Texas Academy of Family Physicians

by Jonathan Nelson

from July/August/September 2003 Texas Family Physician

When the experts begin to assess the damage left by the storm that was the 78th Texas Legislature, they’ll probably find the worst of it hit the state’s health care safety net. Much like Freddy Kruger sliced his way into the dreams of apathetic youths, legislators brought their blades to bear on Texas’ health care safety net with cuts to Medicaid, the Children’s Health Insurance Program and many other initiatives. Even with a $10 billion hole to fill, Gov. Rick Perry joined a majority of lawmakers who had pledged not to raise taxes and passed a budget that elevates the number of uninsured Texans and shifts more of the state’s health care costs to county taxpayers.

Texas isn’t alone in its revenue crisis. In February, the National Governors Association said the country’s states were facing a combined $80 billion deficit. California’s deficit could be as much as $38 billion and newspapers from coast to coast have been vetting the Medicaid conundrum.

According to Quorum Report’s Harvey Kronberg, it was no mistake that the budget axe fell hard on health care spending in Texas. He says some lawmakers used the budget shortfall as “a vehicle for shrinking government,” adding that “shrinking government” translates to reducing state dollars to public education and health care services. “Since they were fairly constrained on what they could do with public education, that meant the bulk of shrinking government had to come from safety-net-related stuff.”

The end result was a budget that cut almost 170,000 kids from the Children’s Health Insurance Program and eliminated mental health benefits, durable medical equipment coverage, dental coverage, rehabilitative services, home health services and hospice care from the program. Texas leads the nation in uninsured children and this only makes it worse. The budget also removed month-to-month Medicaid eligibility for almost 10,000 medically needy adults, denied prenatal care to 8,300 pregnant women per month and rolled back many of the Medicaid and CHIP enrollment simplification measures put in place during the last legislative session.

Not counting the projected savings from reducing the growth in Medicaid and CHIP, lawmakers kept the state from spending $950,400,000 on these programs. But by not spending that money, Texas won’t receive more than $1.6 billion in federal matching funds. That brings the total amount of money lost to the Texas Medicaid and CHIP programs to $2,551,962,907, according to the Center for Public Policy Priorities.

Health care providers didn’t escape the blade. State Medicaid payments to physicians and hospitals were cut by 5 percent despite warnings that the cut would further reduce the number of physicians willing to accept new Medicaid patients. Other cuts like those to graduate medical education and physician preceptorship programs could put substantial strain on physician education.

“It’s a really penny-wise and pound-foolish decision,” says Anne Dunkelberg, senior policy analyst for the Center for Public Policy Priorities, about the cuts to prenatal and postnatal care for low-income pregnant women. The Legislature lowered the eligibility threshold for that program from 185 percent of the federal poverty level to 158 percent. The medical community has known for years that the provision of prenatal care can reduce future health costs by a 3 to 1 ratio or more, Dunkelberg says. “To make it harder for these women to get prenatal care is probably a false savings at best.”

Parents enrolling their kids in CHIP will now have to wait 90 days before the coverage kicks in, a move some say is designed to make the program less attractive. Dunkelberg says this will give the state a one-time savings, but it could put families in a tough position. “Some parents will be racking up bills in financial hardship during that time and others will just be deferring care,” she says. In-home care and other services for the elderly, disabled and mentally retarded have also been reduced, affecting thousands of Texans using those programs.

Aside from direct program cuts, legislators used some funny math to coax the budget into balance. By changing enrollment rules for children’s Medicaid, they hoped to slow the growth of the program dramatically. According to a CPPP report, in February the best estimates showed the program would grow by 17.3 percent in 2004 and 8.4 percent in 2005. Lawmakers expect the changes to slow growth to 2 percent and 1 percent, respectively.

Budget writers saved $524 million by simply lowering the estimated caseloads for Medicaid over the biennium, meaning they didn’t fund the best projections for the program, says Rep. Craig Eiland, (D-Galveston). “They changed the caseload assumptions to meet their funding desires.” Should the caseloads outgrow the Legislature’s estimate, lawmakers would be forced to pass a supplemental appropriation in the next session, and Eiland says that will probably occur. “I don’t think anybody is realistically thinking otherwise.”

Eiland says the Medicaid provider fee cut is another damaging blow. “We are already having difficulties with physicians participating in the Medicaid program and now we are going to cut their reimbursement rates even further, which I think may give us an availability problem,” he says. “It certainly isn’t going to increase physician participation.”

A TAFP survey conducted during the session comes to the same conclusion. While 88 percent of family physicians surveyed said they currently participate in Medicaid, only 58 percent said they would continue if rates were cut. Only 32 percent of those currently participating said they would continue to accept new Medicaid patients if the cut was passed.

“These Medicaid cuts will force a mass exodus from the program leaving more and more patients stranded without access to health care and with limited physician choice,” says TAFP President Robert Hogue, M.D. “As physicians are forced to drop out of the Medicaid program, patients will receive care in the emergency room, driving up the cost of health care to all Texans.”

Another disturbing trend highlighted by the survey involved referrals. A whopping 84 percent of respondents said they have trouble finding specialists who will accept Medicaid referrals.

Of course many doctors will go on accepting Medicaid patients even with the cuts and many will continue to care for those patients who will be dropped from the program. Eiland says physicians should compare whatever savings they may get on their liability premiums with their losses from the reimbursement rate cut and the cost of seeing patients dropped from Medicaid and CHIP. “I think it’s going to be at best a wash for many physicians,” he says.

Apart from Medicaid, a number of programs at the Texas Department of Health will receive reduced or unchanged funding. Among them is the County Indigent Health Care program, through which counties get support when they provide care for a high level of indigent care. According to CPPP, the program has been funded at $11.2 million for the biennium. The trouble is it paid out $7.2 million in 2002. With unemployment on the rise, the economy in flux and more Texans uninsured, the program will likely run out of money before the end of the next biennium.

“Not funding that program is a pure cost shift to the counties,” says Don Gilbert, former Texas Commissioner of Health and Human Services, who served as a legislative consultant for TMA this session. “All of these cuts I think at some level can be described as shifting the burden of cost somewhere else.”

For Medicaid, the federal government covers 60 percent of costs, leaving 40 percent to the state. CHIP has an even better match rate. For every 28 cents the state pays, the feds pitch in 72 cents. Gilbert says this only worsens the cost shift. “They may save that 28 cents on the dollar that they’re now paying, but assuming that those children are still going to need health care, a full dollar of that goes right to the local providers. You lost the federal share, you lost the state participation and the health care is still going to cost.”

Aside from the damage done to the state’s health care safety net, these cuts are detrimental to the state’s economy. That is one of the major points raised by respected economist Ray Perryman in a study he released in April. Among his findings are that for every dollar cut in state spending on Medicaid and CHIP, state tax revenues drop by 47 cents, local taxes rise by 51 cents and retail sales drop by $1.77.

Gilbert praises lawmakers for initiating a preferred drug list for Medicaid. As long as it is managed appropriately and decisions on which drugs are included are based on efficacy, he believes the list is “good economics, it’s good medicine and it ought to be supported.”

Gilbert also praises lawmakers for their work on balancing the budget. Given the limited revenue they had to work with and the fiscal situation with which almost every state is wrestling, he says he has great respect for their effort. Still, he questions the funding levels for health and human services. “It seems to me the question is a matter of priorities. I think those who take a look at the fact that we lead the nation in uninsured children and have made that worse by 170,000 would have to wonder about whether the health of children is indeed the priority that it’s claimed to be,” Gilbert says.

Rep. Jaime Capelo, (D-Corpus Christi) agrees. He says a group of lawmakers had a goal of reducing the Medicaid and CHIP rolls “based on the pure philosophy that the government should not provide any assistance whatsoever when it comes to health care.”

During the budget debate on the House floor, Capelo proposed an amendment to fund CHIP with its full range of benefits for children up to age 12 by moving $67,500,000 from other programs. In identifying which funds to move, Capelo says he took care to avoid important special interests, finding expenses that had no champions on the floor, like the $26 million slated for fingerprint imaging to stop food stamp fraud and $7.4 million for the Aircraft Pooling Board Building and Procurement Commission. “Certainly no one stood up to argue [the expenses] were critical to the future of Texas as obviously providing health care would be to our children.” The amendment did not pass. “I was very disappointed, quite honestly,” Capelo says.

What worries Capelo is that health care cuts not only affect those on Medicaid and CHIP, but it might lead to the dismantling of the state’s health care infrastructure. He says the 44-percent reduction in funding to the Texas Higher Education Coordinating Board’s medical and graduate medical education programs are a perfect example of this possibility. “Here’s a cut in a very specific situation that really is not a whole lot of money for the state in the budget,” he says, but since these programs make up the pipeline of new doctors into many underserved regions, the loss could be devastating. “It won’t matter who’s on the rolls — who’s on Medicaid, who’s on CHIP — because there’s not going to be anyone around to take care of them in many areas.”

Roland Goertz, M.D., is chair of the Family Practice Advisory Committee for the Higher Education Coordinating Board, which oversees and distributes state funds to family practice and primary care residency programs as well as the Statewide Family Practice Preceptorship Program. He says the state cuts are a double hit to residency programs because they have been trying to make up for federal funding reductions in recent years and many are already on the brink. “I am concerned that we will lose programs,” Goertz says.

Programs in trouble have been turning to their supporting hospitals for more funds. Hospitals have been willing to help in many cases because they understand the importance of medical education, Goertz says. “I don’t think that’s going to be likely this time around because hospitals are under their own pressure.”

So what choice do programs have? Goertz says they can cut pay, see more patients for less money and add more clinic hours to resident schedules. “Then you run the risk of unbalancing the educational model,” he says. Residents choose programs based on the quality of education they are likely to receive and Goertz says the level of quality depends on a balance of classroom hours versus clinic hours. “At some point in time, you cannot continue to produce a good product with ever-dwindling resources.”

The other choice residencies have is to reduce the number of residents and that’s what Goertz says is likely to happen. “Either you cut resident slots or the ultimate – you close the doors. I hope that doesn’t happen, but I definitely think there are going to be fewer residents because I don’t think we’re going to be able to fund the current numbers that we have been training.”

Is all of this nightmarish enough for you? It could have been worse. Early in the session state leaders asked all agencies to consider a 12.5-percent, across-the-board cut. When Health and Human Services Commissioner Albert Hawkins told lawmakers what that would mean for his agency, jaws dropped statewide. Hawkins said the cuts would eliminate care for 750,000 poor people. 17,000 pregnant women and 19,000 nursing home patients would be dropped from Medicaid and physicians would be slapped with a 33-percent reduction in Medicaid reimbursement.

“TAFP along with the Primary Care Coalition, the Border Health Caucus, and the TMA went to work right away to try and restore funding to those programs,” says Tom Banning, TAFP’s director of legislative affairs. “Given the new leadership and their insistence on passing no new taxes, our backs were against the wall.”

Letters from the Primary Care Coalition, a group comprised of Texas Pediatric Society, the Texas Academy of Internal Medicine Services and TAFP, pleaded with the governor and legislators to reconsider reductions in health care spending. They pointed to the Perryman report and to the burden such reductions would place on counties. Doctors wrote letters to editors of the state’s newspapers, finally begging legislators to consider a $1-per-pack cigarette tax to restore funding to Medicaid and CHIP, but nothing would change the “no new taxes” mantra.

While the state’s lawmakers and leadership argued that the state simply had to tighten its belt, doctors representing the Border Health Caucus penned an editorial in the Houston Chronicle that said the belt being tightened was looped around the necks of impoverished Texans. Other efforts focused on restoring funds for residency programs and the Statewide Family Practice Preceptorship Program, which had 50 percent of its funding yanked in the final analysis.

In the end, Russell Thomas, Jr., D.O., chair of TAFP’s Commission on Legislative and Public Affairs, says TAFP had a much better session than members could have expected. “We got through this session much better than we thought we would, but by the same token, the elephant is still under the table,” he says. The next legislative session promises to feature many of the same fiscal battles fought this time around. If medical liability rates don’t come down, insurance reform will probably be priority No. 1, and that could get ugly. Plus, the State Board of Medical Examiners will sunset next session.

“We’ve got a lot of big deal issues so we can’t afford to sit back and say ‘boy, that wasn’t nearly as bad as we thought,’” Thomas says. “I think perhaps we used up all of our get-out-of-jail cards this time.”

And the biggest “elephant under the table” is already being whispered about among the lobby and power brokers: Tax reform. Coalitions are forming, and quiet discussions ensuing among a range of capital- and labor-intensive industry representatives on how to reallocate Texas’ dated and complex tax systems, a debate visited at least three times in the last decade. It invariably involves proposed trade-offs between property taxes, the state franchise tax and other revenue sources.

By the time this issue of TFP hits your desk, the Legislature will be in the thick of a special session with the prospects of another to come. Then there’s the election cycle, interim studies and before you know it, the gavel will fall at the opening of another legislative session. The two-year cycle starts now and participation in the process is one of the best ways family doctors can make sure the practice of medicine can weather the storms to come.

Like Robert Earl says, “The road goes on forever, and the party never ends.”