Texas Budget: Opt out of Medicaid??

Right now Texas legislators are looking at all sorts of ways to reduce the Texas budget.   One option being batted about is opting out of Medicaid, but opponents say this is too costly and could lead to no health services for the poor.  So what is really going on here?

According to the Fiscal Size Up
the Total Health and Human Services budget for the 2010-2011 biennium is $59.747 billion, $33.832 billion
of which comes from the federal government.  According to the LBB

The $4.4 billion increase [between 2008-09 and 2010-11] for Health and Human Services is primarily due to increased funding for the state’s Medicaid program.

Federal Funds are the largest source of funding for the HHS function. Many federal funding streams require General Revenue Fund (or other state fund) expenditures to draw down Federal Funds. State contributions can be a match, wherein General Revenue Funds comprise a set percentage of total expenditures, or a maintenance of effort, wherein the state expends a set dollar amount that is tied to previous expenditures.

The 2010–11 GAA establishes the following average monthly service levels for fiscal year 2011:
• health insurance for almost 3.2 million Medicaid recipients (including 2.2 million children);
• health insurance for more than 500,000 Children’s Health Insurance Program (CHIP) enrollees;
• cash grants to approximately 100,000 Temporary Assistance for Needy Families (TANF) clients;
• adoption subsidies for over 30,000 children; and
• foster care payments for nearly 15,000 children per month.
Eligibility for many of these programs is based on income in relation to the federal poverty level (FPL)

When Politifact looked at Rick Perry's claim that the 

federal health care overhaul will cost Texas state government "upwards of $30 billion over the next 10 years."

they found that

An essential fact underlying all these figures: Health care reform becomes more expensive for the state as time goes on. Among the factors driving up costs down the line is the federal government's declining contribution for Medicaid. During the first three years of the Medicaid expansion (2014-2016), the feds pay all the cost of newly eligible enrollees. Starting in 2017, that federal share starts to drop, reaching 90 percent by 2020.

Another essential fact: So far, we've only mentioned the cost of health care reform to the Health and Human Services Commission. A June report by State Comptroller Susan Combs enumerates other costs — as well as some financial benefits — to the state as a whole, although it doesn't offer a net figure. (The comptroller's report also uses a different time period than the commission's, focusing on the 10 years from 2010 through 2019.)

For instance, on the expense side of the ledger is the mandated expansion of health plans administered by the Employees Retirement System of Texas, the University of Texas System and the Texas A&M University System.

One of the pluses: The comptroller's office estimates that the state will receive $1.3 billion in new revenue from a tax on premiums charged by insurers and health maintenance organizations licensed by the Texas Department of Insurance.

As for the projected increase in Medicaid costs, the comptroller's report jibes with the health commission's estimates. But it also tabulates the hefty federal contribution. For every dollar the state spends on new Medicaid enrollees through 2019, the federal government will spend $13, according to the figures in the report. The total federal contribution: $76 billion.

So Perry's claim was considered barely true because he exaggerated the state's contribution ($27 billion instead of $30 billion) and claimed that the costs would start immediately, when they actually don't start until 2014.  But Texas still has a $21 billion budget shortfall so one of the biggest state expenses, Medicaid, has to be looked at to find ways to lower the costs.

The Heritage foundation, a conservative think tank, has done a study bemoaning the burden of Medicaid on state budgets.

Unfortunately, states have lost considerable flexibility to reduce Medicaid’s burden on their budgets. As a condition for receiving the additional federal dollars, both the stimulus bill and PPACA [Patient Protection and Affordable Care Act] contain maintenance-of-effort (MOE) provisions that prohibit states from changing eligibility levels. States have resorted to slashing provider reimbursement rates and benefit packages to cope with rising Medicaid expenses and reduced revenue attributed to the recession. Forty-one states and the District of Columbia cut provider reimbursement rates in 2009 or 2010, and 29 states and the District did so in both years. Additionally, 39 states and the District cut Medicaid pharmacy benefits, and 22 states cut Medicaid medical benefits over the past two years.

 In the short term, however, the best solution is to remove the MOE requirements and give the states greater flexibility to manage the cost of their programs. 

So how would you remove the MOE requirements?  Opt out of Medicaid, it's a voluntary program. Here is a proposition by the Heritage Foundation for fixing the part of the problem, not enough doctors to treat Medicaid patients.

A Better Policy.
There is a better way. Rather than expand the funding for HRSA [Health Resources and Services Administration], Congress should convert the various training-related (and perhaps other) programs funded by this agency into block grants to the states. This would enable states to build upon their critical roles in the oversight of the health care workforce and encourage them to craft solutions relevant to their unique requirements. When the Reagan Administration collapsed the separate mental health service programs supported by the Alcohol, Drug Abuse and Mental Health Administration into block grants to the states, the clinical care system that emerged was able to “bend” the cost curve while offering more choice to patients and families through a more diverse workforce and other innovative strategies.[5] By virtue of the breadth of their oversight, states are in the best position to define the needs and develop the models for the future workforce across the health professions.

 But do these block grants exist already?? The CHIP program is covered by block grants.  So what's the difference in the way Medicaid is currently funded and the way block grants work

Source:  Kaiser Family Foundation 

So Medicaid would continue with block grants, but rolls would probably not be allowed to increase.  At a time when the Texas population is expanding twice as fast as the entire US this might become a problem.  According to Rick Perry everyone has access to health care in Texas.  Here's Politfact's analysis

Everyone? Even people without health insurance?

When we asked for back-up for Perry's statement, his campaign didn't offer any data or additional analysis.

Next, we looked at hospital emergency rooms, often the portal through which uninsured people seek treatment.

Some background: In 1986, Congress responded to concerns that emergency rooms were refusing to treat indigent and uninsured people — a practice known as patient dumping — by approving the Emergency Medical Treatment and Active Labor Act. The act requires all hospitals with emergency rooms that participate in the Medicare program to medically screen, treat and stabilize any patient (including illegal immigrants) who shows up with an emergency medical condition. The law doesn't require hospitals to offer preventive or follow-up care.
However, not every condition that merits treatment is an emergency, and not every town has an emergency room. In Texas, 64 of the state's 254 counties don't have a hospital because it isn't economically viable, "particularly in the Panhandle and West Texas," said Amanda Engler, spokeswoman for the Texas Hospital Association. Still, Engler said "everyone should be able to access some level of care through the community."

A national health care expert, Henry Aaron at the left-leaning Brookings Institution, echoed Engler, saying that "everyone has access to some health care. The issue is what care and how much of it... If you live in a place where few physicians practice and you don't have a car, you may not get much."

Also the health care provided by emergency rooms tends to be a lot more expensive than visits to the doctor. Us tax payers will bear the burden whether the care is received through Medicaid or the emergency room at the county hospital.  I'm not convinced that going to block grants would be the end of health care for the needy, but at the same time it seems that it would definitely limit our options and could be more costly in the end if the poor spend most of our health care dollars in the emergency room.