Michael Hiltzik

Is Texas, the biggest domino, about to topple on Medicaid expansion?

Yielding to logic, Texas starts thinking about expanding Medicaid

The serial capitulation of red-state governors to the Medicaid expansion authorized by the Affordable Care Act has left the holdouts increasingly isolated.

Tennessee, Wyoming, Indiana, Utah, and Alabama either have reached agreement with the federal government or are open to negotiations to cover their poorer residents with some variation of Medicaid and federally funded private insurance, the biggest holdout is still Texas. 

But just before Christmas, Texas Gov.-elect Greg Abbott signaled that he might be open to a compromise that finally would bring as many as 2 million low-income Texan adults and children under the coverage umbrella. At a meeting with Houston-area state legislators, the Houston Chronicle reported, Abbott asked for more information about Utah's groundbreaking compromise with the feds on Medicaid expansion. 

Abbott himself initiated the discussion of Medicaid, "a topic so radioactive in Texas politics that even the mention of it caught the room off guard," according to the Chronicle. The state legislature's valiant pro-Medicaid minority isn't ready to declare victory, but one remarked, "it sounded like at least he’s looking at options." 

That would be a dramatic departure from the state's stance under departing Gov. Rick Perry, who called Medicaid expansion "a fool's errand" and made his state the national epicenter of opposition to the ACA.

Yet in no state is the economic logic of expanding Medicaid as self-evident as it is in Texas. The state consistently leads the nation in its ratio of uninsured residents -- 22.1% in 2013. (The national average in 2014 is 13.4%.) A 2013 report by former deputy state comptroller Billy Hamilton projected that the state would lose $7.7 billion in federal funds and incur $397 million in costs through 2015 by shunning Medicaid expansion. Acceptance would relieve Texas hospitals of a sizable share of the $17 billion in uncompensated care they provide to uninsured residents every year. 

Without expansion, nearly 900,000 Texan children lack coverage. The state has had the highest uninsured rate among residents earning less than 138% of the federal poverty line, the income ceiling for Medicaid expansion, at 55%. Under the ACA, the federal government would cover 100% of the cost of serving those residents via Medicaid through 2016, after which the match declines in stages to a permanent 90% in 2020 and beyond.

The Utah program in which Abbott expressed interest is a refinement of a deal pioneered by Arkansas, which allows federal funds to be used for the purchase of private insurance for the target population. In Utah's case, that would be adults with incomes below the federal poverty line.

Utah's Republican Gov. Gary Herbert reached agreement on the program with the federal government earlier this month; it now awaits approval by the state legislature. The state has issued a detailed description of the plan, though it couldn't resist lying about the Affordable Care Act: "The ACA left approximately 62,000 Utahns living below the federal poverty level (earning less than $11,670 per year) with no financial assistance to purchase health care," it states. In truth, the ACA covered those people; it was the state government's refusal to accept the ACA's Medicaid expansion that left them without assistance. The ACA required the expansion, but it was made voluntary by a Supreme Court decision.

Utah's program will bring coverage to as many as 100,000 residents by 2019, including about 35,000 living just above the poverty line. Although the program imposes modest co-pays even on some residents living in poverty -- with an out-of-pocket maximum of $300 per couple -- and requires all but the "medically frail" and those over 60 years old to enroll in a work and training program, it largely falls within national Medicaid standards. Those with incomes below the poverty level get straightforward Medicaid, and those with incomes of 100% to 138% of the poverty line get financial assistance to buy private insurance or participate in an employer-offered plan.

Health-insurance blogger Richard Mayhew calls this "a liberal coverage expansion without poor shaming" and a decent compromise: "Conservatives get some policy reforms, liberals and moderates get coverage expansion, and the public gets a bit better off."

Other red-state governors have found these terms inviting. Earlier this month Tennessee Gov. Bill Haslam announced federal agreement on a plan, which will be considered by the state legislature at a special session in the new year.

That makes Tennessee the 11th state to expand Medicaid under a Republican governor, including Utah but not Indiana or Wyoming, where the expansion is still under study. "In the struggle between pragmatism and ideology over Medicaid expansion in red states, pragmatism may slowly be winning," observes Drew Altman, head of the Kaiser Family Foundation.

The trend may bode well for a possible response to a looming decision from the Supreme Court on the legality of tax subsidies for many Americans. If the court rules that the subsidies are illegal in states that failed to establish their own exchanges for individual insurance, three dozen states may have to scurry to establish those exchanges or let millions of constituents lose their insurance. The GOP capitulation on Medicaid implies that many of these states will respond sensibly. Texas may continue to hold out, but it will be in a lonelier place. 

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