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TexHealth: The Lone Star State's New Medicaid?

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Devouring 19 percent of the state’s annual budget and growing at a rate of 9 percent each year, the cost of Medicaid is rapidly becoming unsustainable in Texas. According to a report released in December 2010 by the Texas Department of Insurance, 24 percent of Texans receive publicly funded care, and just over half of that group is on Medicaid.

State costs have skyrocketed over the past two years as federal matching funds rose to meet the needs of larger enrollments that accompanied the economic downturn. Now, in the face of a $27 billion shortfall, Texas legislators must make some tough budget cuts.

GOP leaders have proposed curtailing Medicaid costs by 29 percent, a task that has proven to be even more difficult than it first seemed.

The trouble with cutting select medical services is that the decisions that save money in the short term can lead to much greater costs down the road. A person who is unable to get kidney dialysis, for example, may ultimately need extended hospital treatment. Likewise, cutting costly hospice services now means that more people will need hospital care at the end of their lives. All of these emergency treatments can result in larger Medicaid bills.

A possible solution
As legislators battle over these decisions, an Austin think tank has put forth a new idea: scrapping the Medicaid system entirely. In a proposal unveiled on Feb. 24, the Texas Public Policy Foundation suggested a replacement plan called TexHealth, a defined contribution program that, the foundation says, will expand care and lower costs.

“By switching to a premium subsidy, TexHealth will provide better access to health care services and be available to potentially 4 million more individuals than currently served,” TPPF Executive Director Arlene Wohlgemuth said. “Not only can TexHealth provide better health care, but we can do it at a lower cost to taxpayers.”

The plan would provide subsidies to individuals to purchase health insurance in the private market, adjusting the amount of the funding based on the individual’s income. This sliding scale is designed to help enrollees gradually move off publicly funded care. Whereas Medicaid provides for 100 percent of coverage for all qualifying participants, TexHealth would only partially cover care for enrollees above 50 percent of the federal poverty line. Employees making between 150 and 174 percent of the FPL, for example, would receive a subsidy of just 10 percent.

Like Medicaid, TexHealth would also provide for long term care needs: The plan states that current enrollees in Medicaid’s Long-Term Services and Support would be grandfathered into a revised LTSS program; new enrollees would be required to meet a 138 percent FPL income and assets test. In contrast, Medicaid currently requires only that participants are at or below 220 percent of the federal poverty line.

The TexHealth advisor?
Under a program like TexHealth, insurers would still have a good deal of autonomy. At the heart of the proposal is a free market where any insurer who meets the current state requirements can compete for the business of enrollees. This means that private insurers would still have the opportunity to offer customized coverage plans, as well as to set deductible, copayment, and co-insurance rates to the same extent they do for the non-Medicaid population.

But what about for agents? The TexHealth plan references “counselors” who will advise consumers on health plan selection. Arguably – and it seems exceedingly one-sided – advisors are best qualified to fill these roles. But as is characteristic with health reform, it’s all up for debate. Professional certainty is a relic of the past.

Of course, TexHealth is proposition, not policy. It will continue to be debated, and the state may take a very different path. Yet, at a time when all mention of health reform has started to sound monotonous, it is a reminder that all of these policy decisions really matter. In Texas, as throughout the country, staying educated about every consumer option is the agent’s lifeline.

Nichole Morford is the managing editor of the Agent’s Sales Journal. She can be reached at [email protected].