April 12, 2011
Host: Ted Simons
AHCCCS/Medicaid Cuts Lawsuit
- The Arizona Center for Law in the Public Interest is preparing to file a lawsuit challenging state budget cuts to Arizona’s Medicaid program known as AHCCCS. Tim Hogan, the Center’s executive director, explains why he believes a lawsuit is warranted.
- Tim Hogan - Executive Director, Arizona Center for Law in the Public Interest
Ted Simons: Good evening, and welcome to "Horizon." I'm Ted Simons. Last week the governor signed an $8.3 billion budget that includes about a billion dollars in spending cuts. The biggest cut, about a half billion dollars comes from AHCCCS, the state's Medicaid health insurance program for lower income Arizonans. The bulk of that savings would be realized by freezing AHCCCS enrollment for mostly childless adults. But that's a group of people Arizona voters elected to cover back in 2000, when they passed prop 204, raising Medicaid eligibility to 100% of the federal poverty level. Now the Arizona center for law in the public interest is preparing to file a lawsuit challenging the cuts to AHCCCS. Here with more is the group's executive director, Tim Hogan. Good to see you again.
Tim Hogan: Good seeing you, Ted.
Ted Simons: OK. Will you file suit if these rollbacks happen?
Tim Hogan: Oh absolutely. We're ready to go. We've known for some time that the legislature and the governor were looking at either terminating coverage for this population, or freezing enrollment. And we still don't know which is going to happen, but no matter what happens, if they fail to cover the people that voters voted to protect in 2000, we'll – we’re going to file a lawsuit.
Ted Simons: A lot of people thought the minute the governor signed the bill the ink wouldn't be dry, would you have already filed. What happened?
Tim Hogan: Well, the governor has a request pending with the federal government to approve her plan to freeze enrollment for the so-called proposition 204 population. That includes the childless adults and so-called higher income parents, if you can call poor people higher income. As of at least the childless adults, as of July 1st in the higher income parents as of October 1st. So we're going to wait and see what the federal government does in response to that request to implement that program. So it's not just the freeze on enrollment, there are a bunch of other changes to the AHCCCS program that the governor has proposed to the federal government as well.
Ted Simons: Talk about the complexities involved. You mentioned the federal government, and everyone is waiting to see what will happen there, and just the idea of how complex this issue is because of that federal component as the feds run Medicaid.
Tim Hogan: It's a system that's been around for a long time. I think it was enacted in 1965, Arizona became the last state to participate in 1982, I think, and you can imagine over, what, 45-plus years the complexity of the system has just increased. To the point where kind of perversely the state wouldn't need any permission at all as we found out this year to just terminate coverage for this population as of October 1st. But to freeze enrollment and continue to cover the existing participants does require federal approval.
Ted Simons: And let's talk more about now exactly what prop 204 says and why this particular freeze, this particular action, would in your mind violate prop 204 in the state constitution.
Tim Hogan: Sure. This goes back to the tobacco tax settlement, where states across the country sued the tobacco industry and recovered billions of dollars. There was a debate in Arizona about what to do with Arizona's share of that recovery. And so in 2000, proposition 204 proponents said let's take that money and supplement it with whatever we need to to be able to raise our federal poverty limit in Arizona, which was very low at the time, 200% of the federal poverty level. So everybody who is at the federal poverty level or below would be covered with health insurance. There was a competing proposition on the ballot which didn't do that. Took the tobacco settlement money and spent it on health care programs. Educational type programs. In fact, the proponents of that initiative criticized proposition 204, saying, well, it was going to be too expensive because the tobacco settlement money wouldn't cover the cost of providing health care coverage to these people up to the federal poverty level. So that's all very clear from the history here. Voters knew that we were going to have to supplement the tobacco settlement money with general fund money, and we've been doing that over the last 10 years. We've been providing coverage to this population. The proposition itself is very clear. It says you're eligible for health care coverage under AHCCCS up to 100% of federal poverty level.
Ted Simons: The measure also says shall be supplemented as necessary as any other -- federal monies. The governor and lawmakers say there are no available sources. They say the budget has been cut by over a billion dollars the last three years, that's indicative of the fact the state has no available funding as required by this measure. How do you respond to that?
Tim Hogan: Pretty simply. You mentioned it already. The budget was 8.3 billion dollars that were spending this year. We stand to save, if that's the right word, $200 million, just a fraction of that budget, by freezing enrollment for the proposition 204 population. The money is there, they just chose to spend it some other way and once they spend it, they say, well, it's gone, there's no other available source of funding.
Ted Simons: Do you think -- another argument from the other side is that voters may not -- you mentioned voters knew because there was a competing proposition, that this may not -- the tobacco money may not cover all this. Granted, but what about the intent of voters should a huge economic crisis happen and a budget crisis happen?
Tim Hogan: The answer to that is simple, and the governor night answer a year ago in January of 2010 in her state of the state message when she said we need to ask voters to roll back proposition 204. They've known for a long time what the problem is, and if they thought this was the solution to act against the voters' wishes as expressed 10 years ago, then they could have easily called an election to do that. I have a feeling what happened was they saw the election results last November with first things first and thought, well, we don't trust the voters to do what we want them to do, so we're going to do it ourselves.
Ted Simons: What happens there? Give us a timetable. What's going on here as far as, basically we're waiting for HHS to come back with some sort of ruling or decision?
Tim Hogan: Right. I think that will be reasonably soon on the proposition 204 population. Within the next few weeks at the most, I think. Some parts of this request may take longer, but given the fact the freeze is proposed to start on July 1st, I think HHS is going to be responsive and try and act on that relatively quickly.
Teed Simons: All right. Tim, good to see you. Thanks for joining us.
Tim Hogan: You're welcome.
iPads in the Classroom
- Students in ASU’s W.P. Carey School of Business were part an experiment designed to test the viability of tablet computers as a substitute for books and other printed materials. Professor Beth Walker, associate dean for the W.P. Carey MBA, explains what the school learned from the trials.
- Beth Walker - associate dean, W.P. Carey MBA
Ted Simons: ASU business students were recently part after trial to see if iPads are ready to replace books and other print the materials in the classroom. Earlier I spoke with Professor Beth Walker, associate dean for the W.P. Carey MBA. Thanks for joining us tonight on "Horizon."
Beth Walker: Thank you for having me.
Ted Simons: Why did the business school take a look at iPads in the classroom?
Beth Walker: Well we've been looking at technology in the classroom for several years. We even have a standing committee of students and faculty and staff that look at this. So recently this year our course pack provider knowing that we are a very innovative program, and that we look at technology in the classroom identified the W.P. Carey School of Business MBA program as one of the sites for a pilot test for iPads, to see how students use iPads to interact with course materials.
Ted Simons: And so how many -- let's talk about how many classes, how many students, how long was the test?
Beth Walker: Well, we did actually two pilot tests. The first was in August, with a management class, and the second was -- began in November, with the supply team management class. And we were looking at classes that were -- had students about 30 students in each classroom, we were actually provided these iPads for free, so we were looking to identify classes of that side with faculty who were willing to give this a shot.
Ted Simons: Faculty willing to give it the shot, kids, students have to be willing too. You see resistance at first?
Beth Walker: Well, it was a very interesting trial. Our first trial in August, we looked both at course packs, digital course packs as well as E textbooks, and we learned a lot from the trial. So the course pack trial went quite well, but for the textbook, the students did -- there was resistance to the E-texts.
Ted Simons: Why do you think that was?
Beth Walker: Well, in order to access the E-textbooks, students had to be online. And that was a problem for a lot of students.
Ted Simons: Really?
Beth Walker: Yes. So that’s sort of the state of where we are with E-textbooks. So that was a bit inconvenient, though there's wireless everywhere these days, still it wasn't exceedingly convenient.
Ted Simons: But you were able to use spreadsheets and other presentation material like this in the business classes?
Beth Walker: Oh definitely. So students could also -- documents, spreadsheets, all that other functionality provided by the iPad as well as using this as a device to download their course packs and course packs are supplementary materials that accompany textbooks, so they include articles in case studies, so they're very important part of the MBA experience. So that's what we were also looking at, instead of providing students with that big thick stack of paper, we provided them with this iPad where these course packs were provided digitally essentially.
Ted Simons: Now, as far as getting feedback, how often was the feedback offered, what kind of feedback was offered?
Beth Walker: Well, students met with our I.T. team, and we have a wonderful technology team, every two weeks to provide feedback. And we were providing feedback in turn to the course pack provider so they could see where our students were having trouble. And based on the feedback that we provided, the course pack provider developed a new application for the iPad so that students could easily access the course materials in the PDF files that were included were extremely interactive, very functional, and the students really appreciated that new application.
Ted Simons: It's interesting the new app, however, we are talking iPads here, flash is still a problem, isn't it?
Beth Walker: It is, for the iPad, it absolutely is. So in this case the PDF files that the course pack provider developed were not flash dependent. However, students could highlight material, they could write notes on their course pack material, they can download their notes and send it to other -- to themselves to other students, etcetera, so the PDF files the course pack provider developed were very interactive.
Ted Simons: And talk now, explain this to me, because I know some of these E-textbooks actually have expiration dates. How does that work? And how does that affect the test?
Beth Walker: Well, right now a lot of publishers do have expiration dates on their E-textbooks, so they're available to students for about 180 days. And then they expire, and students no longer have access. So that can be a problem. Certainly for students who want to cope their textbooks and use them as a reference, and that's something that we encourage, so knowing that there's expiration dates connected with these E-texts we not only provided the students in the pilots with the iPad so they could have digital access to their text and to their course packs, but also we provided hard copies of both their books and their course packs if they'd like that.
Ted Simons: So I can see the idea behind a test being instead of the kids looking around goodness knows how many books, carry your iPad, everything is on there. How close to reality is that after what I have seen with this test?
Beth Walker: Well you know, the possibility is really tremendous. So if you can picture students carrying around a device, a tablet like an iPad, versus carrying around a semester's worth of textbooks, plus course packs, the convenience factor is huge. What's happening right now in the publishing industry is a course pack providers are working together-to-with publishers to develop more digital materials that are very friendly for students. So hopefully within a year or two perhaps we might see textbooks that aren't going to have expiration dates or perhaps students can essentially rent to own if you will. But we haven't yet seen that. But this is in the works. As you know, things just emerge and change in this -- in the technology arena so quickly, we're excited about the future.
Ted Simons: So for now iPad's more of a supplement than an replacement.
Beth Walker: Absolutely. iPads are definitely a supplement, and we're looking at them right now mainly as something that can carry course packs and textbooks. We like their podcast functionality, you can use them to Skype. We look forward to different ways we can use an iPad, however, they don't have the same functionality of a laptop. So right now they're really supplementary.
Ted Simons: All right. Good information. Thank you so much for joining us, we appreciate it.
Beth Walker: Thank you, Ted.
Real Estate Update
- ASU real estate professor Jay Butler discusses the latest Arizona real estate market news and trends.
- Jay Butler - Professor, ASU
Ted Simons: March was a huge month for residential home sales in the valley. The Phoenix business journal reports that nearly 10,000 homes were sold in the month of March according to data from the Arizona Regional Multiple Listing Service, it was the strongest showing for monthly sales in over five years, but while sales are up, prices continue to decline. Earlier I spoke with ASU real estate professor Jay Butler about what it all means. Jay good to have you here, thanks for joining us.
Jay Butler: Glad to be here again.
Ted Simons: OK, let's talk about some recent numbers that have been released, month-to-month sales. In the month of March, up, looks like up considerably. What does it mean?
Jay Butler: Basically we had a lot of reasons. About 40% of the activity is foreclosures being recorded. And some of that is due to the moratoriums that were in effect toward the end of last year. Also, lenders are now after the moratorium selling back to the marketplace to previously foreclosed properties. So the problem is yes, it's a big number. For the last couple years we've been setting record numbers, but for all the wrong reasons. Heavy foreclosures, properties being -- REO properties being sold, short sales. It's far from quotes around normal, that we haven't had safe in a long time.
Ted Simons: The idea we haven't seen this activity since maybe back as far as '04 and '05, very different market.
Jay Butler: Very different. Much more positive market back there, although we were beginning to create the beginnings of this market. There was a more sense -- the strange part is it to say motivation is driving both markets. Investors looking for the deal for flip or rental purposes.
Ted Simons: I was going to say, how much are these investors driving the market?
Jay Butler: They're driving it. Owner occupancy basically nonexistence. Either entry level or people moving here. If you're trying to sell your home, you're going to have a real difficult time. We have virtually no move-up market. And that's usually at this time of the recovery, you have the people selling their homes, say, entry level, and buying new homes and moving up the ladder. We're not doing that. They can't sole because they're underwater, or they don't want to sell. They bought nice homes, and they're underwater, and they're having issues, but it's a nice place.
Ted Simons: The traditional homeowner who buys that house on that pretty street they've always looked at, because that's where they want to live, and the seller is able to sell to that particular buyer, that's almost an anomaly right now?
Jay Butler: Right now it is. Basically it's because of tight underwriting, interest rates are low. Back in 2004, interest rates were low and money was available. Right now we have interest rates that are low but not readily available. Back in 2004, if you had a FiCA score 600 or you could fog a mirror you got a loan. Nowadays, some of the stuff they're talking about, 700, 720.
Ted Simons: That’s keeping these entry level buyers out of the market too, correct?
Jay Butler: Yes. The only advantage they have is that homes are fairly cheap, and they can work directly with the investor to buy that particular home and not have to go through institutional lending.
Ted Simons: What are we looking regarding short sales?
Jay Butler: Again it's a very active market, but it's active in some areas and not others. And it's really based on the lender's willingness to get involved.
Ted Simons: So you're saying if the house is not, or home is not distressed financially in some way, shape, or form, very difficult to sell right now?
Jay Butler: Yes, it is. And a lot of people don't want to sell because they're remodeling. Remodeling activities are very heavy right now. Or they're just perfectly happy where they are.
Ted Simons: Talk more about the challenges of getting a home loan. We talked -- I know you referred to this a couple times, but jest in general, is that easing at all?
Jay Butler: There appears to be no evidence it's easing. FiCA scores are 720 for sort of the low rates we're talking about, down payments, unless you go FHA or VA, down payments are still fairly significant. If you're putting less than 20% down for a conventional loan, you've got to go through mortgage insurance, which is also tough. It is a lot of requirements. And they're looking much more tighter. It used to be that we would take the FiCA score, the highest if you were married. Now they look at both. So it's a lot more tighter rules and regs than what they had. And everybody is following those because the regulators are looking at them closely right now.
Ted Simons: So we're seeing, again, with some of these investors buying right now, a lot of cash buys?
Jay Butler: Basely. If you're going to buy a home that's being foreclosed you have to have cash. But what's happened is many times they'll turn around and sell them to people who are financing their home purchase. And they will sometimes do the financing themselves.
Ted Simons: With that in mind, back to the investors, that was one of the concerns regarding the initial bubble if you will. A lot of investor activity. If we're seeing investor activity right now, what does that mean for the future?
Jay Butler: Well, there's an issue. A lot of these investors are going to look for the first time the market starts to improve to sell these homes to make their profit. They're not looking for big profit, but some profit. I've sort of the idea of shoving the elephant through the key hole. A lot of homes coming on sale as soon as the spring blossoms start. And it's going to be difficult. Again, it's going to put pressure on prices in many neighborhoods, which are really impacted by foreclosures and lower valuations etcetera.
Ted Simons: OK, talk about some of those neighborhoods where is -- first of all, what's hot right now?
Jay Butler: Basically the east valley. Gilbert and Chandler are really good communities. If you're looking at investors, they start in El Mirage and they're spreading out into Glendale and Buckeye and other places. The prices are lower there.
Ted Simons: I find it interesting, if an investor buys in Buckeye, just sitting on it, are necessity able to rent in Buckeye?
Jay Butler: To some degree they're able to rent. They're looking a lot of times they think they're going to rent, the problem it’s getting to be is you're getting a lot of homes for rent clustering in the same area. And they're competing with each other. What happens is, the renter looks at whatever the most available rent and the guy who bought the cheapest gets the tenant.
Ted Simons: Overall, valley wide, rental market, what is it looking like?
Jay Butler: From my perspective it's a very competitive and tight market. Apartments, vacancy rate, varies over the valley from over 20% in some of the older areas, to less than 7%. Rents are down to about as low as they're going to go. There's very little concessions and it's not because they don't want to give could be sessions, they just lowered their rent ask don't feel they need to give concessions. Tenants are looking around, but from an investment standpoint, for commercial properties, the hottest market is the apartment market. You can buy them cheap. Especially the condo conversion. So you can buy a very nice A property for maybe B or C prices, rent them out, and what you're going to do is take the tenants from the A guy and put them in your project which is as good as his, but cheaper rents.
Ted Simons: You mentioned rents are as low as they're probably going to go. I always ask this when you’re here or when other realtor guys are here, have we hit the bottom with prices? Everything is so skewed do, we know what is bottom?
Jay Butler: Well, in a sense, I always tell people the "Titanic" found bottom. It just never recovered. The problem is, the price of what's being sold and what is being sold is investment price driven properties, because the move-up market and intricate decisional owner occupants predominantly on the sidelines. Even in the new home market we're looking at tremendous price differentiation because the biggest competitor is the model built two years ago that's been foreclosed on. So there's a lot of pressuring. Gilbert is doing well because you can buy a very nice family community home for half the price than just a few years ago.
Ted Simons: So it almost the effect where new homes, you know, lived-in homes, there's almost a different market there?
Jay Butler: Well it really is. The new home people are stressing, their homes are greener. So that you can have the -- it will cost you less to operate the new home than the older home. We've even seen ads where they talk about the new home smell. So they're competing against this same model competitive price, and they're pushing the green aspect of their new homes.
Ted Simons: You mentioned condos. Real quickly here, the condo sale market, is anything happening?
Jay Butler: There is some activity. It's a good investment. You can buy condos in some parts of the valley fairly nice ones for $35,000. And they're probably pretty easy to rent out. And even if some of the nicer ones, etcetera investors are looking at these and looking very heavily.
Ted Simons: Last question -- what should we look for? What kind of index, when kind of research study, what report should we look at next to say, all right, now we've got a pretty good idea what's going on here.
Jay Butler: I don't think there is such a thing. Every number tells us something different. Right now the key issue, people must feel confident in the income they're earning. And that's difficult to do right did you moment. And it's really the net income, because people are talking about higher health care costs, all sorts of things that are going to hit their net income, and when people begin to feel confident in that, then we'll feel more confident in the housing market.
Ted Simons: The other aspects of the economy, look at those, work them into the real estate.
Jay Butler: The numbers are people making decisions. The question is, what impacts those people making those decisions?
Ted Simons: All right. Jay, good stuff. Thanks for joining us, we appreciate it.
Jay Butler: Glad to be here.