Healthcare Business News
Merrill Goozner, Modern Healthcare editor

What's the matter with Texas?

Perry fails to see how expanding Medicaid benefits state, taxpayers

By Merrill Goozner
Posted: February 9, 2013 - 12:01 am ET

The dominoes are falling. Last week, conservative Republican governors in Ohio and Michigan joined the parade of state leaders admitting the U.S. has a major problem in the way it provides healthcare for the uninsured.

The public, at least if we're to judge by the results of the November election, endorsed the Patient Protection and Affordable Care Act as a reasonable approach to solving this festering social blight, which has left the U.S.—more than half a century after national health plans were adopted in western Europe—as the only advanced industrial nation without universal coverage for all of its citizens.

The issue confronting governors in the wake of the U.S. Supreme Court's decision last June is whether to expand Medicaid to cover people earning up to 138% of the federal poverty level. These are people who, though working, do not get access to affordable insurance on the job and are too poor to buy coverage in the private marketplace, even with federal subsidies that will be provided through the insurance exchanges set up under the law.

The economic consequences of failing to provide coverage to these near-poor Americans are well-known but bear repeating. The uninsured avoid routine care, which means they do not get access to the cost-effective preventive care that would keep them away from hospital emergency rooms. When they seek out care, they are often far sicker than they would have been under the care of a primary-care physician. Or, they make the emergency room their first stop when they need routine care (like this winter for a serious bout of the flu).

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Those types of visits can translate into very high personal bills, leaving the sick, working poor with a mountain of unpaid debts. Massachusetts Sen. Elizabeth Warren burst onto the national scene as a social policy thinker by documenting how unpaid medical bills were the No. 1 cause of personal bankruptcy in the U.S.

So what happens next? Hospitals must raise their prices on all of their paying customers to pay for this uncompensated care, an oxymoron if ever there was one. Are the emergency room physicians unpaid? Do the nurses, technicians and orderlies put out a tip jar? There is no such thing as uncompensated care. There are only unpaid bills that get picked up by somebody else.

The ACA was designed to have the vast majority of these unpaid bills picked up by Uncle Sam, 100% in the short run and 90% in the long run. And in that long run, it makes much more sense to finance coverage that provides routine care through the universal tax system than to finance more expensive emergency room coverage later through a surreptitious tax on every one else's insurance premiums.

Michigan Gov. Rick Snyder finally got it. When he reversed course and announced his decision to expand Medicaid, he pointed out it would bring $20 billion into the state during the next decade. The state's general fund would save about $1.2 billion by 2020 by removing nearly a half million residents from the ranks of the uninsured. Gov. John Kasich, a rock-ribbed conservative in Ohio, made a similar calculation.

But if those are the stakes in Michigan (13% uninsured) and Ohio (14% uninsured), what would be the benefits to Texas, the big enchilada when it comes to benefits derived from signing onto Obamacare? The Lone Star State has nearly one-quarter of its population uninsured, or 5.6 million people. The Texas Hospital Association estimates that the 595 community hospitals in the state provide a staggering $5.4 billion in uncompensated care.

So far, Republican Gov. Rick Perry's response to Obamacare is not just to say no, but to say “hell no.” The blandishments of the local medical establishment so far have failed to sway the former presidential candidate. Instead, he's sticking to his call for turning Medicaid into a block grant.

Whatever the merits of that approach, Perry stands no chance of getting a block grant waiver out of the Obama administration. It rightfully fears Perry would use the waiver to undermine the coverage standards in the law.

Perry can stand firm in the face of that refusal. Or he can put in a few calls to Snyder and Kasich and learn firsthand why expanding Medicaid is the right thing to do—not only for the uninsured in his state, but for his taxpayers, for businesses that already provide their employees with health insurance and for the state's healthcare providers.

Merrill Goozner, Editor

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