On the first morning after the long Easter weekend, state troopers and men wearing dark suits and scowls occupied the area outside the Governor’s Public Reception Room on the second floor of the Capitol. They would soon have company. I stood with a group of reporters, and we could hear the protesters heading our way, their chants growing louder as they closed in. The ennui of the morning was broken as TV cameramen raced to the stairs to film the scene. The cacophony filled the rotunda and floated upward into the dome. “What do we want?” the demonstrators shouted. “Health care!” was the response. “When do we want it?” they called out. “Now!” came the familiar reply. Sometimes they varied the message to say, “Rick, take the money,” and a few protesters carried signs that portrayed Governor Rick Perry and U.S. senators John Cornyn and Ted Cruz as the Three Stooges and read, “Only a knucklehead would reject $78 billion for their state.” And that pretty much summed up what the controversy was all about: Will Texas participate in an expansion of Medicaid offered by the Obama administration under the Affordable Care Act?
While the protests continued outside the reception room, a press conference was taking place inside featuring Perry, Cornyn, Cruz, Lieutenant Governor David Dewhurst, and other Republican leaders, all of whom had come to the Capitol to engage in two of their favorite pastimes: bashing the federal government and criticizing Medicaid, which currently provides health care to more than 3.3 million children and poor or disabled adults in Texas. The pols were here to insist upon their refusal to accept an expansion of Medicaid that could bring billions of dollars to the state and reduce the number of Texans without health insurance, currently 24 percent of the population, or about 6 million people.
Not to be outdone, the Democrats had scheduled their own press conference in the Capitol, featuring two of the party’s rising stars: San Antonio mayor Julián Castro and his twin brother, Joaquín, a freshman congressman. Along with representatives of the Texas Hospital Association, they would make the case for why Texas should expand Medicaid and take the federal money that comes with it. The dueling press conferences, which introduced an element of political theater that had been largely absent from the Eighty-third legislative session, left no doubt that the debate over health care had become the seminal issue in the Capitol, one that could not only determine Perry’s political future but also have a transformative effect on medicine and business in the state.
Under the terms of the expansion, 1.5 million Texans who currently don’t have insurance would become eligible for Medicaid. The Obama administration is offering to pay 100 percent of the program’s health care costs over the next three years; after that, the state would have to contribute 10 percent, with the federal government picking up the rest of the tab. Former deputy state comptroller Billy Hamilton has estimated that Texas would have to put up $15 billion to roll out the program over the next decade, a relative pittance considering that the state would be able to draw down $100 billion in federal funds. Regardless, Perry was holding fast to his vow to oppose expansion.
As the press conference began, Perry said that the Obama administration’s drive for Medicaid expansion was a “fool’s errand,” a misguided attempt to mask the shortcomings of Obamacare. “Texas will not be participating in Medicaid expansion,” he said firmly, not for the first time. A roughly 9 to 1 return on the state’s investment? No thanks. This is Texas, after all. Better to reject the Medicaid money than have to deal with the Obama administration.
“I commend Governor Perry, Lieutenant Governor Dewhurst, the leaders of the Texas House and the Texas Senate for standing strong,” Cruz said. “For those states buying into this, they will come to rue the day.” Cornyn agreed, saying that he wanted to save Medicaid but it was a “flawed system.” “When the federal government retreats,” Cornyn added, “the state’s going to be on the hook.” Their argument is that Medicaid is a runaway train that will eventually overwhelm the budget. Perry points out that over the past two decades, Medicaid expenditures nationwide have jumped 445 percent, from $73.7 billion to $401.4 billion. During that same time, the caseload has risen 135 percent. That trend has put tremendous pressure on Texas, and last year total spending on Medicaid accounted for 23.4 percent of the state’s budget. Perry argues that if Texas could receive a block grant to develop its own plan, including co-pays and health savings accounts, it could better manage its finances and still provide quality care.
Never mind that there have been encouraging signs about expansion elsewhere in the country, as the Washington Post’s Wonkblog recently pointed out. Under Republican governor Arnold Schwarzenegger, California moved quickly to accept Medicaid expansion, and when the law is fully implemented next year, the portion of the state’s uninsured population is expected to fall from 20 percent to less than 5 percent.
And in an about face, many Republican states, including Arizona, Florida, Arkansas, and New Jersey, have signed on to the expansion after initially saying that they would oppose it. Texas’s stubbornness is what happens when you have a one-party, one-politician state, where one officeholder’s ideology has dominated public policy for thirteen years. That ideology has spread through the circulatory system of Republican politics until Perry’s values now pass for conventional wisdom among members of his party. They believe what Perry tells them: the Obama administration will renege on its end of the deal, and Texas will have to pay for the expanded entitlement.
During the press conference, Perry remarked, “Only three out of every ten doctors are accepting new Medicaid patients.” That statement would subsequently be judged “mostly false” by the nonpartisan website PolitiFact, but whose fault is it in the first place that doctors won’t take Medicaid patients? The previous Legislature slashed provider rates, which is the amount of money doctors are reimbursed by the state for their services, and Perry signed the budget that slashed them. So I asked the governor if the real reason that doctors don’t want to take Medicaid patients is that the state has made the program unattractive to physicians. “Do you believe Medicaid is broken?” Perry shot back, answering my question with a question. Yes, I said. But provider rates are one reason it’s broken, and the governor knows it.
Yet another serious issue lurks in the weeds: the refusal to expand Medicaid could cost Texas employers as much as $448 million in fines because the Affordable Care Act penalizes some companies when workers can’t obtain affordable coverage, according to a recent report by Jackson Hewitt Tax Service. Is Perry really going to stiff those employers? Not likely. But if Texas rejects Medicaid, the state will have to come up with a plan that will satisfy employers.
And because Medicaid’s expansion was conceived in part as a new source of revenue for hospitals, Obamacare ratchets back the disproportionate share payments—ignore the jargon, please—that the federal government currently makes to providers who treat the uninsured. Texas, for instance, received almost $1 billion in disproportionate share payments in 2011. Under Obamacare, providers in Texas will receive far, far less. What’s the chance that the state will step up to cover that gap?
The benefits to Texas, especially the state’s medical community, of accepting the expansion are huge. Several economists, including the Waco-based Perryman Group, have done reports on the subject in an effort to persuade Perry that expansion is good for business, particularly for hospitals, which could receive more than $60 billion in additional funding. Again, this has fallen on deaf ears. The state has a long history of relying on emergency rooms for treating Medicaid patients, but emergency room care is the most expensive care there is. Most Medicaid patients can’t afford to pay for their care, and so the hospital must recoup its costs from urban counties with hospital districts that can levy and collect taxes. The economics of our health care system amounts to a tax hike on property owners, but this bit of information is also carefully hidden from the voters.
Meanwhile, the state continues to have the highest rate of people without health insurance in the country. All of this could be changed in a single stroke of the pen if Perry were to accept expansion of Medicaid. At the moment, he has painted himself into a corner, but the pressure from chambers of commerce and the medical community is building. Noticeably absent from the press conference was Speaker of the House Joe Straus, who also doesn’t support expansion but has said that the state needs to find a way to move forward and address the problem. “We need to move beyond the word ‘no,’ ” he told a reporter earlier in the session. Perry is talking tough, as he always does, but there is too much at stake for him not to find a face-saving exit.
The politics of Medicaid expansion raises a timeless issue: What is the proper role of government? As conservative groups like the Texas Public Policy Foundation see it, Medicaid should be left to the states. The refrain that is often heard here is “We want a Texas solution to our problems.” Translation: we want the federal government to give us the money for a block grant for health care and then butt out. The TPPF’s version of a state health care program leaves almost all the decision-making to the state and virtually nothing to the federal government. That is a scary prospect considering the Legislature’s lack of commitment to health care over the years, which has included kicking children off the Children’s Health Insurance Program in 2003 and making access to Medicaid more difficult. But when it comes to Medicaid, the federal government is unlikely to grant Texas’s wish to be in charge of its own destiny, a reality that Perry will find hard to accept.