| Perspectives on Texas

Medicaid in Texas is flawed, but it is not irreparable. With state investment, the program could function more effectively.

Medicaid covers nearly 4 million Texans, 75 percent of whom are children, and caseload has grown nearly 135 percent since 2010. More than 40 percent of all children in Texas get health care through Medicaid or to a lesser extent, the Children’s Health Insurance Program, and Medicaid covers 53 percent of all births in Texas.

Some view these data as proof that Medicaid is a budget-busting program that requires drastic measures to curtail spending.

But, as the Texas House of Representatives considers the state budget this week, it is important to note that the flaws with Medicaid are not cost overruns or inefficiencies or overly generous eligibility.

In fact, over the last decade, Medicaid spending in Texas has remained largely flat as a result of the state’s aggressive implementation of managed care and other cost containment initiatives. Managed care alone has generated $4 billion in savings over six years and is projected to save an additional $3.3 billion over the next three years. Per enrollee costs in Medicaid grew just 10 percent over the last 10 years, compared with 45 percent and 60 percent for the state’s employee and teacher retirement systems, respectively. Medicaid eligibility for Texans is among the most stringent in the nation, limited also exclusively to what the federal government requires. As a percentage of the state budget, general revenue spending on education and other programs is more than twice that for health and human services in Texas.

The real flaws with Medicaid are a growing state population of low-wage earners and chronic underfunding of the program. Texas lawmakers often champion the fact that our state’s economy attracts more than 1,000 people a day to move here, but they neglect the fact that not all of these people have access to private health insurance. Texas leads in job growth and small business creation, but it lags in employer-provided health insurance coverage. More than half of all employers in the U.S. offer health insurance benefits, but in Texas, it is 46 percent. Looked at another way, 60 percent of Americans nationwide have health insurance through their employer, compared with 52 percent of Texans. Texas is also home to the largest percentage of workers earning the federal minimum wage or less; 12.1 percent of the nation’s minimum wage earners live here. Private health insurance is out of reach for themselves and their families.

Medicaid’s other flaw is the state’s chronic underfunding of the program. Reimbursement rates are well below costs, and supplemental payments are not keeping up with need. Medicaid reimbursement for hospital inpatient services is now less than 50 cents on the dollar and for outpatient services, 72 cents. Reimbursement for physicians is also lagging; as a result, many enrollees have difficulties finding providers willing to see them and end up in hospital emergency rooms. The need for supplemental payments – disproportionate share hospital and uncompensated care payments – that are intended to partially offset the costs of caring for patients without health insurance and those with Medicaid coverage -- is conservatively estimated to be more than $7 billion for fiscal year 2015 while available funds are about $5 billion.

And this need is growing. Like a balloon squeezed at one end, reducing reimbursement rates and an increasing number of uninsured residents put increased pressure on supplemental payments.

At the same time, it is hospitals themselves and, by extension, local property taxpayers that are providing much of this supplemental payment funding. The state’s general revenue commitment is limited, and legislative leaders would like to limit it even further.

Medicaid has an important role to play for all Texans. In addition to children, it covers people at high risk for needing high-cost medical care – those with disabilities, the elderly with low incomes and pregnant women – and in doing so, makes private health insurance more affordable and accessible for others. And this makes employees more productive and the economy stronger.

Divesting from Medicaid when the state’s population and the demand for health care services are exponentially growing is short-sighted — just as deferring maintenance on roads when more people are relying on the infrastructure would be.

Medicaid is not perfect. But the cure for what ails it is investment, not neglect.