Rick Perry may be fed up with the federal government, but can he really afford to turn down Obamacare’s Medicaid expansion?
After Barack Obama won his first term, Rick Perry responded with Fed Up!, the anti-Washington rant that gave him a national profile as a pistol-packing defender of states’ rights and coyote-menaced dogs—and briefly made him a contender for Obama’s job. Now that Obama has four more years, Perry can get to work on a sequel, both to the book and to his White House run. The president’s reelection, however, poses challenges to Texas and its longest-serving governor that will require more than shoot-from-the-hip rhetoric. We face a historic choice in our relationship with Washington, one that will test the proposition that a great and powerful state can build its future on an inflexible antigovernment ideology. Maybe the title for Perry’s sequel should offer a bit of self-help advice for himself and our redder-than-ever state: Wise Up!
The single most consequential decision confronting Perry and Texas is whether to accept the expansion of Medicaid—the federal-state partnership that provides health insurance for poor children and long-term care for the disabled and elderly—mandated by Obama’s 2010 Affordable Care Act (a.k.a. Obamacare). When that choice was left to the states’ discretion by last summer’s landmark Supreme Court ruling upholding most of the ACA, Perry promptly fired off a letter to the U.S. Department of Health and Human Services denouncing the Medicaid expansion as a federal “power grab” that “would only exacerbate the failure of the current system, and would threaten even Texas with financial ruin.”
By anybody’s measure, Medicaid is government at its biggest and costliest. From the program’s relatively modest origins in Lyndon B. Johnson’s Great Society, Medicaid has mushroomed to become the second-largest line item in our state budget (behind only K–12 education), with Texas now kicking in roughly $11 billion annually, while our federal taxes provide the $15 billion Washington antes up. Medicaid covers one in eight Texans at costs lower than private insurance, and without it our chart-topping percentage of the uninsured—nearly 25 percent of Texans lack insurance—would increase to more than 33 percent of the population, including the millions of children who make up the majority of Texas Medicaid enrollees.
Red-state governors have long chafed at their ever-increasing contribution to Medicaid, and the Supreme Court ruling seemed to offer them a lifeline out of a yawning fiscal abyss. But Medicaid already had an opt-out option; any state can say “Adiós, mofo” to the program at any time. Though seldom mentioned by the ranting right, this escape clause hasn’t escaped Texas lawmakers, who in 2009 passed a bill directing Texas’s Health and Human Services Commission (presided over by Perry, who appoints its commissioner) to report on the economics of a Medicaid opt out.
And it’s exactly the arguments that Perry’s HHSC made that the governor will have to overcome if he decides to reject Obama’s Medicaid expansion. The HHSC concluded that if we dropped out of Medicaid entirely, Texans would forfeit the billions in federal tax dollars we’re paying into the program. But we’ll give away considerably more if we refuse the expansion, which would be fully funded by the federal government for the first three years, with the federal share gradually slipping to 90 percent by 2020. That means Texas would leave on the table $76 billion in federal spending during the first five years of the program, all of it paid for by our own taxes.
Then there are Texas’s hard-pressed public and nonprofit hospitals, which, as the HHSC noted, would lose billions annually in a full Medicaid opt-out. This is because of the Emergency Medical Treatment and Active Labor Act, the 1986 federal law requiring participating hospitals to provide care to anybody who shows up at an emergency room with an emergency condition, regardless of ability to pay. Far from being a shibboleth for liberal do-gooders, EMTALA has become a sentimental favorite of Republican politicians from George W. Bush to Mitt Romney to senator-elect Ted Cruz, who almost ritualistically inform us that every American has guaranteed health care because we can always go to the emergency room.
Notwithstanding Cruz’s jaw-dropping claim that it’s cheaper for the state to have uninsured Texans receive their primary care in the emergency room than in a doctor’s office, EMTALA costs Texas hospitals about $5 billion annually in actual out-of-pocket costs for services worth $15 billion in the health care marketplace—losses these hospitals believe will be substantially reduced when the Medicaid expansion cuts the number of uninsured Texans in half. Right now the whopping bill is passed on to all of us in the form of higher local property taxes, higher insurance premiums, and higher federal taxes, because Washington reimburses Texas hospitals for much of their EMTALA costs every year. Unlike Cruz, Perry knows that relying on this so-called uncompensated care as a social safety net is an expensive folly. The marquee item in the governor’s 2007 State of the State address was his own health plan, which “recognizes the long-term benefits of providing Texans with preventative care through insurance instead of paying for costly emergency room visits.”
In that same speech, Perry drew a bead on the problem that Obama’s Medicaid expansion would most effectively address. As Perry noted, millions of Texas’s uninsured “are working Texans whose jobs offer health care benefits they can’t afford or no benefits at all.” The ACA would extend coverage to many of these families, probably helping Texas more than any other state.
Of course, Perry will protest that he could do a better job for these families with the no-strings Medicaid “block grant” he’d have gotten from Mitt Romney. But even if Perry had offered more than fuzzy math to explain how he’d provide coverage under his 2007 plan, total state-level control is no longer an option. Instead, Perry needs to step up for the millions of Texas workers for whom, to cite him again, “years of hard work and savings can be wiped out with the onset of one life-threatening illness.” Perry’s HHSC has actually been willing to request waivers from the Obama administration that would allow Medicaid to be tailored to Texas, and he’ll be under considerable pressure from Texas businesses to cash those big Obamacare checks and try to change Medicaid from within.
Perry has previously shown an ability to bow to political realities—i.e., demonstrated a willingness to heed his big donors—on immigration, where his position has put him far to his party’s left. Before the Medicaid expansion spigot turns on a little more than a year from now, Perry will again have an opportunity to put Texas businesses and workers ahead of ideology. If he does, his long tenure may well be remembered as the stable foundation for a Texas century. If he doesn’t, he’ll have written the final installment of his long-winded government-service saga even before the 2016 primaries begin: Washed Up!
Read a response to this column by John Daniel Davidson, a health care policy analyst with the Texas Public Policy Foundation.