Perry, Cornyn, and Cruz Reject Medicaid Expansion

Perry, Cornyn, and Cruz Reject Medicaid Expansion
April 1, 2013

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)

Texas has been a prominent target of the Obama administration when it comes to Medicaid expansion. Local Democrats in the state believe the Medicaid issue is one they can leverage for political benefit, and providers have been concerned about an influx of new and costly individuals who otherwise would be eligible for Medicaid under the expansion. But today Governor Rick Perry, joined by Senators John Cornyn and Ted Cruz, held fast in opposition to the expansion:

Republicans including U.S. Sens. Ted Cruz and John Cornyn, Gov. Rick Perry, Lt. Gov. David Dewhurst and members of a  conservative think tank gathered first, reaffirming their opposition to expanding Medicaid, a key tenet of “Obamacare” that is widely supported by Democrats. The expansion — and in particular, the flexibility the federal government has shown some Republican-led states in implementing it — has in recent months drawn the support of some fiscal conservatives reluctant to pass up billions of federal dollars and the opportunity to curb Texas' ranks of the uninsured. 

"For those states buying into this, they will come to rue the day," Cruz said.  "When the federal government retreats," Cornyn added, "the state's going to be on the hook." ... 

Republican lawmakers want the Obama administration to give Texas a block grant for Medicaid, which the state would use to subsidize private health savings accounts for low-income recipients. Medicaid recipients would either enroll in a Medicaid managed care plan or be given subsidies on a sliding scale based on their income. The state would also likely include “personal responsibility” measures, such as higher co-pays for patients who went to the emergency room for minor ailments.

Cornyn's column on the subject is here. Perry's official announcement is here. It's worth noting the additional recommendations from the Texas Public Policy Foundation and from James Capretta, which can be read here

To solve this problem, state funding for Medicaid should not be determined based on the amount of federal funding, nor should federal funding be dependent on state decisions regarding eligibility, benefits, and provider payments. Federal funding should be fixed at a certain amount and given to states in the form of a block grant. In return, states should be given the flexibility to implement more cost-efficient
programs while also being held accountable for outcomes, such as health status indicators of low-income residents and insurance coverage trends.

Converting Medicaid funding to a block grant program has clear advantages for states and the federal government alike. By funding state Medicaid programs with a block grant, the federal government would gain budgetary stability; funding would no longer be subject to state spending patterns and schemes to pull down ever-more federal funds. Likewise, states could rely on a fixed amount for Medicaid in their budgets and avoid chronic issues of underfunding and backfilling program budget shortfalls. Such an approach would incentivize states to control costs, as they would have clear budget limits and no unlimited entitlement to matching federal funds.

A block grant would also give states near total control over program design, eliminating the need for federal waivers and approval of state plan amendments. Authority to design and run the program would rest entirely with the states, as would political accountability for outcomes and performance. With greater control, states would have flexibility to innovate in their Medicaid program implementation and improve both quality and access to care for those who rely on it. Research by the Texas Public Policy Foundation has shown that Texas could provide higher quality care to a greater number of Medicaid recipients for only 95 percent of the aggregated amount of current funding, resulting in a budget surplus for both federal and state governments.

Beyond cost considerations, a block grant would allow Texas to pursue patient-centered, market-driven reforms that allow Medicaid enrollees to be active, decision-making participants in their own care.

Additional insurance reforms recommended by TPPF are available here. While Texas' challenges are unique, there are still lessons to be gained from the solutions they seek.

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)