States' Woes Spur Medicaid Drop-Out Talk
Topics: Medicaid, States
By Emily Ramshaw, The Texas Tribune and
Marilyn Werber Serafini, KHN
Nov 12, 2010 - Kaiser Health News
A week after newly emboldened Republicans in the Texas Legislature floated a
radical cost-saving proposal — opting out of the federal Medicaid program —
health care experts, economists and think tanks are trying to determine just how
serious they are, and if it would even be possible.
The answer? It is complicated. But that is not stopping some conservative
lawmakers in nearly a dozen other states, frantic over budget shortfalls and
anticipating new costs from the federal health care overhaul, from exploring it.
"States feel like their backs are against the wall, so this is the nuclear
option for them," said Christie Herrera, director of the health and human
services task force for the American
Legislative Exchange Council, an association for conservative state
lawmakers. "I'm hearing below-the-radar chatter from legislators around the
country from states considering this option."
In Texas, some Republicans — bolstered by their expanded majority in the
State House — say the strings attached to Medicaid and the Childrenfs Health
Insurance Program (CHIP) are bankrupting the state, which is staring down a
budget hole that some have estimated as high as $25 billion. They argue that
states could provide more efficient and cost-effective care for children, the
disabled and the impoverished by either giving up federal matching money
altogether or getting federal officials to grant states waivers to provide
health care as they see fit.
Jobless parents in Texas only qualify for Medicaid if their income is below
12 percent of poverty ($22,050 for a family of four), and working parents only
qualify if their income is below 26 percent of poverty. Gov. Rick Perry
"understands the frustrations of legislators as they deal with a program that
consumes 20 percent of the state budget," said Katherine Cesinger, his
spokeswoman. "Their options are severely limited by a federal government that
continues to tie their hands when it comes to administering Medicaid."
Opponents argue that dropping Medicaid would have such a devastating effect
on the state's economy — not to mention the health of 3.6 million Texans
currently enrolled in the program — that the idea is pure anti-Washington
grandstanding.
The federal government covers 60 percent of Texas' $45 billion biennial
Medicaid budget. Without that money, critics say, any health care the state
could provide would be so limited that undercovered patients would flood
emergency rooms, and Texans would end up paying the costs through local property
taxes or higher insurance premiums.
"The real benefit of Medicaid is it's a shared expense, with the feds taking
up a larger portion," said Regina Rogoff, executive director of the safety-net
People's Community Clinic
in Austin. Speaking of a withdrawal from the program, Ms. Rogoff said: "This
will raise local property taxes, because hospital emergency rooms can't turn
away patients. And it has the implication of us paying, through federal taxes,
to subsidize care in other states, leaving people who live in our state without
care."
Such fears notwithstanding, the idea of dropping out of Medicaid is on the
table in Texas and roughly a dozen other states, including Alabama, Mississippi,
Washington and Wyoming. Options include remaking Medicaid with only state
financing to give states broad flexibility in benefit and cost design, and, two,
seeking federal waivers to allow states to change parts of their Medicaid
programs.
"If people are in superbad poverty, that's one thing," said State
Representative Warren Chisum, Republican of Pampa, the state's most vocal
supporter of dropping out of Medicaid and a candidate for speaker of the House.
"It breaks my heart when there's someone who smokes, and who stays drunk half
the time, and we're supposed to provide their health care."
Starting in 2014, the new health law extends Medicaid to those with incomes
up to 133 percent of the federal poverty level, which is $29,327 for a family of
four in 2010. Some conservatives believe that if states dropped Medicaid, many
low-income people could instead receive federal subsidies to buy private
insurance coverage through state exchanges, another piece of federal health care
overhaul that takes effect in 2014. States would then become totally responsible
for Medicaid beneficiaries who require nursing homes and other long-term care,
for premiums and other Medicaid costs for Medicare beneficiaries — but everyone
else would go into the exchange.
Edmund Haislmaier, senior research fellow at The Heritage Foundation, a
conservative research organization, estimates that Texas would save $46.5
billion from 2014 to 2019 under this model. In all, Mr. Haislmaier said, 40
states would come out ahead financially.
Others dispute that and note that switching millions of people from Medicaid
to subsidized private insurance would be costly to the federal government, and
may not be legal.
"The subsidies are explicitly not available for those with incomes below the
poverty level," said Jennifer Sullivan, senior health policy analyst at the
consumer group Families
USA.
Judith Solomon, co-director of health policy at the nonprofit Center for Budget and Policy
Priorities, said the new health care law explicitly stated that only
"applicable taxpayers" were eligible for subsidies, ruling out anyone whose
income is less than 100 percent of poverty, except for legal immigrants.
Cindy Mann, director of the federal Center for Medicaid and State Operations,
said the Department of Health and Human Services was trying to determine whether
Medicaid recipients dropped by their home states would qualify for subsidies.
Critics say dropping out of Medicaid would be a devastating blow to the
state's medically underserved. Seven of 10 Texas nursing home residents rely on
Medicaid, which also pays for more than half of all deliveries of babies in the
state.
The state's share of these expenses would not shift to the federal
government, said Jose Camacho, executive director of the Texas Association of Community Health
Centers, but to counties and local taxpayers.
Others fear that cutting off the flow of federal Medicaid dollars could
cripple the state's economy: About a million Texans work in health care, and
from 2005 to 2009, a quarter of the new jobs created in the state were in that
field.
Tom Banning, chief executive of the Texas Academy of Family Physicians, said that without
Medicaid, or with a less-extensive replacement program, health care providers
would be forced to shift their costs to the private market, driving up insurance
premiums and prompting more people to forgo coverage. "From a practical
standpoint," Mr. Banning said, "the downstream economic implications for Texasf
health care infrastructure would be decimating."
Opponents also say that the theory that a Democratic administration would
offer Texas a no- or few-strings-attached Medicaid waiver is a pipe dream. "A
state's choice to get out of Medicaid is to get all the way out, not to pick and
choose," said Anne Dunkelberg, associate director of the Center for Public Policy
Priorities, a nonprofit group in Austin.
In the end, said Robert Reischauer, a former director of the
Congressional Budget Office, the debate over Medicaid alternatives may be more
about states' leveraging additional federal financing than dropping the program.
"Some states will toy with it, think about it, and reject it from the state
perspective," Mr. Reischauer said. "To the extent they don't, I would hope
Congress and the president work together to create very strong incentives
against it."
Marilyn Werber Serafini is the Kaiser Family Foundationfs Robin Toner
Distinguished Fellow based at Kaiser Health News. The fellowship honors
the late Robin Toner, The New York Times' long-time health and politics reporter
whose work often framed the public debate on health issues. KHN is an
editorially independent news service of the foundation.
© 2010 Henry J. Kaiser Family Foundation. All rights
reserved.