Medicaid is the safety net health insurance provider for children, the disabled and the very poor. It is jointly funded by the federal government and the state, which administers the program with oversight from the Centers for Medicare & Medicaid Services (CMS), part of the U.S. Department of Health and Human Services (HHS).
Both Medicaid and Medicare — the federally run health provider for the elderly — were major provisions of the Social Security Act of 1965, signed into law by President Lyndon B. Johnson. Although Medicaid and Medicare serve different populations, there is some overlap between the two programs in both coverage and administration.
The scope of the combined programs is huge: Together they provide health insurance for one in four Americans. In 2011, Medicare, Medicaid and the Children’s Health Insurance Program (CHIP), the third major component in U.S. health coverage, accounted for $769 billion, or 21 percent, of the federal budget — exceeding both Social Security and defense spending.
By law, individual states must designate an administrator of these jointly-funded health programs mandated by the federal government. In Texas, the job falls to the Health and Human Services Commission (HHSC), currently headed by Tom Suehs, who was appointed to the position by Gov. Rick Perry in 2009.
Texas began participating in Medicaid in 1967. Originally, eligibility was restricted to people receiving cash assistance from the government, such as welfare or Social Security checks. Over time, the program has expanded in size, scope and complexity. Congress’ expansion of eligible participants in the 1980s and early 1990s resulted in a dramatic increase in the Texas Medicaid population. By the early 2000s, expanding definitions of who qualified and changes in the rules involving coverage of children led to another steady rise in enrollment, which continues to this day. By last count, 3.3 million people in Texas were enrolled — roughly twice as many as in 2000.
Medicaid eligibility is generally tied to income. People enrolled in either TANF — Temporary Assistance for Needy Families — or Supplemental Security Income (SSI) — designed for low-income people 65 or older and persons with disabilities — automatically qualify.
Families and children make up 71 percent, or more than 2 million, of Texas Medicaid clients receiving full benefits. The majority of foster children automatically qualify; so do infants of Medicaid-eligible mothers, for their first year of life. Non-disabled, non-pregnant adults younger than 65 must be parents or related caretakers of children whose income is below TANF levels, which are set by the state. Pregnant women and children younger than 19 whose incomes exceed guidelines may qualify for limited Medicaid benefits.
While children make up the largest percentage of clients, 58 percent of Medicaid spending is on the disabled. Additionally, long-term care for this population makes up a large part of Texas Medicaid expenses — more than a quarter of the entire budget — and is by far the major source of income for the facilities that provide such care.
The Children’s Health Insurance Program (CHIP) is designed to cover children whose parents or guardians make too much money to qualify for Medicaid but not enough to afford insurance. In some states, CHIP functions as an extension of Medicaid; that was initially the case in Texas, but the state gradually separated it into a separate entity. Both are administered by HHSC.
Medicaid and the Texas Budget
Medicaid accounts for more than 20 percent of the state’s total budget — $24.5 billion, or almost 25 percent, in fiscal year 2009. And while Texas spends less per Medicaid client than all but 10 states, it falls in the middle of the pack nationally by extending coverage to 18 percent of its population (compared with 30 percent in California, 27 percent in New York and 20 percent nationally). That kind of money draws a great deal of attention, from politicians, activists, medical groups, hospitals and inevitably, people out to commit fraud.
For elected and appointed officials scrambling for dollars in a budget crunch, looking for savings in how the state administers Medicaid is irresistible; relatively small changes can wipe millions of dollars from the bottom line.
In 2011, facing a huge budget shortfall, lawmakers had to get creative to balance the budget as required by law. When deep cuts to education, state services and employee ranks weren’t enough, lawmakers used an accounting trick to find billions more dollars for the balance sheet. They left out Medicaid financing for 5 months of the two-year budget cycle, essentially leaving an additional $4.8 billion for the next set of lawmakers to fund.
Care Providers and Medicaid
Medicaid reimbursement — how hospitals, doctors and other health care providers get paid for treating Medicaid patients — is incredibly complex, and changes to how it is calculated can offer the state tremendous savings, or leave providers in a pinch. Lower rates to physicians can mean fewer doctors willing to take Medicaid patients.
For years, Medicaid in major metropolitan areas of Texas has been operated by private companies under a system known as managed care. Medicaid clients choose their provider from a state-approved list, and the provider receives a flat rate per patient. In 2011, lawmakers expanded the program to include more regions. They also wrapped in prescription drugs, yielding biennial savings of about $100 million, but worrying independent pharmacists who are afraid that lower prices might run them out of business.
Medicaid, a vast and complicated bureaucracy, is administered differently in each of the 50 states. With so many different rules and so much money at play, some find the urge to defraud the system irresistible. In February 2012, for example, Dr. Jacques Roy and several associates in North Texas were indicted on federal charges of bilking Texas Medicaid and Medicare of $375 million over a five-year period. In May 2012, Texas Attorney General Greg Abbott announced a $20 million settlement with giant pharmaceutical firm Abbott Laboratories after the firm was accused of promoting an anti-epilepsy drug for unapproved uses. About $14 million of the settlement went to the state of Texas for improper Medicaid payments.
Federal Health Reform and Medicaid
Currently, the biggest Medicaid debate revolves around the Affordable Care Act (ACA), almost universally referred to as “Obamacare.” Praised by some, reviled by others, one thing’s for sure: if it is fully implemented (an open question even after the U.S. Supreme Court affirmed it, with opponents vowing to repeal it at the earliest opportunity), it will represent a massive change to enrollment in Texas Medicaid.
Across broad categories of eligibility, Texas’ Medicaid caseload wouldn’t just expand, it would explode. The principal standard of determining eligibility for Medicaid is the Federal Poverty Line (FPL). Under the new law, in every category — from pregnant mothers to infant children right up to long-term care for low-income and disabled people— more people will be eligible for coverage. Meanwhile, new categories of coverage would be added, including: Parents and caretakers between 12 percent and 133 percent of the FPL; former foster care youths through age 25; children ages 6 to 18 between 100 percent and 133 percent of the FPL; and childless adults up to 133 percent of the FPL.
Altogether, the Medicaid-eligible population in Texas is projected to increase by about 1.2 million people in 2014 if the ACA stays on the books.
As it’s structured, the federal government would carry the entire financial burden at first, then gradually hand some responsibility back to the states — a responsibility that could eventually cost Texas hundreds of millions of extra dollars a year.
Medicaid Women's Health Program
The Medicaid Women's Health Program (WHP), launched in January 2007, offers family planning and health screening services for poor women. The federal government has traditionally paid 90 percent of the cost for this state-federal program, which currently serves 130,000 women and has been widely lauded for preventing unplanned pregnancies and costly Medicaid-funded births.
The program is in the process of becoming purely state-run; after Republican lawmakers and Gov. Rick Perry announced they would begin enforcing a long-ignored rule banning Planned Parenthood and other “affiliates” of abortion providers from the program, the Obama administration announced it was turning off the funding tap.
Meanwhile, competing lawsuits — one filed by the state against the federal government, the other filed by Planned Parenthood clinics against the state — are working their way through the courts.
Future of Texas Medicaid
Texas weathered the recession better than most states, but it faces enduring problems that make it more vulnerable to rapidly rising health care costs. It is near the bottom or dead last in many categories that contribute to concerns about the state’s ability to meet its obligations to Medicaid: It ranks 50th in percent of the population that is insured, 50th in the percentage of women who receive prenatal care, and 50th in several measures of air and water quality, according to the Texas Legislative Study Group. And the state has some of the highest rates of hunger, poverty and teen pregnancy in the country.
While the Affordable Care Act broadly represents Democrats’ vision for the future of Medicaid, Republicans in Texas — who enjoyed a historic supermajority in the state House and a near-supermajority in the Senate in the last session — are taking a different approach. They’re backing measures that would allow Texas to partner with other states to wrest control of Medicaid and Medicare from the federal government, or allow Texas to administer Medicaid under a block grant, spending the money as it sees fit. Opponents argue that Texas, known for its lean budgets, would drastically underfund Medicaid if left to its own devices. Conservatives insist that the state knows better than the feds how to take care of its people and that it will spend the money wisely, to maximum effect.