Texas officials seek flexibility on Medicaid coverage

The state's spending on the program is a quarter of its $182 billion budget for 2010-11.

By Doug Trapp — Posted Dec. 27, 2010

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Texas leaders are exploring ways to limit growth in state Medicaid spending, including asking the Obama administration for exemptions from the national health reform law or Medicaid law. But no quick or easy solutions are at hand.

Texas Gov. Rick Perry has sharply criticized Democrats in Congress for not giving states more flexibility in the health reform law to cover people, especially with the 2014 Medicaid expansion to 133% of the federal poverty level. Texas' share of Medicaid spending could increase by as much as $9 billion between 2014 and 2019, according to an analysis released Dec. 3 by the state's Medicaid agency. State Medicaid spending in Texas is about a quarter of its entire $182 billion two-year 2010-11 budget.

"Washington should return money to the states via block grants without strings attached, allowing each state to identify the best way to use that money to meet the specific needs of its patients, families and taxpayers," Perry wrote in a Dec. 13 editorial published in Health Reform Report, a conservative blog.

Perry and others at the Texas statehouse even considered withdrawing from Medicaid as a way to reduce state obligations. The Legislature asked the Texas Health and Human Services Commission -- the state's Medicaid agency -- to study the fiscal impact of opting out of Medicaid. The agency concluded that the state would lose $15 billion in federal funding and increase the number of uninsured people in Texas by 2.6 million. Perry and other state leaders have since backed away from opting out.

Now Perry and Texas lawmakers are turning their attention to seeking additional federal matching funds and exemptions from Medicaid benefit mandates, among other options.

"You can't be everything to everybody," said Texas Rep. John Zerwas, MD, a Houston anesthesiologist. He co-wrote the bill that requested the Medicaid opt-out study. Dr. Zerwas said Medicaid benefits seem to be more extensive than those in private insurance. Also, Medicaid enrollees should have incentives to be more judicious users of health care and stay healthy, he said.

Susan R. Bailey, MD, president of the Texas Medical Assn., said she doubts Medicaid enrollees are accessing many benefits not available to the privately insured. Fewer than half of Texas' physicians participate in Medicaid in part because the state pays only about two-thirds of Medicare rates, she said.

Texas Rep. Mark Shelton, MD, a specialist in pediatric infectious diseases in Fort Worth, said some of the U.S. health system is held together by the good will of physicians. "We cannot ask family practice doctors to take less than the cost of care ... and expect them to make it up in volume," said Dr. Shelton, whose patient mix is 55% Medicaid.

Higher Medicaid costs

Growing enrollment has driven Medicaid cost increases, although medical inflation also has been a factor, the state report found. The number of Texas Medicaid enrollees reached 4 million in 2009, an increase of 2.3 million since 1999.

The state report also noted Texas' financial disadvantages regarding the federal Medicaid funding formula. If federal dollars were distributed based on states' population living in poverty, rather than on per capita personal income, Texas would receive $5.8 billion more in federal Medicaid funds, the report concluded. Texas' federal Medicaid matching percentage is slated to be reduced to 58% in fiscal 2012, a reduction of two percentage points. And the state pays millions to care for undocumented immigrants.

Texas enacted a 1% Medicaid physician pay cut effective in September and another 1% cut effective in February 2011. More could be on tap in part because Texas faces a multibillion-dollar budget deficit, Dr. Zerwas said. "Certainly that is another area that is going to be considered in order to address the costs."

Dr. Shelton said Texas' Medicaid program needs more emphasis on primary and preventive care. For example, Medicaid will spend hundreds of dollars for an emergency department visit, but not very much for a visit with a primary care doctor whose care might have prevented the ED visit.

Dr. Bailey said some of the costliest care in Medicaid is delivered at the end of life, so that should be part of the discussion. "They really ought to be thinking about Grandma in the nursing home."

States already have a lot of flexibility in delivering health care to Medicaid enrollees, said Anne Dunkelberg, associate director of the Austin-based Center for Public Policy Priorities, which studies issues affecting low-income Texans. But that does not include reducing Medicaid benefits or limiting enrollment.

"I don't think that it's wrong for the federal government to say we're going to set some minimum ... standards that you won't fall below," Dunkelberg said.

Block grants?

Drs. Shelton and Zerwas said state lawmakers are interested in looking at receiving Medicaid funding in a block grant, perhaps in the way that Rhode Island received approval in late 2008.

Rhode Island's five-year global Medicaid waiver allowed the state to secure additional funding to care for certain disabled people. It also accelerated state initiatives to move Medicaid long-term care enrollees from institutional facilities into community-based care, said Linda Katz, policy director of the Poverty Institute, a Rhode Island organization focusing on tax and budget decisions affecting low-income residents.

However, the Rhode Island waiver hasn't saved the state a great deal of money, nor has Rhode Island significantly changed its Medicaid benefits, said Judith Solomon, co-director of health policy at the Center on Budget and Policy Priorities, a Washington, D.C.-based organization studying fiscal policy and public programs that affect low- and moderate-income people.

States still have to provide matching money to get a block grant, said Robin Rudowitz, principal policy analyst at the Kaiser Commission on Medicaid and the Uninsured.

Said Dr. Bailey: "I cannot imagine a block grant system working in Texas without eventually costing the state more. It would have to be an awfully generous grant."

Texas is unlikely to get the Obama administration to approve a Medicaid waiver with the benefit flexibility state leaders would prefer, said Tom Miller, resident fellow at the American Enterprise Institute for Public Policy Research, a conservative think tank based in Washington, D.C. "The Obama administration has committed itself to expanding Medicaid significantly across the board in all states -- to bring eligibility and benefits up to a higher level."

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If Texas opted out of Medicaid

Texas would give up billions in federal funding if it opted out of Medicaid, a report from the state's Medicaid agency shows. Specifically, the state would:

  • Forfeit at least $15 billion in federal funding.
  • Add 2.6 million Texans -- mostly children -- to the uninsured ranks.
  • Create billions in costs for hospitals because federal law still would require them to provide emergency care to former enrollees of Medicaid and the Children's Health Insurance Program.
  • See some of Texans' tax dollars used to support other states' Medicaid programs.

Source: "Impact on Texas if Medicaid is eliminated," Texas Health and Human Services Commission, and Texas Dept. of Insurance, December (link)

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