DALLAS -- The cost of health care in Texas is rising faster than both the general inflation rate and the growth of the state's population, but state leaders have provided little guidance on how to address major changes that may be coming this year.
According to state Comptroller Glenn Hegar, the state budget now allots more funding for health care than for education, traditionally the largest budget item for the state Legislature. Excluding federal funds, education still takes a higher percentage of the general revenue, however.
In fiscal year 2015, Texas state government spent $42.9 billion on health care services, or 43.1% of all its appropriations from state, federal and other sources.
From fiscal 2011 to fiscal 2015, state health care expenditures rose by 19.7%, a rate exceeding the growth of both inflation and the Texas population.
"Emerging technologies, demographics and the growth of our great state will ensure the demand for health care services continues to increase even while the cost of these services is on the rise," Hegar said.
"The question for policymakers is how to contain these costs," he said.
K-12 education, which makes up about 34% of the state budget, is facing potential cuts in the current session after Gov. Greg Abbott called for 4% cutbacks in state agency funding.
Neither Abbott nor Lt. Gov. Dan Patrick have mentioned medical costs as a budget factor, other than to promote withdrawal of funds for Planned Parenthood, new abortion restrictions, including a "wrongful birth" law, and improvements in child protective services.
Patrick, who heads the Senate, has made transgender bathroom regulation one of his highest priorities in the current session and has criticized House Speaker Joe Straus for giving the issue short shrift.
Straus has focused primarily on the state's budget, which will require either cuts in spending or use of the state's rainy day fund.
With Senate passage of the so-called "Bathroom Bill," the state Senate is now expected to turn more attention to budget issues as the 2017 session passes the halfway point.
While the Texas House advocates tapping the $10 billion rainy day fund by $1.4 billion to balance the budget, the Senate budget under Senate Bill 1 calls for a reduction in spending.
SB 1 would not fully fund Medicaid with any supplemental appropriations for the final months of the 2016-2017 budget, which would result in $1.2 billion less in general revenue for the program, according to analysis for the Austin-based Center for Public Policy Priorities.
"The proposal does not include enrollment growth costs (over $700 million), though instructions from the Governor and the Legislative Budget Board called for factoring in such growth," according to the CPPP. "The proposal contains a rider requiring an additional 1.5% in General Revenue cuts across the budget, with only K-12 formula funding (Foundation School Program) exempt. If distributed evenly across the budget, this would require another $400 million general revenue in Medicaid funding reductions."
Medicaid is key, according to CPPP Health and Wellness Program Director Anne Dunkelberg.
"The first thing we all need to be looking at when a bill is proposed is how much does it propose to cut Medicaid for Texas," she said.
Much of the uncertainty in Austin stems from Washington.
The Republican-controlled Congress and Republican President Donald Trump have proposed a replacement for the 2010 Affordable Care Act that would increase the ranks of the uninsured by 24 million Americans by 2026, according to an analysis by the Congressional Budget Office.
Texas has the highest percentage of uninsured residents of any state.
A report by Fitch Ratings found that state governments could face significant reductions in federal funding under the American Health Care Act.
"States that expanded Medicaid access to the newly eligible population under the Affordable Care Act (ACA) are particularly at risk," according to Fitch. "But even non-expansion states will face budgetary challenges, which will likely accelerate for all states over time."
Texas did not expand Medicaid to cover the working poor and operates under a Medicaid waiver.
"As Medicaid represents approximately one-third of state budgets, the fundamental changes proposed could challenge that flexibility," according to Fitch.
"Negative implications for entities that rely on state support, including school districts, cities, counties, and public higher education institutions could be more significant given their generally more constrained budgetary flexibility," the Fitch report said.
Texas Hospital Association president Ted Shaw said that his members are concerned about what happens to uncompensated care under the federal legislation.
"From a clinical and financial perspective, continuing to reduce the number of uninsured Texans is key for Texas hospitals," Shaw said. "With hospital uncompensated care costs already exceeding $7 billion a year, accruing any additional such costs would be unsustainable for the Texas hospital industry."
Under the state's 1115 Medicaid waiver, which expires this year, local governments in Texas gather funding from property tax revenue and other sources, which the federal government then supplements.
The combined revenue, of which roughly 60% comes from the federal government, is divided up into two categories: one reimbursing hospitals for uncompensated care and another paying for "innovative," cost-effective health care programs.
With all the uncertainty in Washington, the waiver's prospects are unclear.
While Texas lawmakers have said little about how the state should adjust to the new paradigm, some were outspoken in 2015 when President Obama was still in office.
Calling the Affordable Care Act a "broken but well intentioned program," state Sen. Charles Schwertner, R-Georgetown, chair of the Senate Health and Human Services Committee, said that health care as a budget item "continues to grow two-and-a-half times faster than any other aspect of state government."
