Perry’s Medicaid Plan Secret: Dems Like It

Texas Gov. Rick Perry publicly floated dropping out of Medicaid less than a year ago to cut spending — but now the state is quietly revamping the health care safety net for the poor in a way even some Democrats can get behind.

The Medicaid proposal, which came up in Thursday’s Republican presidential debate, could prove increasingly inconvenient for Perry’s presidential campaign narrative.

The state gained tentative federal approval to begin rolling out the proposal that, in its own words, would prepare the health system “to serve newly insured individuals … in 2014,” when the 2010 federal health law that Perry forcefully opposes expands health coverage.

Federal officials said in a Sept. 14 letter they had reached “agreement in principle” with the state on the Medicaid plan, which would waive some federal laws to reshape the way hospital care for the poor is financed.

The idea is to reroute federal funds the state would otherwise lose — an undesired consequence of expanding managed care — to subsidize hospitals’ uncompensated care costs. The plan would also finance projects to help the uninsured, such as new clinics. Final approval could come as soon as Sept. 30.

Texas’s proposal is not an audacious cure for the state’s staggering health care problems, and it does nothing to expand health coverage now to the 26 percent of residents who are uninsured. But, Democrats and consumer advocates welcome the plan as a cushion for a surge of new Medicaid patients in 2014, when the federal law expands to cover 16 million more people nationwide.

“We’re the biggest beneficiary — in terms of newly insured — of health reform of any state, by far,” said state Rep. Garnet Coleman, a Houston Democrat who chairs a legislative committee overseeing the new Medicaid plan. The effort “will extend more services to individuals who are not being served,” Coleman said.

Other Democrats and consumer advocates back the proposal, though some have objected to specific provisions to finance it, such as a move congressional Democrats said Thursday would hurt local pharmacists.

“We’re cautiously optimistic” that the overall changes will help uninsured and low-income patients, said Anne Dunkelberg, the associate director of the Austin-based Center for Public Policy Priorities. “[Perry’s] administration has not been marked by a lot of other proactive health initiatives.”

The Texas Medicaid proposal had to be in a form that could win approval from the Obama administration, of course, so it couldn’t fully reflect Perry’s health care views. Indeed, Perry shot down legislation earlier this year to create a health insurance exchange, a cornerstone of the federal overhaul. Texas is one of the states challenging the federal health law in court. Perry also signed a health care compact seeking to dodge overhaul requirements, such as a mandate that individuals obtain health coverage.

And, at the Google-Fox News debate Thursday in Orlando, Fla., Perry blamed the federal government’s reluctance to approve Medicaid waivers, such as the Texas plan, for his state’s flagging health system and millions of uninsured people. “We are proud of what we put together in the state of Texas,” he said.

Texas’s waiver application is a complicated request for extra funding from Washington, the financier of about 60 percent of the state program. The proposal will reroute $40 billion over five years to public hospitals and new Regional Healthcare Partnerships, coalitions of public and private hospitals, to fund care for the uninsured and projects such as new clinics.

The money would offset losses hospitals face as Texas replaces its traditional Medicaid program with private managed-care companies. The private insurers aim to save the state about $600 million over two years by coordinating care. But, the change would cost hospitals at least $15 billion over five years in extra payments that Washington only finances in traditional Medicaid.

The initiative’s warm reception by Democrats and consumer advocates, and the federal funds it seeks, could add up to a political liability for Perry. His 2010 book, “Fed Up,” rejects any whiff of federal money — and the rules that come with it.

“Candidate Rick Perry bashes federal health care spending. But Gov. Rick Perry is asking the federal government to spend more money on health care for the people of Texas,” said Democratic consultant Paul Begala. “The word ‘hypocrite’ was invented for politicians like Rick Perry.”

A Perry campaign spokeswoman, Katherine Cesinger, said Perry sought to make Medicaid more sustainable “even before the passage of the onerous one-size-fits-all Obamacare.”

The Texas hospital finance plan mimics California’s “Bridge to Reform” plan, which gained federal approval last year. California’s plan, unlike Texas’s, also significantly expands health coverage.

California officials advised their Texas counterparts on the hospital finance proposal, said Stephanie Goodman, a spokeswoman for the Texas Health and Human Services Commission.

But, a meeting between Texas and California officials in Sacramento was recently canceled, after Perry announced his presidential bid. Goodman cited scheduling conflicts. During a legislative hearing last week, Texas Medicaid chief Billy Millwee said, “It’s not the intent to transform the Texas Medicaid program into the California program.”

Texas conservatives haven’t balked. “The waiver is the technical correction to allow for the expansion of managed-care programs while ensuring hospitals receive federal safety net funding,” Texas Conservative Coalition spokesman Brent Connett said in a statement.

Yet, some officials acknowledge Texas must prepare to support a much broader safety net. A March study by the Urban Institute, a D.C. think tank, estimated that of the 27 million uninsured people who would gain health coverage if the overhaul law were now in effect, nearly 4 million live in Texas.

“If all of a sudden we see this influx of individuals, we’re going to see the health system strained quite a bit,” said Rep. John Zerwas, a Houston Republican. Zerwas opposes the federal health law, but added, “What we are trying to do is let Texas fare as well as it can fare [under the law].”

Hospital leaders expect more demand for their services as the uninsured people they already treat gain coverage — a green light to seek more care.

Texas now funds care for the uninsured through a hospital financing maneuver called the upper-payment limit program. Counties and public and private hospitals forge agreements to treat the uninsured and extract supplemental payments — this year about $2.7 billion beyond the state’s normal Medicaid rates — from the federal government. The counties contribute a share of that money before Washington chips in, and will continue to do so.

Under the new plan, public hospitals “will be able to better target [the money] to facilities that are building infrastructure to serve uncompensated care patients,” said Robert Earley, the chief executive of JPS Health Network, a public hospital system in Fort Worth. Some private hospitals may feel threatened, but Earley said those that continue to provide uncompensated care should continue to get a cut of the money.

Insiders gave state health officials high marks for navigating the policy through turbulent politics.

“The [Texas health] commission did a very good job of threading the needle” between politics and policy, said Coleman, the state lawmaker.