Medicaid expansion: Not as expensive as the state claimed it would be

Remember last year when the state Health and Human Services Commission claimed that Medicaid expansion would cost the state of Texas $27 billion over ten years, causing every Republican in the state to have a fainting spell and a hissy fit about how that would bankrupt us all? Turns out that estimate was a wee bit too high.

On the heels of Gov. Rick Perry’s declaration that Texas will not expand Medicaid because it is too costly, his health and human services commissioner said Thursday that fully implementing health care reform would cost the state about $11 billion less over 10 years than previously estimated.

Executive Commissioner Thomas Suehs told a Texas House subcommittee that the new estimate is between $15 billion and $16 billion in state costs over a decade, compared to the previous estimate of $26 billion to $27 billion.

The state would get an additional $100.1 billion in federal money over that time, according to the Texas Health and Human Services Commission – money that Suehs acknowledged would be attractive to local entities grappling with the cost of caring for the quarter of the state’s population that currently is uninsured.

“If I was a county hospital district, I would be knocking on your door saying we need to re-debate” Medicaid expansion, perhaps with a push for a local option, Suehs said. That idea, in which a local agency would deal directly with the federal government to expand Medicaid in its area, has been cited by Bexar County Judge Nelson Wolff.

I’ll get back to that “local option” in a minute, but for now take a look at the reasons why HHSC says they overshot the mark. The interesting thing is that in an ideal world that original HHSC esitmate would be closer to the mark because more people who would be eligible for Medicaid under the Affordable Care Act would be getting it in a more timely fashion. Of course, the dirty secret is that under those same assumptions Texas would be paying a lot more for Medicaid now. A lot of people who are eligible today for Medicaid don’t get it, in large part because of policy decisions made by Texas such as means testing and six month enrollment periods. The same is true for CHIP, whose enrollment levels have never returned to those before the 2003 cuts. Our stringent enrollment requirements and stingy benefits, both of which are big contributors to the large number of uninsured people in Texas, are matters of policy and priority, just as Medicaid expansion is. Rick Perry and legislative Republicans don’t want to spend any money on that. It’s just not something they care about. For all their carping and whining about the federal government making them do something about this, they themselves have never proposed a solution to deal with the problem. Well, they are proposing something now, but I’ll get to that in a minute as well.

What does that “local option” mean?

“It (the federal portion) is a huge amount of money. You just can’t leave that on the table, particularly when the burden falls on public hospitals that are funded by local taxpayers,” said Wolff. He is head of the commissioner’s court, which approves the budget for University Health System, a main provider of health care to low-income Bexar County residents.

Harris County Hospital District president and CEO David Lopez said he wants to talk with Perry’s office about possible funding alternatives.

The local option would have to be discussed by all the area’s health care providers, Lopez said.”It’s more than just a public hospital issue. All providers in our community are impacted by this, so they should all be part of the discussion.”

Sen. Leticia Van de Putte, D-San Antonio, said she does not think a local option is available in the law as written, but she is making inquiries about what is possible. “This is real money, and it means real health care for Texans,” she said.

I’ll have to do some research, because this is the first I’ve heard of this, but I gather that a “local option” means that local entities such as counties or hospital districts would apply to the federal government for some amount of money to cover the needs that the state has abdicated by opting out of Medicaid expansion. I have no idea how this would work, whether we’re talking about a restoration of funds to covered uninsured patients who show up at emergency rooms – which, you will recall, is the most expensive and least efficient way to deliver health care – or if these local entities would somehow be administering their own mini-Medicaid programs, or something else entirely. How this is a better idea and a less burdensome regulatory context than simply expanding Medicaid is a question I can’t answer. (The same could be said about having fifty individual statewide Medicaid programs instead of one federal program, but that’s beyond the scope of this discussion.) Whatever this is, I’d call it better than nothing, which is what the state wants to do right now, but in the absence of any details I can’t say how much better than nothing it is.

On the matter of funding to cover uninsured patients, some hospitals are in for more hurt than others if nothing happens.

Bruce Siegel is the chief executive of the National Association of Public Hospitals, which represents the nation’s safety-net hospitals. His members include more than 60 hospital systems, largely in urban areas. As public institutions, they tend to see a greater share of Medicaid and uninsured patients, and also provide more medical services that ultimately do not prove profitable.

That all made the Supreme Court ruling of the Medicaid expansion as optional a huge deal for Siegel and his members. “It’s a pretty grim menu of choices,” he says. We spoke Thursday afternoon about why he’s taking governors’ threats to opt-out seriously, what that would mean for public hospitals and how his group will push the White House for a fix.

[…]

SK: I was writing about DSH payments last week and I was hoping you could explain why they’re so important. They amounted to $11.5 billion last year, which isn’t nothing, but is a pretty small part of Medicaid’s $393 billion budget.

BS: It’s important to keep in mind these payments don’t go to every hospital. They are designed to target those who serve lots of uninsured people. So DSH payments are very important for public hospitals in places like Mississippi, Alabama and Texas, really a lot of Southern states. They’re not going to most hospitals. They’re targeted to a very specific purpose.

SK: Let’s say a big state like Texas, which got nearly $1 billion in DSH payments last year, doesn’t participate. Game out what happens to the public hospitals in that state.

BS: The average American hospital has an operating margin of 7 percent. The average among our members is 2 percent.

We project that if you took away DSH, the margin drops to negative 6 percent. If that happens, you can’t keep up a negative 6 percent margin for more than short time. After a year or two, you have to think about what happens next. You’re having to think about what you shut down after a year or so.

We think there are essentially three options. One is you start cutting back on services. You start figuring out what isn’t bringing in much revenue. And that could be things like community clinics or trauma services. You make some hard decisions.

You may be forced to go to local taxpayers. You find yourself basically putting this in the lap of taxpayers and tacking on the bill for your uninsured to their bills.

In the worst circumstance, you simply decide you can’t go on in that situation and close your doors. It’s a pretty grim menu of choices.

SK: How do you fight this at the state level?

BS: We’re working in state capitals, trying to give our members facts to work with about what this does and doesn’t mean, so they can have an intelligent discussion. There are different strategies for each state. We’re raising awareness that you can’t have it both ways. You can’t say no to the coverage program and cut the DSH program in half, and have this work. We need to get to a consensus that is a huge problem.

Again, the point is to reduce the number of people who rely on emergency rooms – the most expensive and least efficient way to deliver health care – by getting people onto insurance so that they can have access to non-emergency health services. Maybe expanding Medicaid isn’t the best way to do that, but any program to expand health care access is going to involve some up front cost. Some part of that is mitigated by reducing costs elsewhere such as this, which is why the Affordable Care Act cut the subsidy for uninsured patient care to hospitals. Without the expansion of Medicaid, however, you get the worst of all worlds. What does the state’s Republican leadership plan to do about this? Going by the rhetoric of retiring Medicaid director Billy Millwee, speaking to a bunch of zealots at the TPPF, it’s mostly slogans.

Despite Perry’s announcement that Texas will not expand Medicaid, the state will likely see a jump in those enrolling in the current program, Millwee said. Because the individual mandate — which requires all citizens to purchase health insurance — was ruled constitutional, those who were “eligible but not enrolled” in Medicaid will now join the program, he said.

“Medicaid is crowding out other programs,” Millwee said. “In my mind, it is starting to enable poverty.”

Millwee called the current Medicaid system “antiquated” and suggested the state instead receive block grants — federal funds with relatively few restrictions — to expand its health care system.

Expanding Medicaid would “add a lot of people” to the program without increasing their actual access to coverage, Millwee said, because of the scarcity of doctors accepting new Medicaid patients.

Last year 31 percent of doctors accepted Medicaid patients, The Texas Tribune reported earlier this week. Millwee attributed this number to the complexity of Medicaid, saying doctors are not paid as well under the current system as they could be under a block grant system.

That remark about poverty is the sort of thing that could only be said by someone who doesn’t worry about where his next meal is coming from to a bunch of people who think poor people have no one to blame but themselves for their situation. I’m sure they all congratulate themselves for their rectitude every Sunday at church. Having said that, there is some truth to what Millwee says, in the sense that as people move up the income ladder from the very bottom to a step or two above the very bottom, they suffer the equivalent of extremely steep marginal tax rates as they lose eligibility for various programs, including Medicaid. There’s no reason why Congress and the State Lege can’t address this in a fashion that makes more sense, but what with all the wailing and gnashing of teeth by the TPPF types about millionaires paying slightly higher marginal tax rates, which as we know will cause them to stop creating jobs, that seems to get lost in the shuffle.

Then there’s the talk of block grants, for which five GOP legislators shilled on the Chron’s op-ed pages on Saturday. This is a GOP wish list item, and the SCOTUS ruling that invalidates the ACA provision penalizing states for rejecting Medicaid expansion has given them fresh hope of getting it. The thing to remember is that a block grant is a single lump sum of money, with the lure for states being that it has few restrictions on how it can be spent. But the thing about a block grant is that if you run out, either because the amount you were given was insufficient to meet your need or because you spent it foolishly, that’s all there is. If you’ve been paying any attention to the budget ideas of the Congressional GOP – the Ryan plan, in particular – you know that the strategy for controlling future costs is to ensure that block grants remain static or grow at a fixed rate that’s sure to be less than the rate of growth of the actual expenses. To be blunt, this is all about controlling expenses by cutting them. How it would expand coverage, as Millwee claims, is not explained, but look at it this way: You would be putting your faith in the people who have kept Texas at the bottom of the national list for health care access to do something about it once we’ve given them what they want. If that sounds like a winning scenario to you, I’ve got some beachfront property in Midland you might be interested in.

Finally, as far as the lack of doctors is concerned – what, you mean tort “reform” hasn’t solved all of our problems yet? – who says we have to have doctors accepting Medicaid? Why not seek out ways to encourage more nurse practitioners to do the kind of checkup and maintenance work they’re perfectly capable of doing? Maybe there are some burdensome regulations holding them back that the Lege could address. All I know is that going on a dozen years of Republican control of state government we’re no closer to solving this problem on our own, and we’re resisting a comprehensive solution that’s been presented to us. It’s all a matter of priorities.

Related Posts:

• Counties may try to expand Medicaid on their own
• What will Texas do now?
• If Medicaid is broken, who broke it?