Updated: Bill Would Grant HHSC Power to Address Medicaid Reform

Updated March 9, 1:06 p.m.:

State Rep. John Zerwas, R-Simonton, filed legislation Friday that would grant the Health and Human Services Commission authority to craft “a Texas solution” to Medicaid reform and negotiate with the Obama administration to draw down billions in federal financing to expand Medicaid services.

As debate in the House Appropriations Committee on Medicaid expansion revealed Friday morning, the House remains divided on how Medicaid should be reformed and whether the program should be expanded. Currently, House Bill 3791 is a shell bill that will be altered as state legislators continue to negotiate how Medicaid should be reformed.

“We felt like it was time to start to get the ball moving on this. We’ve made it pretty clear that we’re not for current Medicaid expansion, but we do need to be for something else,” Zerwas said Saturday, “because I think it's very important for the state that we determine a way to cover this group of people that are currently uninsured.”

HB 3791 directs the HHSC to negotiate with the Obama administration so that Texas can draw down Medicaid expansion financing while implementing Medicaid reforms that enhance the “personal responsibility” of Medicaid recipients, such as copayments or deductibles. It also includes a severability clause that ends the agreement if the federal government reduced its share of Medicaid expansion financing.

“Zerwas’ bill will allow Texas leaders to craft and customize a coverage reform package that utilizes Medicaid expansion funds to reduce uncompensated care at Texas hospitals and eliminate detrimental cost-shifting to the private market,” Dr. Dan Stultz, president of the Texas Hospital Association, said in a statement. “Doing so will vastly improve the state’s business infrastructure by increasing worker access to primary care, which promotes increased workplace efficiency and decreased morbidity and mortality.”

As it stands, the HHSC does not “have a legislative directive or mandate to go forward on this, and that’s what this is intended to be,” said Zerwas, explaining the bill gives state lawmakers the opportunity to weigh in on how Texas should tailor a Medicaid expansion agreement with the federal government. The bill prompts the HHSC “to move forward on something that the Legislature, the [state] leadership is comfortable with that is in the best interest of Texans and allows us to pull down those dollars, which ultimately are our dollars,” he said.

Original story:

A House Appropriations Committee hearing on Friday provided the clearest picture yet of how divided the Texas House is on expanding Medicaid, a key tenet of federal health reform. 

After three hours of invited testimony on whether to expand subsidized health coverage to more poor adults, Chairman Jim Pitts, R-Waxahachie, told his colleagues they have an “obligation to discuss” options for reforming the current Medicaid system.

“It’s time leadership step up,” said Rep. Charles Perry, R-Lubbock. “We don’t have the solution today. The status quo is broken.” 

Although the House GOP caucus overwhelmingly voted on Monday to reject the version of the Medicaid expansion called for under the Affordable Care Act, lawmakers left the door open to discussing other possibilities for reforming Medicaid and drawing down dollars from the federal government to do it. Since that vote, House Speaker Joe Straus has put pressure on legislators to present a proposal for how Texas should reform Medicaid. He hasn't ruled out negotiations with the Obama administration that could lead to the expansion of the Medicaid program — on Texas' terms.

Eight Republican governors have struck deals with the federal government to expand Medicaid, but Gov. Rick Perry has remained firm in his opposition. He has repeatedly said the federal government should grant Texas the flexibility to reform Medicaid as the state sees fit.

There are thousands of scenarios that the state could take to expand and reform Medicaid, Kyle Janek, executive commissioner of the Texas Health and Human Services Commission, told the committee. But “we don’t have something on paper,” he said. Janek said he is awaiting further direction from the Legislature to craft a specific plan.

Rep. Sylvester Turner, D-Houston, referenced a compromise Arkansas' Republican-led Legislature reached with the federal government, and said that if “the people in Arkansas are much more capable of designing a system than the people in the state of Texas, that has taken us to a different level.” He called on his colleagues to stop being critical of the Medicaid expansion presented by the Affordable Care Act and to ask themselves “whether or not Texas has the ability to design something that works for Texas.”

Requiring Medicaid patients to make co-payments for their care — an option that has received support from Perry, Straus and other GOP members — is allowed under the Affordable Care Act, Janek said. He said that if Texas took a different route and attempted to subsidize private health plans through an Orbitz-style health insurance exchange like Arkansas, the state would need to set up policies to ensure benefits offered by Medicaid that weren't covered by private plans didn't disappear.

“I think the public has a misconception that Medicaid expansion will get us the greatest bang for our buck,” said Rep. Lois Kolkhorst, R-Brenham, who chairs the House Public Health Committee. “For Texas, the bang for our buck is really in the exchange, the subsidy [for] people going into private insurance.”

Kolkhorst said that without expanding Medicaid, other tenets of the Affordable Care Act would reduce Texas’ uninsured rate from 24 percent — the highest in the nation — to 16 percent. Including the Medicaid expansion would drop the uninsured rate slightly more, down to 12 percent.

The Legislative Budget Board estimates that the direct cost to the state of expanding Medicaid as directed by the Affordable Care Act — an option that is largely off the table — would be $50 million in 2014, during which time the state would draw down $4 billion in federal financing.

The federal government would finance 100 percent of the health care costs for Medicaid expansion enrollees for the first three years, during which time Texas would be required to pay half of the program’s administrative costs. After 2016, the federal share of financing would slowly be reduced until it reached 90 percent in 2020.

There is no deadline for Texas to decide whether to expand Medicaid, but the 100 percent federal matching rate is only available between 2014 and 2016. The federal government has indicated that partial expansion would not be allowed; therefore, Texas counties could not pursue Medicaid expansion without the rest of the state, an earlier option proposed by LBB staff.

“The common expectation would be that there would be less or fewer uncompensated costs,” said Wayne Pulver, assistant director of the LBB, emphasizing that the nonpartisan body's estimates did not take into account secondary economic effects, such as the reduction of uncompensated care costs currently paid by hospitals and local government entities.

In total, unreimbursed charity care creates a $4.3 billion annual tax burden on local government entities and public hospitals, Billy Hamilton, the state’s former chief budget estimator, told the committee. Overall, he said, there is enough local and state spending in the current system to cover the state’s share of Medicaid expansion costs. 

“I know this is a controversial issue … but I don’t really think you’re going to see a more overwhelming fiscal opportunity during your service here,” Hamilton said. “I served this Legislature for 30 years and I’ve never seen anything like it.”

The committee also heard testimony from judges from Harris and Dallas counties who spoke in favor of expanding Medicaid, and from John Davidson, a policy analyst from the conservative Texas Public Policy Foundation, who spoke against Medicaid expansion.

Rep. John Zerwas, R-Simonton and an anesthesiologist, said Texas needs to ensure that any expansion of reform of Medicaid include ways to incentivize more health care providers to accept those patients. If it doesn't, those patients will end up in the highest-cost environments, emergency rooms. Zerwas pointed out that only 32 percent of doctors are willing to take Medicaid patients in the existing program, under current reimbursement rates.

Rep. Donna Howard, D-Austin, said the Legislature should be held responsible for this lack of Medicaid providers, because lawmakers set those reimbursement rates. “The provider capacity is a real issue for this system, whether we expand or not,” she said.