H.B. 3791: The “Texas Solution” to Medicaid Expansion

May 07, 2013

Following the Supreme Court’s ruling in National Federation of Independent Business v. Sebelius last June, states like Texas must decide whether or not to expand their broken, costly Medicaid program.  Americans for Prosperity-Texas strongly believes the Lone Star State should not expand and applauds efforts by state legislators and Governor Rick Perry to continue to resist the temptation to expand Medicaid.  .

However, AFP-TX opposes HB 3791, sponsored by Rep. John Zerwas, to seek a so-called “Texas Solution” to the Medicaid issue. We believe this proposal is simply Medicaid expansion by another name following Arkansas’ flawed expansion model.

According to Rep. Zerwas’ bill, Texas would pursue a block grant from the federal government for its Medicaid program.  While AFP-TX supports Texas requesting a block grant, we are concerned about other provisions of Rep. Zerwas’ bill and we have reservations regarding the reforms discussed under the block grant.

H.B. 3791 would expand Medicaid eligibility in Texas to include all individuals below 133% of the federal poverty level and provide a sliding-scale subsidy to those individuals to purchase private insurance from an “authorized health benefit plan insurer.” Texas currently provides Medicaid eligibility to parents below 25% of the federal poverty level (12% for jobless parents). According to analysis by the state of Texas, this population could exceed 1 million new enrollees.

Additionally, expansion via private insurance is actually a more expensive type of expansion than traditional Medicaid. According to the Congressional Budget Office, private insurance costs 50% more than Medicaid—largely due to the differences in provider reimbursements. Private insurance costs are also expected to increase dramatically in 2014 due to the Presidents’ health care law. A recent study by the Society of Actuaries estimates policies in the individual market in Texas will increase by 30%.

Finally, AFP-TX understands Rep. Zerwas’ desire to include cost-sharing requirements for such an expansion plan and supports this approach. However, the federal Department of Health and Human Services in its “Good Friday” memo states unequivocally that states can’t have cost-sharing above current Medicaid and if they did—because of the private insurance—the state would need to go back and pick up the costs.  HHS has basically stated that what Zerwas proposed won’t be approved.

AFP-TX applauds the legislature’s desire to confront the problems within our Medicaid system. However, we strongly urge the legislature to reject any attempts to expand Medicaid eligibility in the name of reform.  Reforming the Medicaid system must come before expanding the system.

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