Health care providers across the Greater Houston area are grappling with the effects of an evolving Medicaid program. As the area grows, taxpayers increasingly cover the cost of public care, Harris County Judge Ed Emmett said. “The Harris County Health System has to provide indigent health care—someone has to pay for these services. Right now, the private taxpayers are paying for it,” he said. “If we had Medicaid expansion, that [Harris County health] tax bill could be reduced quite a bit. Unfortunately, the state leaders try to make it seem like part of the [Affordable Care Act]—it’s not.” Essentially, Harris County taxpayers are contributing more than $600 million a year of local property taxes to provide indigent care, said Ken Janda, CEO of Community Health Choice, a nonprofit health plan which provides insurance to individuals across the Greater Houston area. “That number could likely be cut in half if we did expand [Medicaid],” he said. “Therefore, we could lower property taxes or take those dollars and fill a few potholes or do other things.”

Expansion details

The Affordable Care Act assumed each state would expand Medicaid coverage for individuals living between zero and 138 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 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 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,” he said. “Any hospital that is running a true emergency room is going to see a lot of uninsured [patients] coming in through the ER.” In Harris County, Emmett said a Medicaid expansion program would enable the state to draw down federal funds to reimburse the county and private hospital systems like 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, children and disabled adults, Janda said. “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, 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. “If we look at our [Harris County] population from fiscal year 2015 and the percentage of our population [living] from zero to 134 percent of the federal poverty level that theoretically would have qualified for Medicaid—but for us represent charity care—it was over 50,000 patients with a potential reimbursement of approximately $75 million,” said Michael Norby, executive vice president and CFO of Harris Health System. There are 19,000 existing patients in the Harris Health System living between 138 percent and 150 percent of the poverty line who were left without Medicaid coverage and unable to qualify for the insurance marketplace when the ACA was passed, Norby said. “If you evaluate the total number of uninsured patients in the county, there are over a million,” he said. “If you look at our data, I probably see about 200,000 of that million. [Of] the other 800,000 [patients], maybe 200,000 are visiting other providers’ emergency rooms and 600,000 just aren’t getting care.”

Expansion politics

Political discussions about Medicaid expansion focus on increasing the number of people served, but Emmett said the number of indigent residents covered would not change. He said the purpose of an expansion is to increase federal reimbursement. In 2015, the federal government funded Medicaid expansion programs in other states at 100 percent, Norby said. “That would’ve meant, for Harris Health alone, an incremental $75 million in reimbursement for care provided,” he said. “We ended up, in fiscal year 2015, with a $17 million loss. We would’ve had $58 million more to provide incremental care for other segments of the population that didn’t have access to care.” 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, said state Rep. John Zerwas, R-Simonton. Zerwas authored House Bill 3791, a Medicaid expansion alternative, in the 2013 legislative session. “We proposed [HB 3791] 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,” Zerwas said. 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. “I see that as an opportunity for states to take greater control over Medicaid—[but] like block grants, you always have to be wary of the strings that come attached,” he said.

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. “It’s much better to have people in a managed system,” he said. “They wait until they’re so sick they end up in an emergency room, and the person is much sicker than when they would have gone to the doctor.” Hawkins also said the private market route could be more viable. “I think from a policy perspective when I talk to colleagues in other states who went the private market route, early returns are positive,” he said. “For providers, the private market is a better alternative. I think with private market rates, even under some of these higher cost-sharing plans, you’ll have a better chance of negotiating rates more reflective of the costs than in dealing with the state. We argue the private market option works on a lot of different levels.” Whether federal funds arrive in the form of Medicaid expansion, block grants or waivers, Norby said the funds will be welcomed regardless. “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. “This is all the money we have. Inflation happens. 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.”

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