A TALE OF TWO STATES

NO MATTER WHOSE PLAN WINS in Washington, the current Medicaid program is history. And in 11 states its future has arrived. While still collecting federal money, these states have designed their own health-care systems for their poor and elderly populations. A close look at two of them illustrates the difficulties of the job. Arizona's plan, in place since 1982, is hailed as a model of managed care, while TennCare, started in 1994, is still locked into a troubled and controversial infancy. Both offer visions of what may be facing all states in the lean times ahead. Their stories:

When Dr. Mabel Chen needs a doctor, she goes to see someone at the Arizona Physicians Clinic in downtown Phoenix. Chen, the director of the Arizona Health Care Cost Containment System (AHCCCS, pronounced access), reads her magazines in the waiting room alongside people who pay no insurance premiums, who can barely afford their generic prescription medications, who perhaps cannot even read the warning labels on a bottle of aspirin. When Sherry Broyles, 23, a single mother of two, needs to see a doctor, she waits alongside the likes of Chen and feels no less worthy of her doctor's attention just because she is on welfare and has no private insurance. "I chose him because he was so nice to me when I went into the clinic to get a wart on my finger looked at," Broyles explains. "He treats us all the same. Even if I am on Mercy Care [a provider sponsored by the Roman Catholic Church], he doesn't look at me funny."

The mainstreaming of Medicaid, where low-income patients receive the same care from the same physicians as their better-off peers, is only one of the successes of Arizona's system. The most remarkable thing is that the state government managed to come up with a program that makes just about everybody happy: the patients, the doctors, the bureaucrats and the number crunchers. ahcccs, a managed-care system in which health-care providers enter an intensely competitive auction to win state contracts, serves some 455,000 patients, almost all of whom would be eligible for Medicaid. (Total budget this year: $1.9 billion, of which $1.2 billion comes from the Federal Government.) Thanks to the program's emphasis on primary-care physicians and preventive medicine, the percentage of ahcccs patients since 1989 who receive most of their treatment in emergency rooms has dropped from 18% to 8%, while those seeing regular doctors has jumped from 18% to 36%. Says John Murphy, executive director of the Flinn Foundation, a Phoenix think tank that studies health care: "If what you're trying to do is provide high-quality care to the poorest of the poor for a low price to the state, this system is a success."

Arizona seized an opportunity no longer open to the rest of the country: the state never had an entrenched Medicaid system in place. By 1982, though, county governments were going broke struggling to provide indigent health care. The state decided it needed a piece of the federal Medicaid pie but not under the standard federal conditions. Arizona legislators took their state's clean slate and drew up their own blueprint for a Medicaid system.