Texas-Size Spending Addiction
By Kate Nocera
 Rick Perry's Texas gets plenty of money from the feds
More than $380 million from the health law have gone to the Lone Star State.
The first rule of asking for extra federal dollars in Texas is to never make it seem like you are asking for extra federal dollars.
For Gov. Rick Perry, this is a tricky line to walk. Because as much as the Republican presidential candidate bashes the federal government in his campaign speeches, Texas gets a lot of money from the feds — and a lot of it is going to the health care system he insists Texas can handle on its own.
Perry has repeatedly decried the spending culture of Washington, railing against both President Barack Obama’s health care law and the federal stimulus. But as it happens, Texas has taken a lot of money from both.
More than $380 million in early grants and other aid from the federal health law have already gone to businesses and agencies in the Lone Star State, according to figures from the Department of Health and Human Services, and Texas ended up with $17 billion from the stimulus.
Now, the state is waiting for final approval of a new waiver from federal Medicaid rules that could allow the state to draw down an additional $12 billion in funds from the federal government.
And that’s before the main parts of the Affordable Care Act even kick in, bringing billions of dollars to Texas in extra Medicaid funds and subsidies to help people buy private coverage through a new health insurance exchange.
If the law survives its upcoming review by the Supreme Court, its expansion of Medicaid alone could cost the federal government anywhere from $53 billion to $67 billion in aid to Texas by 2019, according to estimates from the nonpartisan Henry J. Kaiser Family Foundation.
That’s more than any other state would get under that part of the law. The only other state that comes close is California, which would get between $45 billion and $55 billion in federal Medicaid funds.
“The only word that can describe this is hypocrisy,” said Democratic state Rep. Garnet Coleman. “These days federal dollars might as well be counterfeit, they are so dirty — but Texas would not survive without them.”
To Perry, there’s nothing wrong with taking federal money. In his view, Texas taxpayers send plenty of money to Washington — so they have a right to get some of it back.
Publicly, though, he’s more open to the money from the Texas Medicaid waiver proposal than he is to funds from the health reform law.
“Texas taxpayers send a substantial amount of money to Washington, D.C., and this waiver will ensure that Texas receives its fair share,” said Perry spokesman Josh Havens.
What makes the waiver proposal better than the health reform law, though, is that “no Texas law or policy needed to be changed to receive those funds,” Havens said. “Obamacare is a misguided, unconstitutional and unsustainable government takeover of our health care. The waiver Gov. Perry is seeking is a state-based solution.”
That’s a more nuanced view than Perry has taken on the campaign trail, where he often insists that if the feds really want to help Texas on health care, they should get out of its way completely.
“I’ll promise you, we understand that if we can get the federal government out of our business in the states when it comes to health care, we’ll come up with ways to deliver more health care to more people cheaper than what the federal government is mandating today with their strings-attached, here’s-how-you-do-it, one-size-fits-all effort out of Washington, D.C.,” Perry said at a September debate sponsored by POLITICO and MSNBC. “That’s got to stop.”
The biggest injection of federal health reform money could come in 2014, when the Medicaid expansion would take place. It’s not free to the state — Texas would have to pay $2.6 billion to $4.5 billion, depending how aggressive the state is in reaching out to find everyone who’s eligible. But the feds will pay 100 percent of the state’s costs for the newly eligible people for the first three years, scaling back to 90 percent by 2020.
“The biggest beneficiary of the Affordable Care Act is the state of Texas. We will have the single biggest reduction of uninsured people, and the Medicaid is paid for in the first three years,” Coleman said.
Despite a $23.7 billion Medicaid budget, the state lacks the general revenue to bring in more money from the feds (think very low taxes). So a deal between hospitals and the state, called upper payment limits, has allowed for Texas to bring in more federal Medicaid dollars than it otherwise would, with providers putting up the money to help the state win additional federal matching funds.
If the Obama administration gives final approval to the waiver — it has already given a tentative go-ahead — the Medicaid population in Texas will move into managed care plans, and hospitals will have the opportunity to get more money if they achieve certain quality measures.
The waiver would certainly come with more “strings attached,” often dirty words in Perry’s book. But for hospitals, the opportunity to get more money to treat patients will mean only good things.
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For instance, a new diabetes clinic at the Baylor Health Care System in Dallas runs primarily off of upper payment limit funds. Additionally, hospitals in Texas are eager to get more money after steep rate cuts were made to help balance the state budget.
“There are four major transferring hospitals in Texas” that have put up money for matching funds, “and they have about hit their limit,” said Kristi Hoyl, vice president of external and government affairs at Baylor. “So the question now becomes: Is the state of Texas willing to put up any more money for that federal match, or is there another way to come up with the federal match?”
But Hoyl is doubtful the Legislature would find the extra money in the budget, and she’s exploring “other options” to find it.
The upper payment limit dollars have mostly stayed off the state Legislature’s budget books, and there may be a good reason for that. Perry has a long history of distancing himself from Washington and the money that comes with it.
In 2010, the Texas Health and Human Services Commission even looked into what it would mean for the state to opt out of Medicaid altogether. It wasn’t a pretty picture: Texas would stand to lose at least $15 billion in federal matching funds, while at the same time Texas taxpayers would still be paying “federal taxes in support of other states' Medicaid spending,” according to an HHSC release.
“That report certainly shut some people up for a while,” Coleman said.
Still, the Perry administration has taken on a “what’s fair is fair” attitude toward the money they could ultimately get from CMS and what they’ve received from the federal government so far.
Ever since the Medicaid waiver got the tentative “thumbs up” from CMS in September, every stakeholder in the state has been busy preparing for the transition. The “balanced budget” in Texas depends partially on projected savings from managed care that may or may not come, and what’s even more unclear is whether the state will get more money from the feds.
But even if the state were to get every penny in additional Medicaid dollars, the waiver itself wouldn’t do anything to expand Medicaid in Texas. Nearly a quarter of the population lacks health insurance, and although the additional money will help hospitals provide for these patients, Texas still maintains a “pull yourself up by your bootstraps” mentality.
For the uninsured in Texas, the waiver essentially means nothing in terms of access to care.
“The philosophy of the state of Texas and its government has been, we want to invest in things that help the state grow ... and for that we have a fairly low regulatory hurdle,” said Republican state Rep. John Zerwas. “The attitude has been to the extent that we can promote the economic success of the state, along with that will come health care for its citizens.”
Zerwas, however, has gotten signals that Perry won’t stand in the way of a key part of the health reform law — the new health insurance exchange, a marketplace of private plans — if the law survives the Supreme Court.
Zerwas and Coleman together co-sponsored a bill that would have gotten the state ready for a health insurance exchange. That bill ultimately failed, but Zerwas said Perry has indicated he will be ready to sign an executive order authorizing state implementation of the law when it’s necessary. And with that, will come billions to help the state’s uninsured population.
“The governor gave us every sense of comfort that an exchange could be accomplished through an executive order,” Zerwas said. “There has been work that has been done. The state has utilized some grant money to help prepare them and help them create some infrastructure. So we would not be starting necessarily from ground zero.”
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