DALLAS – A looming health-care funding crisis did not make Texas Gov. Greg Abbott's list of emergency measures for the 2017 Legislature or rate a mention in his Jan. 31 State of the State address.
Health care was not on Lt. Gov. Dan Patrick's list of 20 top legislative priorities, which includes trans-gender bathroom regulation and restrictions on collection of union dues.
The future of the Affordable Care Act and the Medicaid system is uncertain as Congress works to repeal the 2010 legislation. More immediately, Texas faces the expected lapse of an 1115 Waiver in December that could dramatically reduce Medicaid funding.
After eight years of fighting the Obama administration's Affordable Care Act and other regulations, Abbott and Patrick are still not declaring victory with the election of fellow Republican Donald Trump as president.
"For the last eight years, the previous presidential administration severely inhibited economic growth by enacting a cadre of heavy-handed regulations that dramatically increased the cost of doing business," Abbott told lawmakers in his written budget proposal.
"While the new administration has already taken proactive measures to roll back Obama-era regulations that interfered with economic growth, the State of Texas should take the lead and work to reign in the federal government so that the balance of power between the states and the federal government is restored and consistent with the intent of our nation's founders."
Except for increasing funding for Child Protective Services and passing new abortion restrictions, neither Abbott nor Patrick, the powerful presiding officer of the Texas Senate, has recommended any moves on health-care funding.
The Texas Medicaid program is the state government's second-largest funding area after education, according to state Comptroller Glenn Hegar. In fiscal 2015, Texas spent more than $30.3 billion in state and federal funds for Medicaid and the Children's Health Insurance Program, with Medicaid representing 97% of that amount.
According to Texas health experts, Medicaid will be underfunded by $1.2 billion in the state Senate's version of the budget, meaning services must be cut for some recipients if that amount is not provided.
Anne Dunkelberg, associate director of the Austin-based advocacy group Center for Public Policy Priorities, told state lawmakers that tapping the $10 billion rainy day fund, known officially as the economic stabilization fund, should be the solution to the funding shortfall.
"The Rainy Day Fund was created precisely to avoid cuts like these, and should be used this session to avoid drastic cuts to health care that Texans need," Dunkelberg said. "Because of tax cuts and diversions enacted in 2013 and 2015, the 2017 Legislature has $10 billion less in general revenue than we would otherwise have had. The Legislature could use $4.4 billion from the ESF and still not go below the $7.5 billion sufficient balance target adopted."
In his State of the State address, Abbott said he saw no need for "looting" the rainy day fund and stood firm on his plan to continue spending $800 million to support federal border enforcement with Texas Department of Public Safety troopers. Abbott and Patrick also called for more tax cuts.
Abbott advocates turning federal Medicaid funding into a block-grant system, an idea that has also been floated by Trump.
"Block grants should be used for the administration of state-managed Medicaid programs, and Congress should act to authorize this important reform," Abbott said in his budget statement. "The block grants should be designed in a way that protects states from cost growth due to population growth or the economy and should be accompanied by reforms that significantly reduce or eliminate federal requirements."
The federal government granted a 15-month extension for the 1115 Waiver on May 1, 2016, but that waiver expires at the end of this calendar year.
The waiver was a result of a standoff between Texas Republican leaders and the federal government over expansion of Medicaid under the ACA. Texas has refused to expand Medicaid coverage to the working poor, even though acceptance of the federal funds would ease the current budget strain in Texas.
Failure to extend the waiver "would have resulted in near catastrophic consequences for the state's most vulnerable populations," according to Ted Shaw, president of the Texas Hospital Association.
Health officials in the state are not looking for another extension.
"A fiscal cliff is fast approaching for Texas hospitals," John Hawkins, senior vice president of government affairs for the THA, told the Texas House Appropriations Subcommittee. "The state's Medicaid 1115 waiver will expire at the end of December 2017 and with it a significant amount of supplemental payments that are vital to hospitals' ability to provide the highest quality care to all Texans."
After December, uncompensated care pool payments could be reduced by as much as 61%, from $3.1 billion a year to $1.2 billion, and Delivery System Reform Incentive Program pool payments could be completely phased out from $3.1 billion a year to zero over four years, Hawkins said.
"The state needs to proactively solve its uncompensated care problem by increasing reimbursement rates and reducing the number of uninsured," said Hawkins. "Texas hospitals and, more importantly, our patients and communities cannot afford the consequences if the uncompensated care problem is not solved."
For local governments, particularly counties that operate safety-net hospitals, the scenario would add to fiscal pressures many are already facing.
Nearly 75% of Texas' local taxing entities soon could have to increase taxes on property owners by more than 8% to continue health care services in their communities, according to joint research by the Texas Association of Business, Texas Interfaith Center for Public Policy, Texas Association of Community Health Plans and Texas Hospital Association.
The study assumes that scheduled cuts to Medicaid disproportionate share hospital payments will continue as planned, taking effect in October 2017, and that uncompensated care payments through the Medicaid 1115 waiver will be reduced beginning January 2018. Federal Medicaid DSH payment reductions are estimated at $437 million and UC payment reductions at $900 million.
"Extending Texas' effective 1115 waiver and its uncompensated care funding beyond December 2017 is critical while Washington figures out how to move forward with plans to cap federal funding for Medicaid," Hawkins said.
"The impact of the loss of supplemental hospital payments would be dramatic, and in some cases catastrophic, for local communities," said Bill Allaway, the study's primary author. "Local governments are required by law to ensure the availability of critical health care services, but many would find it impossible to raise the funds to do so."
