Wealth Care

Is a loophole in our health insurance system costing the state millions in unnecessary spending or saving people’s lives in the Rio Grande Valley?
Wealth Care
money blood: Since 2006, the Border Health PAC has contributed more than $1.2 million to state and local candidates.
Illustration by Dan Page

In the custom of modern political campaigns, invitations to a September fundraiser for Governor Rick Perry prominently displayed the names of major contributors. At the pinnacle of the gilded ladder were those who had earned “Lone Star Council Gold,” for giving at least $50,000 to the governor’s reelection effort. There, perched alongside the usual suspects (political heavyweights like the AT&T Texas Political Action Committee, the Texas Association of Realtors, and the Wholesale Beer Distributors of Texas), was an emerging powerhouse in Texas politics: the Border Health PAC, a group closely aligned with Doctors Hospital at Renaissance, a sleek physician-owned health care facility in Edinburg.

The hospital opened in 1997 and has recently become a force to be reckoned with. Alonzo Cantu, a prominent McAllen developer and an investor in DHR, was a prolific fund-raiser for Hillary Clinton’s presidential campaign. When DHR opened a new women’s hospital, in 2007, Nancy Pelosi dropped in on the festivities (a fundraiser held at Cantu’s house during her visit netted the Democratic Congressional Campaign Committee $800,000). Former Texas comptroller John Sharp, now a Democratic candidate for the U.S. Senate, owns a small stake in the hospital. The Border Health PAC has been equally influential. Since 2006, it has contributed more than $1.2 million to state and local candidates. It now boasts a war chest in excess of $1.3 million.

Nonetheless, few people outside the Rio Grande Valley had ever heard of Doctors Hospital until June, when it was cited by writer and physician Atul Gawande in an article in the New Yorker that called attention to the high per-patient Medicare costs in the McAllen metropolitan area. The article, later seized on by President Barack Obama, questioned whether the business model of physician-owned facilities such as DHR gives doctors an “unholy temptation” for the overutilization of tests and procedures.

Gawande compared Medicare payment data in McAllen and El Paso, cities with some demographic similarities, and found that between 2001 and 2005 “critically ill Medicare patients received almost fifty percent more specialist visits in McAllen than in El Paso, and were two-thirds more likely to see ten or more specialists in a six-month period.”

Physicians in the Valley passionately disputed Gawande’s conclusions, claiming that his assumptions and data were flawed. Principally they argued that the McAllen metro area had a poorer population than El Paso, presenting more-complicated cases with more chronically ill patients. Hidalgo County, where McAllen is located, is one of the poorest counties in the nation. It has a per capita income of $12,190, less than half the national average. Its physician-to-population ratio—116 doctors per 100,000 residents—is the lowest in the U.S. More than 35 percent of its residents are uninsured, beating the state’s dismal record of 24 percent uninsured.

For these same reasons, Hidalgo County and two adjacent Valley counties (Cameron and Maverick) have been the beneficiaries of an unusual exemption in the state’s Medicaid policy that officials say is costing Texas millions of dollars. Earlier this decade, state legislators instructed the Health and Human Services Commission to administer Medicaid in the state’s cities through a managed-
care plan, modeled after health maintenance organizations, to control costs. But in 2003, Valley lawmakers, led by state representative Kino Flores, of Palmview, won a moratorium on expanding managed care to their region, claiming the area’s demographics created special challenges, such as high rates of expensive-to-treat chronic illnesses. Managed care could also drive away doctors, they argued, who had long been in scarce supply in the Valley.

Managed care” is an umbrella term for a variety of cost-controlling efforts, which are at the very heart of the national health care debate. In the case of the Valley, the legislative moratorium on managed care refers strictly to health maintenance organization models, which save money by requiring participating doctors to treat patients in accordance with certain guidelines and restrictions. Not surprisingly, HMOs are not popular with some physicians, who don’t appreciate their judgments being second-guessed by an insurance company.

But if the status quo is maintained, the state’s Medicaid bill will go up almost 10 percent per biennium (a $4.5 billion increase this cycle). As Senator Everett Dirksen is famously credited with saying, “A billion here, a billion there, and pretty soon you’re talking real money.” How the Valley, and everyplace else, spend their Medicaid dollars is an issue that affects every Texan—and can no longer be dismissed as a local concern.

Complicating the situation is the fact that the health care industry has become a powerful engine of economic growth in the Valley. While health care makes up 12 percent of the economy on a statewide average, according to the Federal Reserve of Dallas, it weighs in at 21 percent of the economy in McAllen. Seven of the area’s ten largest private employers are health care firms. State representative Veronica Gonzales, of McAllen, and leaders from DHR tried to make this point—and explain the challenges of the Valley’s unique demographics—this summer, following Gawande’s article, when sixteen Texas House members were invited to McAllen for a tour of the region (and each given a $5,000 donation from the Border Health PAC).

They were cognizant of the elevated exposure they had recently received nationally,” said Lois Kolkhorst, of Brenham, who, as chairman of the House Public Health Committee, declined a donation. “They wanted to tell us why managed care wouldn’t work in their area. They kept telling us they were different [from the rest of the state].”

Few would argue the point. As a former state health official told me, “The Rio Grande Valley is separated from the rest of Texas by fifty-five miles of King Ranch and two hundred years of neocolonialism.” Nonetheless, could managed care address the needs of the local population while saving Texas money? Stephanie Goodman, the communications director for the Health and Human Services Commission, believes the answer is yes. According to an HHSC estimate, the state would save $137 million over four years by undoing the moratorium.

As for the special health challenges of the region’s impoverished population,

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