Texas Rejects Obama Administration on Exchange, Medicaid Expansion

Published November 29, 2012

In a letter to U.S. Health and Human Services Secretary Kathleen Sebelius, Texas Gov. Rick Perry confirmed his state has no intention of implementing an insurance exchange or expanding Medicaid, despite the reelection of President Obama.

Echoing an earlier letter written in July, in his November letter Perry, a Republican, noted any state exchange must be approved by the Obama administration and operate under specific federally mandated rules, many of which have yet to be established.

“In its current form under the Patient Protection and Affordable Care Act and through the yet undisclosed rules set forth by [the Center for Medicare and Medicaid Services], the exchange presents an unknown cost to Texas taxpayers. It would not be fiscally responsible to put hard-working Texans on the financial hook for an unknown amount of money to operate a system under rules that have not even been written,” Perry wrote.

No State Exchange

Devon Herrick, a senior fellow of the National Center for Policy Analysis in Dallas, Texas, said Perry is right to oppose creation of a state-run health insurance exchange.

“Other state officials worry Texas will lose the ability to regulate health insurance within their borders and be straightjacketed with an exchange that does not meet the needs of Texans,” said Herrick.

John Davidson, a health care policy analyst in the Center for Health Care Policy at the Texas Public Policy Foundation (TPPF), said he is pleased Texas returned the initial grant money to fund the implementation of the state’s health care exchange.

“The exchanges are another way the federal government is eroding state sovereignty and taking over state programs. A state exchange is a name by the federal government to strong-arm state governments to fund a federal program,” said Davidson.

In his letter, Perry agreed.

“It is clear there is no such thing as a state exchange. Instead, this is a federally mandated exchange with rules dictated by Washington. As long as the federal government has the ability to force unknown mandates and costs upon our citizens, while retaining the sole power in approving what an exchange looks like, the notion of a state exchange is merely an illusion,” Perry wrote. “[HHS] has broad rule-making authority, including the ultimate decision on what is an essential health benefit, which plans can operate in an exchange, and the ability to establish both price controls and cost sharing limits.”

Medicaid Expansion on Hold

In the Supreme Court’s June decision which upheld the constitutionality of Obama’s health care law, the Court also found states have the right to reject the law’s Medicaid expansion without losing their current federal funding. Perry noted in his letter that expanding Medicaid would mandate the admission of millions of additional Texans into the already unsustainable Medicaid program, at a potential cost of billions to Texas taxpayers, Davidson said.

“The Supreme Court gave state the option to opt out of expanding Medicaid. It would be costly to set up and run and at a time when state budgets are tight and Republican governors should resist the federal government in this regard. If it’s a federal program, then let the feds do it,” said Davidson.

Davidson notes the state’s budget for Medicaid was $23 billion during the last fiscal year. If it expanded at the rate recommended under Obama’s law, the state would pay an additional $7.3 billion in 2020. By 2040 that share would increase by an additional $15.9 billion, consuming more than half of the general budget, according to TPPF’s calculations.

“ObamaCare takes things like Medicaid and transforms them into something else. The Medicaid expansion is designed to go hand-in-hand with the state exchanges,” Davidson said. “You go to an exchange and they tell you what programs you qualify for and if you can’t afford to pay, then they qualify you for Medicaid. This creates another welfare entitlement.”

Avoiding Higher Costs

John Dale Dunn, M.D., a policy advisor on health care for The Heartland Institute, agrees with Perry’s decision, particularly the decision not to expand Medicaid.

“Medicaid is the biggest budget item for all the states. The reason Medicaid is so expensive is it covers people in nursing homes. Families routinely strip a family member of their assets so they are poor enough to qualify under Medicaid. At this point, Texas’s Medicaid budget is about $15 billion, which is a lot of money. ObamaCare creates Medicaid on steroids by moving millions of new people and currently eligible people into the program,” said Dunn.

Dunn says states that choose to implement Obama’s law are likely to see employers dump their employees into the government-run exchanges.

“ObamaCare frees employers from the costs of providing health insurance for their workers because the penalty is three times less than the actual cost of health insurance. Any owner with any common sense is going to dump their employer-provided health plans, pay the penalty, and send their workers to the state exchanges for health insurance. This was not an oversight by ObamaCare—it was a design,” said Dunn.

Internet Resources:

Letter from Texas Gov. Rick Perry to Health and Human Services Sec. Kathleen Sebelius