The plan, which requires approval from the federal Centers for Medicare and Medicaid Services, would allow more than 19,200 children on a waiting list to enroll in KidsCare, a state-subsidized health-insurance program for low-income families.
The state froze enrollment in the program in January 2010 as part of cost-cutting to close a budget deficit. The number of children covered has since dropped to about 14,200, down from 45,820 at the time of the freeze.
There are now more than 120,000 on the program's waiting list.
The new plan was initiated by Phoenix Children's Hospital, Maricopa Integrated Health System, and the University of Arizona Health Network, which will collectively pool $113 million for each of the next two years, in order to receive $229 million in extra federal funds.
The money will help both the hospitals and the state by providing more coverage to uninsured children while getting money from Washington to offset the cost of providing care for which hospitals are not compensated.
The state will not be required to contribute any money.
"Working together, we can find creative solutions," Brewer said Monday, also calling the proposal a "bridge" to help restore coverage until the fate of the federal health-care overhaul is resolved. "Locally designed solutions, not federal mandates, are the best way to move forward."
The Legislature paved the way for the hospitals' plan earlier this year with Senate Bill 1357, which allows AHCCCS, the state's Medicaid program, to authorize other government partners to pay for Arizona's share of health-care programs that trigger matching federal funds.
The proposal also wouldn't return the federal-state program to levels of enrollment seen before enrollment was frozen in 2010 to help balance the state budget. The program now has approximately 15,000 children — down from 45,820.
"It isn't a comprehensive solution. It's an effort to improve our situation," said Karen Mlawsky, CEO of the University of Arizona Health Network.
Gov. Jan Brewer hailed the plan as a "creative solution" that doesn't require additional state dollars while providing a "bridge" to restore some coverage until the fate of the federal health care overhaul is decided.
Arizona has adopted some of the broadest and most stringent Medicaid reductions made by states. Along with the KidsCare freeze, those steps have included a since-reversed elimination of funding for some medical transplants, cuts in payment rates to providers, and phase-outs and enrollment freezes on several eligibility categories.
The new plan's financing hinges on having several hospitals in Phoenix and Tucson chip in $101 million annually for two years, with the federal government matching twice that amount. Most of the money would pay for unreimbursed care provided to people without health coverage, but a fraction would go toward KidsCare.
A spokesman for the federal Centers for Medicare and Medicaid Services said in a statement that "CMS supports the direction of coupling an initiative to assist hospitals in the state with coverage improvements for children. CMS suggested this approach to the state last month, are happy that they have put a proposal together and we look forward to working with them on the specifics they have put forward."
Federal officials previously rejected an Arizona proposal for increased Medicaid funding for uncompensated care, but state officials said they believe the new proposal's inclusion of the new component on KidsCare will help its chances.
The participating hospitals are Phoenix Children's Hospital and Maricopa Integrated Health Systems in Phoenix and two University of Arizona hospitals in Tucson.
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