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ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
2025-2026; health care
Purpose
Makes statutory and session law changes relating to health care necessary to implement the FY 2026 state budget.
Background
The Arizona Constitution prohibits substantive law from being included in the general appropriations, capital outlay appropriations and supplemental appropriations bills. However, it is often necessary to make statutory and session law changes to effectuate the budget. Thus, separate bills called budget reconciliation bills (BRBs) are introduced to enact these provisions. Because BRBs contain substantive law changes, the Arizona Constitution provides that they become effective on the general effective date, unless an emergency clause is enacted.
S.B. 1741 contains the budget reconciliation provisions for changes relating to health care.
Provisions
Department of Health Services
1. Requires the Department of Health Services to add Duchenne muscular dystrophy to the state's newborn screening panel on the earlier of:
a) October 1, 2027; or
b) two years from the date Duchenne muscular dystrophy is added to the Recommended Uniform Screening Panel adopted by the U.S. Department of Health and Human Services.
2. Delays, retroactive to June 30, 2025, the repeal of the Collaborative Care Uptake Fund from July 1, 2025, to July 1, 2027.
3. Delays the repeal of the Arizona Nurse Education Investment Pilot Program from January 1, 2027, to July 1, 2027, and excludes the Arizona Board of Regents from the FY 2026 distributions.
Arizona Health Care Cost Containment System (AHCCCS)
4. Includes, subject to available funding and approval by the Centers for Medicare and Medicaid Services (CMS), traditional healing services in the list of health and medical services covered by AHCCCS and Arizona Long-Term Care System (ALTCS) program contractors if the:
a) member qualifies for services through the Indian Health Service or a tribal facility; and
b) traditional healing services are delivered by or through the Indian Health Service or a tribal facility.
5. Removes, from AHCCCS-covered health and medical services, the exclusion of coverage for speech therapy and cochlear implants for persons who are at least 21 years old.
6. Prohibits Hospital Assessment Fund monies from being used to provide speech therapy and cochlear implants to eligible persons who are at least 21 years old.
7. Requires the Director of AHCCCS, subject to approval by CMS and available funding, to implement limited benefit coverage prerelease services to eligible incarcerated individuals and committed youth for up to 90 days immediately preceding the individual's expected date of release from a prison, jail, secure care facility or tribal correctional facility.
8. Requires the Director of AHCCCS, by December 1, 2025, to offer one-year AHCCCS complete care contract extensions to all managed care entities with then-current AHCCCS complete care contracts beginning with the contract number YH19-0001, including those with regional behavioral health agreements.
9. Requires the contract extensions, if accepted, to be both:
a) effective between October 1, 2027, and September 30, 2028; and
b) offered as provided by law.
10. Prohibits a contract extension from being offered to any entity that will cause AHCCCS to lose any federal monies it is otherwise entitled to.
11. Allows the Director of AHCCCS to offer additional contract extensions on determination by the Arizona Department of Administration (ADOA) that the extensions are in the best interest of the state.
12. Continues to require AHCCCS to transfer to the counties any excess monies necessary to comply with the federal Patient Protection and Affordable Care Act, regarding the counties' proportional share of the state's contribution.
13. Continues to allow AHCCCS, for the contract year beginning October 1, 2025, and ending on September 30, 2026, to extend risk contingency rate settings for all managed care organizations (MCOs) and funding for all MCO administrative funding levels imposed for the contract year beginning October 1, 2010, and ending September 30, 2011.
14. Declares the Legislature's intent that AHCCCS implement a Medicaid program within the available appropriation for FY 2026.
ADOA
15. Directs ADOA to award a one-time $3,000,000 grant in FY 2026 to a health care facility operator to construct an outpatient treatment center for dialysis services.
16. Requires, in order to qualify for the grant, a health care facility to:
a) operate under Public Law 93-638 (Indian Self-Determination and Education Assistance Act);
b) operate as a critical access hospital;
c) be located on unincorporated land within or on tribal land in a county with a population of no more than 70,000 persons;
d) benefit tribal members in need of dialysis treatment;
e) serve a patient population of at least 10,000 persons; and
f) be located at least 30 miles from the nearest outpatient treatment center that is licensed to provide dialysis treatment.
ALTCS
17. Outlines the following FY 2026 county contributions for ALTCS:
|
County |
Contribution Amount |
|
Apache |
$707,000 |
|
Cochise |
$7,510,100 |
|
Coconino |
$2,122,700 |
|
Gila |
$3,173,800 |
|
Graham |
$2,339,400 |
|
Greenlee |
$66,900 |
|
La Paz |
$828,800 |
|
Maricopa |
$275,201,600 |
|
Mohave |
$10,438,200 |
|
Navajo |
$2,926,600 |
|
Pima |
$63,729,700 |
|
Pinal |
$17,094,300 |
|
Santa Cruz |
$2,949,900 |
|
Yavapai |
$7,808,600 |
|
Yuma |
$12,640,000 |
18. Directs the State Treasurer to collect from the counties the difference between the total contribution and the counties' share of the state's actual contribution, if the overall cost for ALTCS exceeds the amount specified in the FY 2026 General Appropriations Act.
19. Requires the counties' share of the state's contribution to comply with any federal maintenance of effort requirements.
20. Requires the Director of AHCCCS to notify the State Treasurer of the counties' share of the state's contribution and report the amount to the Director of the Joint Legislative Budget Committee.
21. Directs the State Treasurer to:
a) withhold from any other monies payable to a county from any available state funding source, excluding the Highway User Revenue Fund (HURF), an amount necessary to fulfill that county's contribution requirement; and
b) deposit the withheld amounts and amounts paid by counties into the ALTCS Fund.
Disproportionate Share Hospital (DSH) Payments
22. Establishes the FY 2026 DSH payments as follows:
a) $28,474,900 for the Arizona State Hospital (ASH), of which the federal portion is deposited in the state General Fund (GF); and
b) $884,800 for private qualifying DSHs, which are hospitals that meet the mandatory definition of qualifying DSHs as defined by the federal Social Security Act (SSA), or DSHs that are located in Yuma County and contain at least 300 beds.
23. Outlines the following requirements once AHCCCS files a claim with the federal government and receives federal financial participation based on the amount certified by ASH:
a) if the certification is for an amount less than $28,474,900, AHCCCS must notify the Governor, the President of the Senate and the Speaker of the House and must deposit the entire amount of federal financial participation in the state GF; and
b) requires the certified public expense (CPE) form to contain both the total amount of qualifying DSH expenditures and the amount limited by the SSA.
24. Stipulates that, after DSH payment distributions are made, the allocation of DSH payments designated to political subdivisions, tribal governments and universities must be provided in the following order of priority to qualifying private hospitals located in a county with a population of:
a) fewer than 400,000 persons;
b) at least 400,000 but fewer than 900,000 persons; and
c) 900,000 persons or more.
25. Requires ASH, by March 31, 2026, to provide a CPE form for qualifying DSH expenditures to AHCCCS.
26. Continues to require AHCCCS to assist ASH in determining the amount of qualifying DSH expenditures.
County Acute Care
27. Outlines the following FY 2026 county acute care contributions:
|
County |
Contribution Amount |
|
Apache |
$268,800 |
|
Cochise |
$2,214,800 |
|
Coconino |
$742,900 |
|
Gila |
$1,413,200 |
|
Graham |
$536,200 |
|
Greenlee |
$190,700 |
|
La Paz |
$212,100 |
|
Maricopa |
$14,783,900 |
|
Mohave |
$1,237,700 |
|
Navajo |
$310,800 |
|
Pima |
$14,951,800 |
|
Pinal |
$2,715,600 |
|
Santa Cruz |
$482,800 |
|
Yavapai |
$1,427,800 |
|
Yuma |
$1,325,100 |
28. Requires the State Treasurer, if a county does not provide funding as specified, to:
a) subtract the amount owed by the county from any payments required to be made by the State Treasurer to the county plus interest on that amount, retroactive to the first day the funding was due; and
b) if the amount withheld is insufficient to meet that county’s funding requirement, withhold from any other monies payable to that county from any available state funding source, excluding HURF, an amount necessary to fulfill that county’s requirement.
29. Requires payments equal to one twelfth of the total amount for county acute care contributions to be made to the State Treasurer by the fifth day of each month and requires the State Treasurer, on request from the Director of AHCCCS, to require that up to three months' payment be made in advance, if necessary.
30. Requires the State Treasurer to deposit the amounts paid and withheld into the AHCCCS Fund and the ALTCS Fund.
31. Allows the Director of AHCCCS, if payments made exceed the amount required to meet the costs incurred by AHCCCS for the hospitalization and medical care of eligible persons, to instruct the State Treasurer to:
a) reduce the remaining payments to be paid by a specified amount; or
b) provide to the counties specified amounts from the AHCCCS Fund and the ALTCS Fund.
32. Declares the Legislature's intent that Maricopa County acute care contributions be reduced in each subsequent year according to the changes in the Gross Domestic Product price deflator.
Miscellaneous
33. Continues to exclude county contributions for Proposition 204 administrative costs from county expenditure limitations.
34. Continues to exclude county contributions related to the costs of inpatient, in-custody competency restoration treatment from county expenditure limitations.
35. Modifies the definition of tribal facility to include a facility that is operated by a tribal organization, rather than only an Indian tribe.
36. Contains a legislative findings clause.
37. Makes technical and conforming changes.
38. Becomes effective on the general effective date.
Prepared by Senate Research
June 16, 2025
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