Health care providers across the Greater Houston area are grappling with the effects of an evolving Medicaid program. The Affordable Care Act assumed each state would expand Medicaid coverage for individuals living between 138 percent and 150 percent of the poverty line—more than 1 million Texans—who would not qualify to purchase a subsidy through the health insurance marketplace. However, the U.S. Supreme Court ruled the expansion would be optional by state, and Texas decided to opt out. While it was initially thought the decision to opt out of the expansion would affect public hospitals the most, particularly in urban areas, it has affected all hospitals, said John Hawkins, senior vice president for government relations for the Texas Hospital Association. “I think the reality is, with the high number of uninsured people in the state, and just the existing number of Medicaid patients and low payment on rates, it impacts all hospitals,” Hawkins said. “Any hospital that is running a true emergency room is going to see a lot of uninsured [patients] coming in through the ER.” Area officials said a Medicaid expansion program would enable the state to draw down federal funds to reimburse local counties and private hospital systems such as Memorial Hermann that provide indigent care. “We still have populations that are uncovered because of the failure to expand the Medicaid program, and so that really places a greater reliance on the safety net hospital system,” said Dennis Laraway, executive vice president and chief financial officer for Memorial Hermann. “Memorial Hermann is a very important safety net provider in the Houston community. That’s part of our mission.”

Expanding coverage

The only groups that can qualify for Medicaid in Texas are pregnant women and children, said Ken Janda, CEO of Community Health Choice, a nonprofit health plan that provides insurance to individuals across the Greater Houston area. “The rationale is that [other populations are] able-bodied adults who should go out and get a job,” he said. “But when you look at the details of who they are, most of them are women taking care of small children or have chronic mental health conditions that make it impossible to keep a job.” Adult males and females without children are not covered under the system, Laraway said. These people end up becoming charity care patients that hospitals are not reimbursed for under the existing system.

Expansion politics

Political discussions about Medicaid expansion focus on increasing the number of people served. Alternatives to Medicaid expansion include waivers and block grants that would enable the state to draw funds from the federal government and disburse them for health care projects, said state Rep. John Zerwas, R-Simonton. Zerwas authored House Bill 3791, a Medicaid expansion alternative, in the 2013 legislative session. “There was strong opposition to [the ACA]—Texas opted not to go that route and looked at other ways [to fund health care],” Zerwas said. “We proposed [HB 3791] in 2013 to give the commissioner of Health and Human Services and the governor authority to provide waivers [through services such as] health savings accounts, [a] copay [system] and rewards for healthy behavior—things we might see in private market plans that foster personal responsibility rather than an entitlement mentality.” The bill did not make it to a House vote, and no major legislation was proposed in the 2015 session. A waiver program known as the 1115 waiver did come out of negotiations, he said. “The 1115 waiver is a bucket of money to invest in health improvement projects,” Zerwas said. Another option is the 1332 provision of the ACA that could give states block grants to reimburse Medicaid programs. Zerwas said the provision would not become an option until federal fiscal year 2017.

Private coverage

Janda said Community Health Choice supports private coverage for Medicaid, and he believes the state will eventually find a way to draw down more funding for Medicaid coverage. Whether federal funds arrive in the form of Medicaid expansion, block grants or waivers, the funds will be welcomed regardless, said Michael Norby, executive vice president and CFO of Harris Health System. “We’re faced this year, next year [and in] 2018 with the probability we’re going to be essentially capped from a revenue standpoint,” he said. “Labor, wages, supply costs, etc. go up 2-3 percent a year. We’re going to have to figure out a way to mitigate those increases because our revenue is stuck.”