Lack of Local Revenue Limits Experimental Health Care Projects

Texas received federal approval in May to begin more than 1,100 experimental projects that could transform the way health care is delivered to the state’s poor and uninsured. But there is a catch: To receive billions of dollars in federal financing, health care providers across 20 Texas regions must start the projects using local financing and meet some performance benchmarks.

This presents a particular challenge for the poorest regions, which have higher rates of people who are uninsured or receiving Medicaid benefits, yet have been unable to put up enough local money to draw a representative share of the available federal dollars.

The Medicaid transformation waiver Texas received from the federal government in 2011 set up a risk-based incentive pool allowing regional health care providers to utilize up to $11.4 billion over five years — including $6.6 billion in federal financing — for experimental projects aimed at improving the health outcomes, cost-effectiveness and quality of care delivered to the state’s poor and uninsured.

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The projects that the federal government initially approved in May use just two-thirds of the $5 billion available for experimental projects over the next two years, partly a result of some regions being unable to find enough local financing to draw more federal dollars.

“There’s a lot of money that’s being left on the table,” said Daniel G. Castillon, executive director of the Border Region Behavioral Health Center in Laredo. “Locally, there was a number of agencies or organizations that would have liked to be part of it, but they did not have the funding available.”

The health center is investing $3 million to start five of the Laredo region’s 11 approved experimental projects, the largest of which will allow it to hire a primary care physician to coordinate patients’ mental and physical health services. If the center meets the projects’ goals, it could receive $4.2 million in federal financing.

“It’s a risk worth taking,” Castillon said. “The benefits for the general population that we serve and the community at large are enormous.”

More than two-thirds of people in both the Laredo and South Texas regions are uninsured or enrolled in Medicaid, the joint state-federal health program that primarily serves impoverished children and the disabled. Without a public hospital district to raise local tax revenue, health care providers in those regions had to find money in their existing budgets to finance the experimental projects.

During the next two years, those regions will be able to receive only up to $63 million of the $243 million that was potentially available from the federal government.

“Just like there are limited dollars available federally, there are limited dollars available locally,” said Michael Norby, chief financial officer of the Harris Health System. Harris Health is overseeing the projects proposed in the state’s most populous region, which includes Houston.

More than 40 percent of the 4.4 million people in that region, which spans nine counties, are uninsured or enrolled in Medicaid. So far, it has received approval to begin 128 experimental projects valued at $647 million over the next two years.

Norby said Harris Health planned to spend $950 million in property taxes collected by the public hospital district — as well as financing put up by medical schools and other public health entities in the region — to draw $1.3 billion federal dollars for the experimental projects through fiscal year 2016.

Regions will have an opportunity to apply for additional experimental projects in the fall. State Sen. Juan "Chuy" Hinojosa, D-McAllen helped set up a financing mechanism in the 2013 legislative session that could allow impoverished counties along the Texas-Mexico border to collect voluntary assessments from private hospitals in order to seek federal dollars.