In hopes of avoiding a crisis as Arizona's minimum­wage rises, the state's Medicaid program plans to boost the amount it pays companies that serve people with disabilities.

The companies that serve the state's most vulnerable residents have said they may not survive (/story/news/politics/legislature/2016/11/23/arizona­minimum­wage­increase­social­services/94150408/) the voter­approved minimum­wage hike without a pay raise of their own from the state. They rely heavily on minimum­wage workers to help care for people with developmental disabilities.

Under Proposition 206, the minimum wage rises to $10 an hour on Jan. 1.

The Arizona Health Care Cost Containment System on Wednesday announced it would increase the rates it pays. It estimated the increase over the next six months, starting Jan. 1, would cost an additional $20.3 million for services for the elderly and people with physical disabilities, and $25.1 million for people with developmental disabilities. The state pays about a third of that, and the federal government covers the rest.

"We have a more than $12 billion budget and we monitor throughout the course of the year the cost of the program," Deputy Director Beth Kohler said of where the agency found additional funds midyear. "We believe, given where we are in the year, we can cover these increases."

AHCCCS reviews its rates annually, usually in October.

The move does not address similar concerns from other entities (/story/news/politics/elections/2016/10/31/prop­206­minimum­wage­hike­would­hit­ schools­bottom­line/92898906/), from public schools to nursing homes, that receive a set amount of funding from the state but must increase wages for some employees next month. The broader impact is expected to be a topic for the state Legislature, which convenes in January.

Hit expected to be in hundreds of millions

Lobbyist Stuart Goodman, who represents the 80­member Arizona Association of Providers for People With Disabilities, has estimated the minimum­

wage hit to the more than 600 companies that serve people with developmental disabilities is estimated to be in the hundreds of millions of dollars a year.

That comes on top of a 15 percent cut to reimbursement rates the Legislature passed during the Great Recession. It has since restored about half of the lost funding.

As a result, pay has been stagnant. For many positions, it hovers, leading to high turnover and difficulty filling jobs. Overtime costs to cover needed hours have skyrocketed, providers say.

Goodman said the pay increase from AHCCCS was desperately needed. The money will come from administrative funds, and so will not require approval from the governor or Legislature.

"This certainly helps us avoid the cliff that would have existed on Jan. 1," Goodman said of the AHCCCS announcement. "Without this action, there would be no July 1 for many of our service providers."

A number of providers had sent letters to Gov. Doug Ducey pleading for additional funding.

Prop. 206: Arizona voters approve $12 minimum wage

(http://www.azcentral.com/story/news/politics/elections/2016/11/08/arizona- minimum-wage-proposition-206-election-results/92970650/)

Mark Monson is president of CPES Inc., one of the state's largest providers. In a letter to Ducey, he said the wage hike will cost his company $1.9 million next year.

"Over the past seven years, our organization, employees and consumers have experienced the impact of multiple funding cuts by the Arizona Division of Developmental Disabilities, which have not been fully restored to date," he wrote. "Current funding is 7.5 percent less than it was in 2009, and when adjusted for inflation, the funding impact is 21 percent less than in 2009."

Monson said the company is expanding in California while services have deteriorated in Arizona.

"Without sufficient funding increases provided by the state of Arizona, CPES would be forced to close and/or consolidate services," he wrote. "Arizona must compensate service providers fairly or face the collapse of the entire developmental­services system throughout the state."