Let’s Have an “Adult Conversation” about Opting Out of Medicaid
This blog was originally posted here on the Center for Children and Families Say Ahhh! blog
Just last August, Texas advocates chuckled and sighed along with our Arizona colleagues when the Onion ran the headline, “Texas Vows to Reclaim Title of Most Regressive State from Arizona.” That satire piece included references to our Governor Rick Perry’s very real 2009 statements about the possibility of Texas’ secession option. Perry distanced himself from his secession comments then, but recently kicked up a whole new flurry of media attention when he suggested on national television (CNN 11/7 /2010; Daily Show 11/8) that Texas might consider shutting down its Medicaid program entirely, and claimed a potential state savings of $60 billion dollars over several years. The interviews were part of the book promotion tour Perry launched immediately following the November election, and were in keeping with the states’ rights theme of that book, entitled “Fed Up”.
The Governor based his projections on a December 2009 memo from the Heritage Foundation, prior to the March 2010 passage of the Affordable Care Act. That memo speculated that the bill eventually passed might allow states to shut down their Medicaid programs in 2014, and send their former Medicaid enrollees to the new health insurance Exchange where their costs would be entirely borne by the federal budget. (Perry also complained about CMS not having approved a Texas 1115 waiver submitted in 2008. CMS authorities told Texas in August 2008 that Texas’ proposal covered too few adults, too slowly, and with too limited benefits — waiver request examples included a benefit package capped at $25,000 a year — to justify the significant departures from federal minimum standards Texas had requested.)
Of course, rhetoric like this is enough to make a policy analyst/health access advocate want to tear her hair out, but a funny thing has happened over the last six weeks since that first story: a whole lot of Texans have learned a whole lot about Medicaid and the critical role it plays in our state’s health care system and economy. News story after story drummed these facts home: leaving Medicaid would cause Texas to lose over $16 billion a year (at 2009 levels) in our federal matching funds — the number one source of federal dollars in our state budget. We would lose federal funding for over two-thirds of Texans in nursing homes, over 55 percent of Texas births, for virtually all residential services and community services and supports for Texans with disabilities, and health coverage for the nearly 3 million Texas children covered today by Medicaid and CHIP.
News coverage also quickly reflected the alarm of Texas health care leaders at the notion of a Medicaid apocalypse including the president of the Texas Medical Association, and the heads of state associations representing nursing facilities, community health centers, family physicians, and hospitals. Most colorfully, Dr. Ron Anderson, President and Chief Executive Officer of Parkland Hospital System, went on Dallas radio to call the concept “so bizarre as to be unworthy of consideration.”
The Governor’s book tour comments were followed a few weeks later — coincidentally it appears — by the scheduled release of a report mandated under 2009 state law which directed the Texas Health and Human Services Commission (THHSC) to study “the effect on the health care infrastructure in the state if the state Medicaid program is abolished, or a severe reduction in federal matching money under the program occurs.” That report underwent some late revisions to directly address the new question of a state-initiated, (rather than federally-driven) Medicaid withdrawal.
The report from our state Medicaid agency is a very good and helpful compilation of important information. Like earlier reports by Wyoming and Nevada, the Texas report lays out in detail the critical role of the federal-state Medicaid partnership in caring for poor and low-income Texans who have disabilities or are over age 65, providing prenatal care and delivery services, supporting safety-net hospitals in managing the burden of Texas’ 6.4 million uninsured, and providing comprehensive health care for millions of Texas children. The report details the expected “down sides” to shutting down Texas Medicaid, among them:
— The loss of a significant chunk of our state’s health care economy — with no offsetting reduction in federal taxes. Medicaid and CHIP spending accounts for over 15 percent of Texas health care. — Most former Texas Medicaid enrollees would be uninsured. Seniors and other Medicare dual eligibles would remain insured by Medicare but would lose their Medicaid wrap-around coverage or assistance with out-of-pocket costs; the relatively small share of Texas Medicaid enrollees with incomes above 133 percent FPL (largely long-term care recipients) plus children in Texas CHIP could enroll in the Exchange. (The agency expects that interpretation of ACA will not allow for persons defined as Medicaid eligible in that law to qualify for Exchange premium tax credits.) — THHSC estimates an annual increase of $4 billion or more in uncompensated hospital care due to emergency admissions to former Medicaid enrollees. Substantial cost-shifting to county governments and hospitals for care to these newly-uninsured would occur. — The addition of such a large group of uninsured (another 2.6 million or more) to Texas already-huge 6.4 million uninsured (2009 Census CPS) could trigger a serious adverse selection crisis in Texas’ commercial insurance market, by adding to the estimated $1,551 in annual excess premium costs already being borne by insured Texas families. — The state’s share of Medicaid spending would be just enough to continue longer-term care (community and institutional) and coverage for children in foster care, with no net savings and all of the negative effects and risks described above.
The report doesn’t neglect the conservative point of view. The agency proposes several scenarios for major future changes to Medicaid, most of which would require major federal law changes. They include:
— A “consolidated annual funding” approach to Medicaid, much like the per-capita cap proposals of the 1990s, would be a block grant that would growth annually based on inflation, population growth, “and other factors.” The agency envisions that states would have fewer floors on who is covered and what services they get than in today’s federal Medicaid law. — The current formula for “FMAP” is criticized for failing to take into account relative poverty and uninsured rates across the country. –Texas could pursue an 1115 waiver to allow clients to buy high-deductible coverage linked to a health savings account. — Texas could pursue federal law changes to allow states to provide more limited “benchmark” benefits to low-income children and pregnant women. — The federal government should pay 100 percent of the costs of Medicaid emergency care as well as other uncompensated care provided to undocumented residents. –The Affordable Care Act’s maintenance of effort that prevent Medicaid and CHIP eligibility rollbacks should be waived or eliminated
Affordable Care Act impact revisited. The report also revisits THHSC’s early (and high!) estimates of the Medicaid-related state budget costs expected to accompany Affordable Care Act implementation. The agency notes that excluding some of their earlier worst-case assumptions (e.g., assuming the state will assume 100 percent of the costs of Medicaid primary care rate increases from 2015 forward) reduces their net state-dollar cost projection to $5 billion for 2014 to 2019. The report notes that THHSC’s $5 billion net cost estimate (which assumes 91-94 percent take-up rates in the expanded Medicaid coverage of adults, offset by $760 million in additional Medicaid managed care premium tax collections) is still higher than the Kaiser Foundation-Urban Institute analysis that projected a high-end state cost from 2014-2019 of $4.5 billion — largely due to the latter’s much lower 75 percent take-up assumption.
THHSC’s report did not mention the over $74 billion in federal matching funds that would accompany the new Texas Medicaid spending, and declined to assume any economic multiplier effect from those dollars. They did note that short-term multipliers (such as the 3.64 used by Families USA) are assumed by some economic models, but they also note an unpublished report from two economists which asserts that “every $200 million in federal matching funds reduces gross state product by $1.8 billion, a multiplier of -9.0.”
Medicaid Red Herring? The report points to the need for Medicaid’s “unsustainable” growth rate to be controlled to keep it within population, general inflation, and GDP growth. This argument, while not without merit, points to perhaps the most serious problem with this highly politicized discourse around state Medicaid spending. The “Medicaid Opt-out” talking point is based on and reinforces a misperception; namely, that Medicaid is uniquely troubled by rising care costs. In reality, the CBO reports that growth rates for Medicare, Medicaid, and “All Other” U.S. health spending have out-stripped GDP growth consistently since 1975. Medicare logged the highest cost growth in excess of GDP, and Medicaid “tied” with All Other health spending over that entire period, despite having grown at a much slower rate than the rest of the system since 1990.
As a nation, we face a serious challenge of reining in health spending growth across our entire population and economy, not just in Medicaid. The “adult conversation” we need to have on reducing federal deficits and debt can’t take place as long key leaders believe they can solve the nation’s health care and debt challenges simply by cutting or eliminating Medicaid.
What we are Learning. Perhaps the experiences of Wyoming, Nevada and Texas will be enough to dissuade other states from traveling too far down the Opt-Out road. But if those too-good-to-be-true talking points (Drop Medicaid! Save Money!, Nobody Gets Hurt!) do arrive in your state, be prepared to seize the teachable moment and help tell the real story of Medicaid and CHIP. It is so important that the new round of freshman lawmakers get the facts about Medicaid and CHIP’s critical role in caring for Americans. In the process, you can not only protect your state’s most vulnerable citizens, but also raise critical awareness that real solutions to our country’s health care spending woes will only come from hard work that looks across all populations and sources of coverage.
— Anne Dunkelberg, guest blogger Center for Public Policy Priorities, Texas