A Texan on Perry's Medicaid Rejection: 'Devastating'

by Jonathan Cohn | July 11, 2012

Texas Governor Rick Perry on Monday said that he wants no part of the Affordable Care Act’s expansion of Medicaid. Perry isn’t the first Republican governor to take this position. Five others, including Florida’s Rick Scott and Louisiana’s Bobby Jindal, announced their opposition to the expansion last week. But Perry surely did so with the most rhetorical flourish.

In a letter to Health and Human Services Secretary Kathleen Sebelius, Perry decried the law’s “brazen intrusions into the sovereignty of our state,” described the law’s name as “Orwellian,” and proclaimed that “I stand proudly with the growing chorus of governors who reject the PPACA power grab. Thank God and our nations founders that we have the right to do so.”

Actually, it’s not God or the Founders whom Perry should thank. It’s Chief Justice John Roberts and the six Associate Justices who invalidated the Act’s Medicaid expansion, even as they upheld the rest of the law. Originally, Obamacare presented states with a stark choice: Expand eligibility for Medicaid, so that all people making less than 133 percent of the poverty line can enroll, or lose all federal Medicaid funding. Now states can stick with their current Medicaid arrangements, which typically cover only certain classes of poor people, without losing the money Washington already provides. By opting out of the expansion, such states would lose only the money the federal government would have provided to cover the newly covered populations.

That makes opting out sound like a rational choice. By any reasonable standard, it isn’t. As you may have heard by now, the Medicaid expansion is the ultimate sweetheart deal. For the first three years, the federal government is providing 100 percent of the money to cover these new populations. By 2020, the contribution will decline to 90 percent, so that states have to provide 10 percent of the funding on their own. But that’s still a far better deal than the states get on Medicaid right now. Nationally, state spending on Medicaid should rise by less than 3 percent because of the expansion, according to projections from the Congressional Budget Office.

The bang-for-the-buck here is virtually unprecedented. And that’s before accounting for the many ways the Medicaid expansion will help state budgets, by reducing the need for spending on direct provision of care to the indigent and by generating economic activity that will lead to more tax revenues. As Greg Sargent wrote recently, relying on Urban Institute estimates, many states could actually make money by participating in the expansions. 

I know: Rick Perry doesn't really care what the CBO or Urban Institute has to say. But surely he pays attention to the people in his own state—and by “people,” I don’t simply mean the millions of low-income Texans for whom the expansion would provide insurance, although in any civilized society that ought to be enough to clinch the deal.

The Texas medical safety net consists of geographical districts, each with its own set of public or quasi-public hospitals and clinics. These districts have their own taxing authority. The more care they must provide to the uninsured for free, the higher they have to push those taxes. Private hospitals provide charity care, too, but they also have to make up for the losses—in part, by charging higher premiums to private insurers. In these respects, as Rick Ungar points out in Forbes, one consequence of turning down federal Medicaid dollars is higher costs, in the form of property taxes and private insurance premiums, for middle-class Texans.

Yes, these hospitals and hospital districts already bear a heavy financial burden for the uninsured, so middle-class Texans are, in a sense, already paying for these costs. But the Affordable Care Act also reduces some of the direct federal funding these providers presently receive. This is very much by design: At least in the current environment, it’s arguably more efficient, and more consumer-friendly, to provide individuals with insurance than to simply throw money at hospitals. (If you have insurance, the thinking goes, you have more ability to take your dollars to different providers, rather than rely on public hospitals and available charity from private providers.)

Hospitals around the country have gone along with these cuts precisely because they expected the expansion of Medicaid to pick up the slack—in other words, they were giving up one source of funding for treating low-income people with the expectation that another, the Medicaid expansion, would (more than) replace it. If states decline the new Medicaid money, as Perry is threatening, providers will get absolutely hammered, with consequences not just for them but for their patients and for the people whose taxes and premiums finance them.

This isn’t just my opinion. A little while ago, I spoke to Ron Anderson, who for 29 years was the president and Chief Executive Officer of Parkland Hospital, the largest safety net provider in Dallas. “This would not just be a net loss for Parkland,” Anderson said. “It’d be a net loss for every provider in Dallas County. In our area, it would cost us hundreds of millions of dollars and destablize the safety net.” In the past, Anderson noted, local hospitals and officials were able to use creative financing, to squeeze extra money out of existing federal and state funding. “But I think we’re out of rabbits in that hat. If the state refuses to accept this, I think we’ll be pretty wounded – it would be devastating for individual patients, communities, and local taxpayers.”

The irony, Anderson noted, is that the Perry Administration has quietly worked closely with Texas providers and local officials to negotiate a special waiver from the federal government, reconfiguring the existing Medicaid program so that Texas gets more federal money in exchange for, in theory, making its system more efficient. As Sarah Kliff noted last year in the Washington Post, that effort may have a real upside.

It's "schizophrenic," Anderson says of Perry's posture, but also a reminder that sometimes political rhetoric belies what policymakers actually do. All Texans, middle class as well as poor, should hope Perry's new rhetoric turns out to be similarly deceptive.

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Source URL: http://www.newrepublic.com//article/104860/texan-perrys-medicaid-rejection-devastating