This report on the April 9 hearing in the Frew v. Hawkins case that could bust the state’s budget is based on an interview with a lawyer for the state who agreed to discuss the case on the condition of anonymity. It represents the state’s position.

The litigation originated in 1993 as a class action lawsuit on behalf of all indigent children in Texas under the age of 21. The plaintiffs alleged that the state had failed in its obligation to provide periodic (twice a year) medical and dental checkups under a program known as Early and Periodic Screening, Diagnosis and Treatment (ESPDT). The presiding judge was William Wayne Justice, who has overseen many major cases against the state, including the Ruiz (prison reform) case and cases involving racial desegregation of public schools.

Originally the court dismissed the lawsuit on the grounds that the state, under the 11th amendment to the U.S. Constitution, enjoys soverign immunity that protects it from suits by individuals. But the lawsuit remained open, and in 1996 Attorney General Dan Morales signed a 78-page consent decree in which the state agreed to perform the desired services (perhaps under pressure from then-Lieutenant Governor Bob Bullock–that’s my speculation, not my source’s–to force a reluctant Legislature to come up with the money. In contrast to the federal law, which is a general mandate, the consent decree “binds the state to a much more extensive program of health care than is required under federal law,” according to my source. There was no end period to the consent decree. Judge Justice continues to monitor it to this day.

In late 1998, plaintiffs filed suit to enforce the consent decree. Republicans, who by this time were firmly in control of all statewide elected offices, objected to being bound by a consent decree that they would never have agreed to. “When a state agency settles a lawsuit,” my source told me, “the Legislature must give it more money. Often this is what the agency wanted all along. Then the consent decree can be enforced against state officials. This removes the opportunity for democratically elected officials to make the decisions.” In 2000, Judge Justice ruled that the state was not complying with the decree and ordered the state to take corrective action. John Cornyn, Morales’ successor as attorney general, appealed Justice’s order, invoking the sovereign-immunity argument and further contending that the state could not be forced to exceed the requirements of federal law. But Judge Justice found that Texas was in violation of the consent decree and further ruled that the state had waived its right to sovereign immunity by signing the decree.

In 2002, the Fifth Circuit Court of Appeals reversed Judge Justice’s decision, finding that Texas was not in violation of federal law and was protected by the 11th amendment. The plaintiffs appealed and the case went before the U.S. Supreme Court, where the state fully expected to win. But in July 2004 the Court ruled against the state, 9-0, and returned the case to the Fifth Circuit, which in turn punted to Judge Justice. Texas was not in violation of federal law, but it was in violation of a federal court enforcement order. “We lost because we signed the consent decree,” my source said. “We must have gotten fifty versions of the same question: ‘How can you say you didn’t consent to the consent decree?'” By signing the decree, the court ruled, Texas had waived its sovereign immunity.

Texas still had one more round of appeals left: In 2005 the state asked Judge Justice to dissolve the consent decree, arguing that participation rates for indigent children in Texas are at or above the national average, but Justice rejected this position. The Fifth Circuit, which had been reversed once before by the Supreme Court, upheld Judge Justice this time, in January of this year, the Supreme Court declined to review the decision. All that remains is for Judge Justice to determine how much the state must pay in order to be in compliance with the consent decree. “The judge has very broad discretion,” my source said. “The Medicaid requirements are irrelevant. The consent decree is all that matters.” And the consent decree, according to my source, is impossible to comply with 100%. For example, hotlines must be answered “promptly and politely” within 90 seconds. “The state can never meet the standard,” my source said. “There’s no middle ground. If a single child didn’t get his checkup, the state is in violation. The state makes outreach efforts. It sends letters to the home of eligible children. It sends teams to homes to take children to the nearest providers. We provided the services for 62% of eligible children–we’re above average nationally. But the judge can say that 38% didn’t get them.”

What happens if the state takes issue with Judge Justice’s decision? Texas can always ask Judge Justice for a stay, and, if that is refused, make the same request of the Fifth Circuit. But the courts have increasingly taken a hostile position toward the state.

An article in the March 2007 issue of Texas Medicine, the journal of the Texas Medical Association, contains position statements by people on both sides of the case:

* For the plaintiffs: “There’s been a lot of focus on problems with the Medicaid eligibility system. But even after children have jumped through the hoops to qualify for Medicaid, they still can’t get the health care they need. Texas is failing our children in this part of Medicaid, too,” [lead counsel Sarah] Zinn said in a press release. Added [co-counsel Jane] Swanson, “More than 1.4 million indigent Texas children didn’t even get one medical checkup in 2005, which is the most recent information Texas Medicaid officials have given us. The number is even higher for basic dental care.”

For the state: In an e-mail to TexasMedicine, attorney general’s office spokesperson Angela Hale [wrote,] “Plaintiffs have maintained this litigation against the Texas Health and Human Services Commission for more than a decade, with no end in sight. Unfortunately, the litigation continues, despite the fact that Texas today spends more money than any other state in the union on Medicaid screening outreach, and despite the fact that the evidence in this case has clearly demonstrated that every eligible child in the State of Texas who requested treatment has received medical treatment.”

The best summary of the Frew case and its implications was done by Anne Dunkelberg of the Center for Public Policy Priorities. Dunkelberg reviews the history of the litigation, lays out the plaintiff’s proposals and their potential cost (Dunkelberg debunks the likelihood of “multiple billions in annual costs”), examines what improvements have been made in Medicaid services, and tackles the issue of whether the 1995 consent decree was too generous. Dunkelberg writes, “[T]he current session is the first time that any one has implied that the Texas Attorney General did not cut a reasonable or fair deal for the state. The plain truth is that Texas was not in compliance with the law in 1995; the attorney general could not have won the case in court; and the settlement was a reasonable solution.” Ms. Dunkelberg has an impeccable reputation as a researcher, and yet I feel compelled to add that the significance of the consent decree was not only what it obligated the state to do but also that it resulted in the state’s waiving its sovereign immunity against such lawsuits. Absent the consent decree, the standard for corrective action would have been what the state had to do in order to comply with federal law, rather than what it had explicitly promised to do that went beyond federal law.