Don't mess with Medicaid expansion? A lesson from Texas

*100B in federal money unclaimed
*$5.5B in hospital costs
*Higher taxes, premiums

Texas is a huge state. It's also leaving a huge amount of federal money on the table—and not insuring more than 1 million people—because of its opposition to Obamacare.

The decision by Texas to reject expansion of Medicaid, the government health-coverage program for the poor, will prevent the state from receiving an estimated $100 billion in federal cash over a decade, at the same time its hospitals are eating $5.5 billion in annual costs for treating uninsured people, a new National Public Radio report details. (Tweet This)

Those uncompensated costs in turn are being covered by taxes and insurance premiums paid by the state's businesses and residents, who are also footing the bill for expanding Medicaid in 29 states and the District of Columbia that agreed to accept federal funds to offer coverage to nearly all poor adults. The Medicaid expansion states, as a rule, have seen a marked decline in their uninsured rates and the amount of costs their hospitals incur in caring for people without insurance.

But Parkland Memorial Hospital in Dallas still has $765 million in uncompensated care costs annually from treating the uninsured, NPR noted. In Dallas County, more than half of property owners' tax bills "goes to reimburse Parkland Hospital" for those uncompensated costs, the report said.

"A huge chunk" of Parkland's uncompensated care costs "could be paid for by about $580 million a year that would be brought in by the Medicaid expansion monies," said Dallas County Judge Clay Jenkins, who oversees the hospital.

Former Texas Gov. Rick Perry (L) leads a press conference with UT Southwestern Medical Center President Daniel Podolsky.
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Former Texas Gov. Rick Perry (L) leads a press conference with UT Southwestern Medical Center President Daniel Podolsky.

The NPR report noted that the lack of Medicaid expansion in Texas "is driving many in the state's business community bonkers."

"It's our money that we're sending to Washington, D.C., and we aren't getting it back," said Bill Hammond, CEO of the Texas Association of Business. "We pay for it with corporate income taxes, we pay for it with our personal income tax and we pay for it in the fact that our premiums are higher than they would be if everyone was insured."

Texas has the second-highest insurance premiums in the nation, after Florida, another non-Medicaid expansion state. And Texas has the third-highest property taxes in the U.S.

Also galling to the business community is research showing that for every $1 the state paid toward Medicaid expansion, it would earn back $1.30 in new economic activity, which would include the creation of hundreds of thousands of jobs.

"You look at the numbers, and you say, this is a no-brainer," said Ray Perryman, a leading Texas economist, in an interview with NPR.

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But no change is likely in the near future as the Texas Legislature isn't even debating the merits of expanding Medicaid.

Medicaid expansion is a key component of President Barack Obama's Affordable Care Act and its goal of providing coverage to uninsured Americans. An estimated quarter of all low-income adults without health insurance in the U.S. live in Texas, more than 1 million people.

Traditional Medicaid is jointly run by the federal government and individual states, and enrollees do not pay premiums for their health coverage. States have the power to set restrictions on who can receive coverage, whose costs are split, more or less evenly, with the federal government.

In Texas, no childless adult can obtain Medicaid coverage. And adults with children who earn above 19 percent of the federal poverty level, or about $3,800 for a family of three, are also barred from coverage in Texas.

The ACA as written called for every state to expand their Medicaid eligibility standards to include nearly all adults, childless or otherwise, who earn below 138 percent of the poverty level, or $16,105 per individual. In exchange, the federal government agreed to foot a much bigger share of the costs for the newly eligible: 100 percent for the first three years, and then declining gradually to no less than 90 percent in future years.

But a 2012 Supreme Court decision said that the federal government could not force states to expand their Medicaid programs. Many Southern and Midwestern states, led by Republicans opposed to Obamacare, rejected expansion.

Among them was Texas, whose then-Gov. Rick Perry, said the state would not be involved in "something as foolish as Medicaid expansion."

In 2013, Perry again restated his opposition, saying, "Texas will not be held hostage by the Obama administration's attempt to force us into this fool's errand of adding more than a million Texans into this broken system."

That statement by Perry, who is expected to seek the Republican nomination for president, echoes other Obamacare opponents who say that Medicaid is a failed system which will not be improved by adding more people.

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Opponents also say the federal government cannot be trusted to honor its promise of shouldering no less than 90 percent of the expansion coverage costs indefinitely; if the federal government reneged on that promise, it would leave states responsible for covering a bigger share of the expansion costs.

Josh Archambault, an Obamacare critic and senior fellow with the Foundation for Government Accountability, earlier this year argued on Forbes.com that Congress should repeal expansion.

"The vast majority of the able-bodied adults covered under Obamacare expansion have never been considered among the most vulnerable, have no disabilities keeping them from work, have no dependent children and don't typically qualify for other types of welfare, including cash assistance and long-term food stamps," Archambault wrote. "Why should federal taxpayers pay states nearly twice as much to cover able-bodied adults as they pay to cover the truly needy?"

But some Republican governors, notably Chris Christie in New Jersey, Mike Pence in Indiana, John Kasich of Ohio and former Gov. Tom Corbett in Pennsylvania, agreed to accept Medicaid expansion in no small part due to economic considerations that overcame their political qualms with the Democrat Obama.

But Texas and Florida remain the biggest holdouts. In Florida, an estimated 764,000 poor adults who would have been eligible for Medicaid if the state expanded coverage also do not make enough money to qualify for federal subsidies to buy private coverage on the Obamacare insurance marketplace.

Those subsidies are set aside for people who earn between one and four times the poverty level. Medicaid expansion was supposed to cover people who earn below 138 percent of poverty, but the Supreme Court ruling leaving expansion up to the states created a perverse situation in some states were very poor adults cannot get Medicaid and do not earn enough money to qualify for subsidies for private insurance.

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Florida Gov. Rick Scott is opposed to expanding Medicaid. But the state Senate, and business community is currently pushing for expansion now that the federal government is saying it will dramatically reduce the amount of money it gives the state to offset the costs of hospitals caring for uninsured patients.

Listen to the NPR report here.