In 1965, Congress enacted the federal Medicaid program to serve the health care needs of the poor
across the country, and by 1972, all states had joined the system – except Arizona. Arizona continued
to serve the indigent as it had since 1864 – through a system of county-run health care programs. In
spite of an enforcement statute enacted in 1974 (which was later declared unconstitutional), responsibility
for indigent health care remained with the counties until 1981, when the financially-burdened counties
appealed to the state for relief.
In response to this fiscal crisis, the Arizona Legislature selected an innovative plan for a prepaid
capitation program for indigent health care services. In the spring of 1982, AHCCCS was approved as a
demonstration project by the Health Care Financing Administration (HCFA), the federal agency that
oversees the Medicaid program.
AHCCCS officially began operating on October 1, 1982. Through several extensions of its demonstration
status since then, AHCCCS continues to operate and receive federal funding. While traditional Medicaid
is "fee-for-service," AHCCCS provides for prepaid capitated care. AHCCCS contracts with health plans in
the public and private sectors for the care of its members, paying them a predetermined capitation amount
each month for that care. At present, the program has more than 1.039 million members across Arizona
receiving quality medical and long-term care.
The AHCCCS program has undergone continual change during its existence and is looking ahead to
even more change as costs, needs, and populations continue to shift and grow. It has caught the
attention of the rest of the country by demonstrating both excellence in health care and lower
costs in a unique partnership between State government and the private sector. AHCCCS’s delivery
system stands out as a viable solution to the national problem of providing and paying for indigent