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Clock ticks on financial crisis for Texas hospitals

Updated
The hospital funding issue offers a chance for conservatives to place protecting the state's finances over rhetoric and solve Texas' uninsured problem.
The hospital funding issue offers a chance for conservatives to place protecting the state's finances over rhetoric and solve Texas' uninsured problem.Eric Gay/STF

The federal government wants Texas to spend taxpayer dollars more efficiently, setting up a showdown that could trigger a financial crisis for the state and its hospitals.

The U.S. government's argument is simple: Providing health care coverage to the working poor costs less than reimbursing hospitals when those same people can't pay their medical bills.

The federal Centers for Medicare and Medicaid Services says Texas has the right to refuse to expanded coverage for the poor, but federal taxpayers shouldn't have to underwrite that bad decision.

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The center has given Texas officials until December 2017 to come up with a better plan, or it will begin phasing out the $5.5 billion a year that keeps our safety-net hospitals afloat.

Harris County hospitals would lose $494 million in 2018, with Fort Bend County losing $23 million and Montgomery County losing $14 million, according to the Center for Public Policy Priorities, an advocacy group for the poor. That would trigger hundreds of layoffs.

"From a pure dollars and cents point of view, it's been critical to the safety net," explained Freddy Warner, who handles government relations for Memorial Hermann Health System. The cut is "the difference between hospitals staying open or closing, the difference between adding jobs and hospitals tapping their lines of credit, particularly for some of the smaller and rural hospitals."

The conflict arises from a U.S. Supreme Court ruling that upheld the Affordable Care Act but allowed states to opt out of expanding Medicaid, the health care plan for the poor that is paid for with federal, state and county tax dollars. Texas Republicans refuse to offer Medicaid to able-bodied adults and only provide coverage to poor children, pregnant women, the elderly and disabled.

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That leaves about 1.5 million uninsured Texans who don't qualify for Medicaid, but don't make enough to qualify for subsidies under Obamacare. When these people need help, they rely on safety-net hospitals that have been tapping a special stream of federal funding called an 1115 Waiver. CMS will allow that waiver, and those funds, to expire on Dec. 31, 2017.

"CMS is telling states right now that they, as an agency, don't want to continue to pay for things which would have been paid for had the state expanded its Medicaid program," Warner said.

Hospitals would take almost all of those cuts at a time when the state's largest public hospitals are already slashing budgets to contain costs. The state reimburses most hospitals only 57 percent of the cost of treating a Medicaid patient, and the waiver was the only way for hospitals to recover the balance.

After cutting taxes last year, the state has its own financial problems. Low oil prices and a slowing state economy have hurt state revenues, prompting Gov. Greg Abbott to ask most state agencies to submit budgets for 2018-19 that are 4 percent lower than current spending.

The feds are under constant budget pressure, which is why CMS is cracking down on states that have not expanded Medicaid.

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"They are going to take a look at the uncompensated care amount that we receive, for example, this year $3.1 billion, and they want to know, that if Texas had expanded Medicaid, how much of that $3.1 bil-lion would go away," Charles Smith, executive commissioner of the Texas Health and Human Services Commission, told lawmakers Wednesday.

The mathematical answer is clear, even if it offends conservative political sensibilities. Expanding coverage to include the working poor is cheaper than paying for their emergency care. And because the federal government would match $9 for every $1 the state spent to expand coverage, Texas would net $4 billion to $6 billion a year, according to Anne Dunkelberg, associate director at the Center for Public Policy Priorities.

"It's efficiency written broadly, both in expenditures by reducing avoidable hospitalization, but also efficiency in improving people's health outcomes by giving them a medical home and treating their chronic health conditions," she said. "It is much more efficient than letting their health care decline until they have to go to the ER."

Republican opposition to Medicaid, though, prevents any chance of expanding Medicaid. But there are conservative ways to expand coverage, such as the Healthy Indiana Plan signed last year by conservative Indiana Gov. Mike Pence, who Donald Trump named Friday as his running mate. The program requires enrollees to contribute to a privately administered program. Conservatives in Oklahoma, Arkansas and Ohio have also expanded coverage with similar plans.

Republican leaders in Texas have floated similar good ideas in the past, but conservatives have falsely equated them with Obamacare. Now that CMS is drawing a line in the sand, though, conservatives need to place protecting the state's finances over misleading rhetoric and solve the state's persistent uninsured problem.

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Lawmakers will face tough fiscal challenges when they meet next year, but solving the safety-net hospital crisis doesn't have to be one of them.

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