The Healthcare Hitch: Will An Alternative To Medicaid Expansion Pass The Statehouse?

(Illustration by Roman Murdov)
(Illustration by Roman Murdov)

(Editor’s note: This article was originally published in the January issue of D CEO. The feds this week threw a thinly veiled threat Texas’ way: Expand Medicaid, or risk not having the Medicaid 1115 waiver renewed. While at this point it’s nearly impossible for the Legislature to expand Medicaid under Obamacare, this article dug into another option that other Republican states have come to agree upon.) 

Can common sense trump partisan politics? The question is especially apropos these days in Texas, which accounts for about 25 percent of the 4 million Americans who would gain health insurance if their state’s lawmakers expanded Medicaid.

The healthcare industry knows how unlikely that is to happen in the Lone Star State, where the Legislature will reconvene this month for its 84th session. Republicans rolled again in the midterms, leaving Democrats just 63 seats in the House and Senate compared to the GOP’s 118. Instead of giving up, though, healthcare providers are promoting workarounds to address the worst uninsured rate in the country without expanding Medicaid.

According to the most recent Census stats, nearly 6 million non-elderly Texans lack health insurance. About half of those are eligible for coverage in the Affordable Care Act’s exchange markets, according to estimates from the Kaiser Family Foundation. During the first open enrollment period, about 734,000 Texans registered for a plan. But then there are the estimated 1.05 million Texans who fall into the so-called coverage gap.

This group of working poor makes too much to be enrolled in Medicaid, but not enough to qualify for federal subsidies on the exchanges. The Obama administration is dangling $90 billion over the Legislature to be doled out over the next decade to insure this group of residents.

Expanding the program for 10 years, a tenet of President Obama’s healthcare reform law, means the feds pick up 100 percent of the costs through 2016 and 90 percent each year thereafter. Estimates say Texas would contribute no more than $15 billion.

But to many legislators, a vote for Medicaid expansion is a vote endorsing Obamacare. So, the politics have soured its potential to help improve the state’s bottom-of-the-barrel uninsured rate of 22.1 percent, as reported in the most recent U.S. Census figures from 2013.

“The fact that I still come back to is, okay, how do we solve the problem of 6 million people with no health insurance?” asks Steve Love, president of the Dallas-Fort Worth Hospital Council. “Put all the politics away. Are we going to let these people continue to be uninsured, or are we going to do something to help them? And, if we are, what is that?”

It’s not likely to be Medicaid expansion; not as it’s defined in the ACA, at least. After the Nov. 4 election, a handful of top North Texas healthcare executives joked about whether it was even worth their time to make a trip to Austin this session.

There are reasons for optimism bubbling out of a number of states, however. Arkansas, Indiana, Pennsylvania, Utah, and Wyoming have convinced the feds to approve waivers using the expansion dollars to purchase private insurance for their low-income residents. Republican lawmakers in Texas, from incoming Gov. Greg Abbott to U.S. Sens. John Cornyn and Ted Cruz, have called for Obama to approve a waiver allowing for a block grant that would give Texas the money, and let it use it as the state sees fit.

There’s no indication the president is willing to give Texas a blank check; nor has he given one to any other state. Offer up a plan of how the dollars will be spent, though, and the administration may play ball. This means the states address their uninsured rates and the legislators avoid culpability in voting to expand Medicaid. And many such waivers, including in Arkansas and Indiana, allow the states to back out if the feds renege in any way on their agreement, such as pulling funding. (This was a major concern for Texas lawmakers on both sides of the aisle.)

A private plan will likely be more expensive than merely expanding Medicaid: The Congressional Budget Office found that insuring Arkansans through the so-called private option would cost $9,000 per person, compared to $6,000 through Medicaid. But a solution that uses federal dollars to buy private insurance could wind up having a better outcome. One reason: the Texas Medical Association says just 34 percent of physicians in the state accept new Medicaid patients—a drop of more than 33 percent since 2000.

“It just pays so poorly,” says John Hawkins, senior vice president for advocacy and public policy at the Texas Hospital Association. “There’s no question that access is going to be a problem because you are expanding the number of insured people, but unfortunately, you are not doing anything to expand the primary care base.”

Strained to Capacity

There’s also the matter of Disproportionate Share Hospital (DSH) payments, which reimburse facilities that provide 15 percent or more of their care to the uninsured or the underinsured. Betting on an increase in the number of insured, the ACA cut DSH payments by as much as 75 percent. Then, the U.S. Supreme Court ruled that states could opt out of expanding Medicaid. But the decline in reimbursements stood.

In North Texas, Parkland Health & Hospital System spent $762 million on uncompensated and charity care in the last fiscal year, according to spokeswoman April Foran. Baylor Scott & White Health spent a hair more than $741 million. Texas Health Resources, the Arlington-based system that sees more patients than any other in North Texas, spent about $656 million.

“There are a lot of smaller hospitals throughout this state that are not going to be able to sustain these hits without additional help,” says Dr. Forney Fleming, head of the Healthcare Management master’s program at the University of Texas at Dallas. “Our safety-net hospitals are basically strained to financial capacity already.”

According to the Texas Health and Human Services Commission, the cost of uncompensated care statewide reached nearly $6.5 billion in 2012. Some of that is covered through DSH reimbursements, but the amount largely falls to county taxpayers and the privately insured, which has the effect of raising premiums. So, finding a way to get these folks insurance will have a huge impact on the state’s economy.

If Medicaid were expanded in Texas, the total cumulative gross benefits to the state’s economy from 2014 to 2023 would be $270 billion, according to The Perryman Group, a Waco-based economic research and analysis firm. “It would dramatically reduce the amount of uncompensated care that … in our view, the employers are paying for in insurance costs and medical costs,” says Bill Hammond, CEO of the Texas Association of Business. “I mean, somebody’s paying for it, and it’s most likely the business community.”

That’s the groundswell providers need to get an alternative through the statehouse: a concerted push by the business community. In November, the Texas Hospital Association launched a campaign coined The Texas Way, echoing a letter sent by county judges in the state’s six most populous counties to state Sen. Charles Schwertner, R-Georgetown, the head of the Senate Health and Human Services Committee. They urged him to find a Texas solution in the upcoming legislative session. (Schwertner declined interview requests for this story.)

In early December, the committee, acting on a request from outgoing Lt. Gov. David Dewhurst, issued a 58-page report that left the door open to the possibility of pursuing a waiver similar to what’s being done in Indiana or Arkansas.

The report calls for “common-sense reforms such as cost sharing, health savings accounts, variable benefit packages, and high deductible emergency care plans.” It also urges a plan that “encourages personal responsibility and lessens the burden” of having to provide uncompensated care.

The THA’s push is loosely modeled after the Healthy Indiana Plan, or HIP. It suggests using federal dollars to buy the uninsured private plans with health savings accounts and high deductibles. As the Senate committee suggests, it would shift the coverage onus to the private sector and, ideally, force the buyer to manage his or her own health to taper costs.

The precedent is there. Indiana politicians, much like those in Texas, rebuffed Medicaid expansion, saying they would instead develop a plan to reform the program. From that effort came HIP, which the feds recently renewed through 2015. If the federal dollars stop coming, a provision in the waiver allows Indiana to back out.

Sen. Royce West, D-Dallas, says the key is getting the business sector to come up with a private solution that can be supported by a bipartisan coalition of Democrats and Republicans. Once that happens, he says, “I think there will be a willingness to get something done with the federal government.”

In Texas, the sea change is here: In addition to the conservative Texas Association of Business, chambers of commerce representing publicly traded companies in Dallas, San Antonio, Fort Worth, and Arlington have supported expansion or an alternate plan. The 15-member Texas Institute of Health Care Quality and Efficiency, which was appointed by then-Gov. Rick Perry, recommended the Legislature permit the HHSC to negotiate a Texas-tailored solution with the feds to access the expansion dollars.

The next step is contingent upon these groups coalescing. They have a big job to do: convince legislators to study the statistics and relinquish their rhetoric.

This column originally appeared in the January/February issue of D CEO.

Posted in News.