The Price of Reform

Behind the fiery health care rhetoric in Washington is a measure expected to dramatically expand Texas’ Medicaid program, adding up to 1 million adults to the state’s insurance roll — but at a steep cost.

Traditionally, states have not covered parents or adults without children under Medicaid, no matter how poor. Of the 3.2 million Texans currently enrolled in Medicaid, the overwhelming majority are children, disabled or elderly. Under the historic bill that the U.S. House of Representatives passed Sunday night, citizens making less than $14,000 a year or families of four with household incomes under $29,000 would qualify for Medicaid coverage starting in 2014.

The federal government would foot the whole bill, estimated by the nonprofit, nonpartisan Center for Public Policy Priorities to be roughly $3.7 billion a year — until 2017, when Texas would start paying a 5 percent share, or about $185 million. That share would grow to 7 percent, or about $259 million, in 2019, and top out at 10 percent, or $370 million, in 2020, according to the center's estimate.

On paper, the measure looks like a great deal for the state: For every dollar Texas pays, it will get about nine federal dollars, to be funneled into health care coverage for roughly one-sixth of Texas’ 6.1 million uninsured. But it’s still a serious strain on the state budget. In seven years, Texas will have to come up with hundreds of millions of dollars in new revenue to fund the Medicaid expansion. "If you have a Legislature with leadership that is dedicated to never creating any new state revenue, it’s a problem,” said Anne Dunkelberg, associate director of the center.

That might not be the only cost. When Medicaid expands, states generally see a so-called “welcome mat” effect — when kids who are already eligible but haven't yet enrolled in the program flock to it. That’s a large additional cost to the state, with just a standard federal match.  

Money’s not the only consideration. Until recent improvements, the state’s Medicaid eligibility system struggled with backlogs and inefficiencies. It’s unclear how quickly the state would be able to process new Medicaid enrollees.

And Texas already faces a shortage of health care providers who accept Medicaid patients, because the reimbursement falls far short of private pay patients. Right now, less than half of Texas doctors accept Medicaid patients, said Tom Banning, CEO of the Texas Academy of Family Physicians. The health care bill would increase Medicaid payments to primary care doctors up to Medicare levels starting in 2013 — at the federal government's expense. But many doctors say the Medicare rates are only a modest improvement.

“With the payment level of Medicaid — about 70 cents on the dollar — there’s a real disincentive for any doctor to take it,” Banning said. “They’re expanding a product at a time when there aren’t the doctors, the providers, to deal with it.”

Depending on their political orientation, lawmakers in Texas and Washington have varying views on how much the entire health care reform package will set Texas back.

Texas’ Republican leaders — Gov. Rick Perry, Lt. Gov. David Dewhurst and House Speaker Joe Straus — are relying on a state Health and Human Services estimate that shows the bill costing Texas a whopping $24.3 billion over 10 years. In the absence of tax increases, which Republican leaders oppose at all costs, they argue the health care bill could force the state to make cuts in education, public safety and road construction. 

"The federal government has no right to co-opt state budgets in the manner that it has with Medicaid," said Arlene Wohlgemuth, executive director of the Texas Public Policy Foundation. "... Legislators need to help the public understand how deeply we will need to cut public education, transportation and public safety to pay for this unfunded federal Medicaid mandate.”

But Democratic lawmakers, such as Houston state Rep. Garnet Coleman, cite the nonpartisan Congressional Budget Office’s estimate: a far lower $1.4 billion over the next decade. They call the Texas estimate inflated because it doesn't take into account the anticipated economic impact of health care job creation — estimated at $3.25 for every federal Medicaid dollar spent here. The state's figures also include the price of paying for children who are already eligible but not yet enrolled in Medicaid — which Democrats say shouldn't be considered a new cost — and the shifting of certain costs from local to state budgets that may not ever occur. 

“All told, Texans and Texas state government stand the chance to benefit greatly from federal healthcare reform legislation,” Coleman said. “Texas will likely receive over $120 billion in federal dollars. … The legislation has the potential to create jobs and boost economic activity in our state while also ensuring the health and well-being of all its citizens.”