New Federal Rule Highlights Importance of Accepting Federal Funds for a “Texas Solution”

The Associated Press reported today that Texas hospitals could lose $56 million in 2014 in special Medicaid payments to hospitals that serve lots of people on Medicaid and the uninsured (so-called DSH or “disproportionate share hospital” payments). A newly proposed federal rule lays out a formula for how the federal budget will reduce those payments over time, as the number of uninsured starts to drop in 2014 with new coverage under the Affordable Care Act. According to the federal guidance, the numbers published today are just for illustration, but they are said to be in the ballpark of what states can expect.

The most staggering thing about the cuts to our state’s safety net hospitals is that Texas can choose right now to eliminate those cuts with simple leadership. By moving ahead with an alternative to Medicaid expansion that relies on private health insurance, or a “Texas Solution” as it has been dubbed, instead of being $56 million down in 2014, our state could be gaining an estimated $2.4 billion in new federal Medicaid spending (according to Texas Medicaid officials). Based on historical Texas Medicaid spending, about 40%–or $990 million of that new 2014 Medicaid spending–would go to hospitals.

If you have your calculator handy, yes, that is more than 17 times the projected cut in DSH payments. This is not an accident! The Affordable Care Act was designed to reduce the DSH payments for care for the poor, because Medicaid would ensure that hospitals could now get paid for care to working poor adults, most of whom are currently excluded from Texas Medicaid under state law.

Of course, if Texas fails to accept the funding already designated in the federal budget to cover working poor parents and other adults, 1.1 million Texans will also remain uninsured. Many will seek care in the very same hospitals that now rely on DSH payments to help pay for that care. The cost of continuing to provide care for the uninsured, combined with cuts in DSH payments, will threaten the economic security of local hospitals throughout the state.

This is why 20 Texas Chambers of Commerce, the Texas Conference of Urban Counties, and the Texas Association of Business all supported a Texas solution to cover the poorest uninsured Texans and bring home billions in federal income tax dollars. The Texas Solution has been called “Smart, Affordable and Fair” by former Deputy Comptroller Billy Hamilton and the “Only One Rational Choice” by economist Ray Perryman.

This is a hit Texas hospitals simply don’t have to take. Yet another reason to call on Texas leaders to finish the job and bring home coverage for the poorest of Texas’ uninsured in 2014.

Written by: Anne Dunkelberg, Center for Public Policy Priorities

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