Texas Medicaid Expansion Attempt Defeated

Published June 7, 2013

Republican legislators in Texas pushed for the expansion of Medicaid under  President Obama’s health care law, despite the opposition of Republican Governor Rick Perry. But their attempts to expand the state’s Medicaid system were defeated before the conclusion of the legislative session.

Rep. John Zerwas (R-Richmond) failed to get his Medicaid expansion bill, HB 3791, out of the House Calendars Committee before the state’s biannual legislative session concluded. Known as “The Texas Solution,” Zerwas’ bill would have allowed the state to pursue a block grant from the federal government for its Medicaid program.

Hospital systems in Texas had lobbied for the Zerwas approach, considering the expansion would cover millions of newly eligible individuals, including all Texans below 133 percent of the federal poverty level (FPL). Currently, Texas provides Medicaid eligibility to parents below 25 percent of FPL and 12 percent for jobless parents. Perry’s opposition helped prevent the expansion from advancing.

“Expanding Medicaid is not a solution; it’s not even a Band-Aid for what ails us. In short, it’s a prescription for failure,” Perry said at an April press conference.

Cost Growth a Worry

John Davidson, a health care policy analyst with the Texas Public Policy Foundation in Austin, Texas, says the problem with Zerwas’ bill is that it did nothing to significantly reform Medicaid.

“Zerwas said it wasn’t a Medicaid expansion bill and was calling it a ‘Texas Solution,’ but in reality it doesn’t matter what he calls it, partial federal funds would not be disbursed to Texas because the feds have already ruled that Medicaid expansion was an ‘all or nothing’ venture,” explains Davidson.

Despite the federal push for the states to expand Medicaid, there is no reason to think expansion in Texas is inevitable, Davidson says.

“Something must be done soon to reform the program. The cost and growth trajectory cannot continue. What is inevitable is that we will have to implement measures to control cost growth because the Medicaid expenditures that are coming will overwhelm the other parts of the budget,” Davidson said.

The problem, Davidson says, is that Medicaid costs are continuing to grow, even without the expansion.

“During this session, the Texas Senate, for the first time in its history, allocated more money for Medicaid than for schools. If we don’t do something in the next 10 years, Medicaid will consume 50 percent of the ‘all funds’ [the mixture of state and federal funds] in the budget. If we do expand Medicaid, the state’s portion will be $160 billion by 2040 and the all funds portion will be $460 billion,” said Davidson.

Alternative Reform Options Available

What would proper Medicaid reform look like? Davidson says Congress and the president should convert the federal funding into block grants that allow the states to receive their money all at once and then have the authority to spend it as they think best. A second reform would be to establish health savings accounts, or HSAs, for Medicaid enrollees, and a third would be to provide health insurance premium support based on a sliding scale for income.

“We need to transform Medicaid as we know it into a premium support plan so that enrollees have access to the same kinds of private insurance as the rest of us,” says Davidson.

Calls for True Flexibility

Devon Herrick, a senior fellow with the National Center for Policy Analysis, a public policy think tank in Dallas, Texas, said the state should continue to ask for flexibility for the program.

“A lot of successful reform efforts create appropriate incentives for Medicaid enrollees. For instance, Cash & Counseling gives people with disabilities, including older adults, the option to manage a flexible budget and decide what mix of goods and services best meet their personal care needs,” says Herrick.

Herrick says Zerwas’ measure included some good ideas.

“In some other states, they use the carrot-and-stick approach: If you use your funds ‘right,’ then you will be rewarded, like funds to pay for over-the-counter medications and medical supplies purchased at a drug store,” Herrick said. “The enrollees like the service better and they make better choices. Zerwas’ plan follows the trend of giving proper incentives.”

‘Big Government Lite’

John Dunn, a physician, lawyer, and policy advisor for The Heartland Institute, says there is no fixing Medicaid through the expansion mandated by President Obama’s law.

“The politicians started thinking that they could try and compromise with the federal government to fix health care. ‘We’ll try and work with the feds to expand Medicaid,’ they said, but there is no way to do it right. They think that they can create a more complex, better plan, instead of letting the market do it,” explained Dunn.

Dunn says none of the proposed reforms would give consumers incentives to spend health care dollars wisely, because they would remain insulated from the true costs of care.

“Zerwas was trying to expand charitable big government, but there is no reason for the recipient to spend the money he’s getting from the government wisely,” says Dunn. “The only thing that distinguishes the controlling nature of his plan from a Democrat plan is that he would do it a little less aggressively. In other words, his plan was Big Government Lite.”