House Budget Writers Consider Health Care Safety Net

With billions of federal dollars for hospitals in jeopardy as Texas leaders maintain their opposition to providing health insurance to poor adults under the Affordable Care Act, budget writers met Thursday to discuss what is at stake for Texas' health care safety net.

The Texas Health and Human Services Commission is seeking to renew a $29 billion waiver that reimburses Texas hospitals for the care they provide to low-income patients. Federal officials have indicated some of the money might be cut off if state lawmakers do not expand the Texas Medicaid program to provide health insurance to more low-income Texans — a key provision of the Affordable Care Act, President Obama’s signature health law.

If the hospital reimbursement money were not renewed, “I would call it an upheaval to our health care system,” HHSC Chief Deputy Commissioner Chris Traylor told the House Appropriations Committee. “It has been, we believe, a significant benefit to health care delivery in the state.”

House lawmakers heard from HHSC and hospital representatives about the waiver’s role in funding health care programs for poor Texans. One pool of money under the five-year waiver pays more than $3 billion per year for “uncompensated care.” HHSC officials said that money is used to shore up the “Medicaid shortfall” — the amount of hospital costs not covered by Medicaid reimbursement rates, which are low in Texas compared to other states — and to reimburse hospitals for the “charity care” they provide in the emergency room to low-income people without insurance. That prompted some lawmakers to ask whether the state had a contingency plan if the feds choose not to renew the uncompensated care funding.

“The potential interruption in federal sources of payment would make me extremely uncomfortable,” said state Rep. John Zerwas, R-Richmond. “You see a whole lot of potential dark clouds circulating up there.”

“Do we have a Plan B should this waiver not be renewed?” asked state Rep. Armando Walle, D-Houston.

Traylor said a non-renewal would force the commission to “regroup” and decide how to provide care. Among other things, the waiver transformed how the state provides Medicaid services, helping to facilitate the privatized “managed care” model across the state.

The Obama administration has encouraged Texas to expand its Medicaid program to cover adults living below 138 percent of the poverty line, saying that money would lessen the need for the waiver’s uncompensated care pool because roughly a million more Texans could be covered by health insurance. But with less than a month remaining in the legislative session, Texas leaders have showed no inclination of doing so.

Republican lawmakers, who have criticized the Medicaid program as inefficient, announced early in the session that they would not expand Medicaid. Bills proposed by Democrats that would expand health insurance coverage to low-income Texans have languished in committee without being heard. In the Senate, Democrats attempted to work Medicaid expansion into an amendment on a different health care bill, but that move failed along party lines.

House budget writers said Thursday that they needed to address the state’s safety net while acknowledging the political opposition to “Obamacare.”

“There is no conversation on doing any kind of Medicaid expansion right now,” said Zerwas, who last session offered an alternative plan to expand health coverage with federal Medicaid expansion money. That plan failed.

“I think it would be prudent on our part to prepare for the uncompensated care portion going away,” said state Rep. Sylvester Turner, D-Houston. “We knew it was not going to be up there forever.”

State Rep. Cecil Bell, R-Magnolia, suggested there could be “reason to be apprehensive” about programs financed with federal money, because that money could be discontinued, leaving state budget writers on the hook. Conservatives have used a similar argument against Medicaid expansion, saying the rate of federal reimbursement could be reduced later.

John Hawkins, the senior vice president of the Texas Hospital Association, told the committee that with the question of waiver renewal up in the air, the state’s safety net was “very tenuous.” Hawkins said Texas hospitals are already losing about $1.2 billion per year in federal cuts to Medicare under the Affordable Care Act — money the hospitals expected to recoup under a coverage expansion. Texas leads the nation in the rate of people without health insurance.

Hawkins said it was not the hospital association’s preference that lawmakers continued to oppose Medicaid expansion. “But we can certainly see the political reality,” he said.

This story was produced in partnership with Kaiser Health News, an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

Disclosure: The Texas Hospital Association is a corporate sponsor of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.