes that the AHCCCS CARE member establish an asthma action plan with their PCP that includes guidance on taking medicines properly, avoiding asthma triggers and tracking level of asthma control.
  • Substance use disorder management, which requires establishing and following a care plan with their primary behavioral health provider that includes access to peer supports, medication management, individual or group counseling and any other modalities needed by the member.

Employer or charitable contributions

The AHCCCS CARE program allows employers and charitable organizations to make contributions on behalf of their employees or to further their identified health goals, such as tobacco cessation or breast cancer awareness. These partnerships help promote the goals of a healthy Arizona workforce engaged in managing their own health.


The AHCCCS Works program is designed to offer AHCCCS CARE members a connection to employment opportunities, job training, resume assistance, and other supports to obtain employment offered by the Arizona Department of Economic Security (DES). Eligibility is not conditioned upon obtaining employment or participating in any DES activity.