New Medicaid rules may cost Texas billion, report says

WASHINGTON – Texas would lose more than $3.3 billion in Medicaid funding if Congress doesn't stop new rules designed to arrest the growth of federal health care spending, according to a congressional report issued Monday.

The new rules target hospitals and other organizations that use Medicaid to provide health care to the uninsured. In a letter to the House Committee on Oversight and Government Reform, the Texas Health and Human Services Commission estimated that the changes to hospital reimbursements would create a shortfall that could imperil health care for 185,000 patients.

Medicaid accounts for 26 percent of Texas' total budget, a figure that has been rising and prompted the Legislature to overhaul the program last year.

However, the new federal rules would take effect before the Legislature's changes – designed to make private insurance more affordable for poor Texans – are introduced.

"If you pull the rug out from under us while we make that transformation, we are never going to be able to get there," said John Hawkins, vice president of government relations for the Texas Hospital Association.

Based on input from state officials, the House committee's report estimated that the Bush administration's new rules would take away almost $50 billion from states. That's more than three times the administration's estimate.

For many states, the biggest change would be a restriction in Medicaid reimbursements to hospitals to only the cost of medical services. That same rule also would reduce the ability of private hospitals to claim additional federal funds for treating the uninsured.

Those changes alone would cost Texas $127 million this year and $2.2 billion over five years, according to the state health commission.

Texas lawmakers say those changes would shortchange Texas hospitals by not allowing them to charge for related costs such as physician services and health information technology.

Last year, a bipartisan group of House members from Texas, led by Michael Burgess of Lewisville and Gene Green of Houston, objected to those changes in letter to Health Secretary Michael O. Leavitt.

"We are convinced that the proposed regulation would have a substantial negative impact on Texas," they wrote.

The other new regulations include banning the use of Medicaid funds to pay for graduate medical education – a use that is popular in other states but hasn't been done in Texas – and at-home rehabilitative care for the elderly. Another rule would make it more difficult for Texas to use Medicaid funds in its child and adult protective services budgets.

Yet Mr. Burgess, a Republican, said the committee's report may overstate the impact on states. He said it was designed to "shock" House members and doesn't address the need to curb runaway health care costs.

"We're on the path with state Medicaid spending that, quite honestly, we just cannot keep up," said Mr. Burgess, who is a doctor. "We're going to have to be honest with each other and make some hard decisions."

Douglas Hawthorne, CEO of Texas Health Resources, the largest hospital system in North Texas, disagreed with the proposed changes, saying they would hamper his company's faith-based initiative to serve the poor and elderly.

"Ultimately, this impacts every person in North Texas because it affects the health of our communities," Mr. Hawthorne said.

"This should not be a partisan issue, and we are working closely with members of the North Texas congressional delegation on both sides of the aisle to ensure adequate Medicaid funding to provide care," he said.

Texas has one of the lowest rates in the nation of reimbursement for nursing homes – about $106 per day for each Medicaid resident.

The cost of care in 2007 for each patient was about $114, according to a September report prepared for the American Health Care Association.

Tim Graves, president of the Texas Health Care Association, which represents nursing homes, said the changes would especially pinch rural nursing homes, where there are fewer residents to keep a facility in business.

Many other nursing homes could lose money because the administration is also scrutinizing high Medicare payments for residents with the most needs. The Medicare funding helps to cover the shortfall in Medicaid reimbursements, Mr. Graves said.

Nursing homes would react by deferring maintenance and freezing wages, which would worsen staff turnover, he said.

"It's bad already, and you don't want to make it worse," he said.