What Is Rick Perry Thinking by Rejecting Obamacare Help?

Joining the swelling chorus of Republican governors who say they’ll have nothing to do with Obamacare was Rick Perry on Monday, sending a letter announcing his intentions to Health and Human Services Secretary Kathleen Sebelius. The Texas Republican and former candidate for the party’s presidential nomination asked Sebelius to tell President Obama that he opposes “both the expansion of Medicaid as provided in the Patient Protection and Affordable Care Act and the creation of a so-called ‘state’ insurance exchange,” calling the health-care legislation a “power grab.”

But while Perry denounces the Affordable Care Act’s “one-size-fits-all requirements,” others in Texas say that the state’s citizens and its health-care industry stand to lose because of the dilly-dallying over health reform.

Perry may not like the idea of expanding Medicaid, a key part of the health-care law, but his state relies heavily on the care provided to citizens through the state and federal health program. Texas tops the nation in the number of citizens who are uninsured—25 percent, or more than 6 million people—and a study by the Agency for Healthcare Research and Quality recently ranked the state’s care level the lowest in the nation. Some studies show that without the Affordable Care Act, the number of uninsured Texans could climb all the way to one third of the population.

Health care is one of the state’s biggest industries, and hospitals in Texas are likely to push hard in the coming months to get the Lone Star State to take Obamacare into its warm embrace. Those benefits to the state are compounded by the fact that many of Texas’s neediest could become eligible for care unavailable to them now, due to the state’s unusually steep restrictions on Medicaid eligibility. Under the health-care reform law, Medicaid will be extended to all citizens with annual incomes under 133 percent of the federal poverty level.

The Affordable Care Act is supposed to go into full effect in 2014, but Perry says he will not implement the expansion of Medicaid or creation of a state health-care exchange prescribed by the law. Other Republican governors, including Louisiana’s Bobby Jindal and New Jersey’s Chris Christie, have said they will also oppose implementation of key portions of the bill in their states.

“To expand this program is like adding a thousand people to the Titanic,” Perry said Monday on Fox News. “You don’t expand a program that is not working already.”

And Perry’s right—if there’s any state that knows the woes of Medicaid and Medicare, it is Texas. The same Texas Health and Human Services report issued in 2007 found: “Today, care for uninsured Texans too often takes place in hospitals and emergency rooms—the most expensive points in the healthcare system. The cost of that care is passed on to local governments and those with private insurance.” And in 2012 the state still can use more help funding its existing Medicaid program. Earlier this year, state HHS Commissioner Tom Suehs said the program would see a $15 billion to $17 billion shortfall when it comes up before the legislature again in 2013.

Which means a Medicaid crisis in Texas was likely in the works with or without Obamacare. But some experts say the $27 billion over 10 years that Perry says the expansion will cost his state doesn’t reflect reality. A report by the Center for Public Policy Priorities, a nonpartisan think tank based in Austin, found in June of this year that Texas will reap $20 billion in new federal funds a year under the health-care reform law, $13 billion of which will go to residents of the state living at or below the poverty line. Medicaid coverage expansions planned for 2014 will be mostly covered by the federal government, the report found. According to the CPPP, 20 federal dollars would be returned to the state in health care for every $1 its citizens put in.

One result of so many Texans going without health insurance has been the cost to hospitals and the state government represented by uncompensated-care charges—treatment costs incurred by a hospital that have to be picked up by someone other than the patient. According to a report by the Texas Health and Human Services Commission, hospitals in the state recorded $11.6 billion in uncompensated-care costs in 2006. That amount rose to more than $13.6 billion in 2008, and would continue to spike without reform.

Hospitals incur uncompensated-care costs when they treat uninsured patients who cannot pay for the services themselves. The number of people in Texas who ring up uncompensated-care costs in is particularly high because of the unusually steep restrictions the state places on Medicaid—12 percent of the poverty level for an unemployed parent—said John Holahan, director of the nonpartisan Urban Institute’s Health Policy Center.

A report prepared by the Urban Institute for the Kaiser Commission on Medicaid and the uninsured found that Medicaid enrollment in Texas would increase by 45.5 percent under the Affordable Care Act. According to the report, only 3 percent of the tab would be picked up by Texas. Holahan said that all in all, Texas would either see no net change to its bottom line or could wind up saving money as more people either ensure through a state exchange or get coverage under Medicaid.

That’s in line with research done by January Angeles and Matthew Broaddus of the Center on Budget and Policy Priorities, who found that the federal government would be footing most of the bill for the Medicaid expansion, as well as increased mental health coverage, across the United States.

“Currently Texas received about one of every 17 federal dollars that go to Medicaid,” Broadus said. “If you look at federal dollars that will go to the Medicaid expansion in the first six years of the program, Texas would receive one of every nine dollars.”

Health officials in Texas say the effect that health-care reform could have on uncompensated-care costs would benefit their health facilities. At the same time, they say, procrastination by Governor Perry could hurt Texas’s vital health sector.

In a statement Monday, Texas Hospital Association President Dan Stultz said, “With a strained state budget, it’s hard to imagine addressing the uninsured problem in Texas without leveraging federal funds, which will now go to other states that choose to expand their Medicaid program.”

“Our sense is that any time that you can find ways to get more people coverage so that they can get the proper care for themselves and their families is preferable than for them to be uninsured,” said Jesus Garza, president of the Seton Healthcare Family, a network of 31 health-care facilities spread through central Texas. “The fact is that you have a lot of working people in Texas who for one reason or another can’t afford health insurance and so don’t have it.”

Garza estimated that 40 to 50 percent of visits made to Seton Family emergency rooms annually “are the kinds of visits that could be handled at a family practitioner or general care visit.” Garza said Seton Family facilities ended up eating about $300 million in uncompensated-care costs in calendar year 2011 and is on track to absorb another $350 million in 2012, all providing care required by law for people without insurance coverage.

“Those are significant numbers,” Garza said. “In any case they’re significant numbers, and a considerable expense providing care to the uninsured.”

Further numbers provided by Seton Healthcare show that in fiscal year 2011 the network absorbed $157 million in unreimbursed Medicaid expenses, more than $190 million in charity care, and $46.6 million in debt incurred by patients who were later unable to make the payments.

As for the governor’s argument that the federal government is trying to force an unwieldy system on Texas’s citizens, Garza said disagreement over whether his patients would be better served by a state- or federal-run insurance exchange doesn’t concern him.

“I think those are political judgments,” Garza said.

There are some ways in which Texas has already seen the benefits of the Affordable Care Act. Data compiled by the U.S. Department of Health and Human Services show that as of December 2011, 357,000 previously uninsured young adults between the ages of 19 and 25 were allowed to stay on their parents’ health insurance coverage because of the Affordable Care Act.

The Texas Department of Insurance also has received a $1 million grant to coordinate efforts among state agencies toward building a state insurance exchange—which Perry now says he’ll oppose.

Health care is already big business in Texas, employing about 1.1 million people in 2010. According to a report released in June of this year by the Georgetown University Center on Education and the Workforce, that number may grow to more than 1.5 million jobs in 2020—9 percentage points faster than the national average. According to the center’s research, those jobs could range from more than 90,000 new positions for high-school graduates to more than 11,500 jobs for Ph.D.s.

Looking at the dollars, Perry’s decision to fight the Affordable Care Act is a fiscal mistake for Texas, said John Holahan. “Ideologically it might make some sense,” he said, “but I don’t think the economics of it work.”