AUSTIN – The Texas Public Policy Foundation unveiled a proposal that would replace the federal Medicaid program with a state-driven TexHealth program, dramatically transforming the way medical care and services are provided to low-income individuals.

“The federal Medicaid program is structurally designed to make states spend money in ineffective ways,” said TPPF Executive Director Arlene Wohlgemuth. “However, Texas now has the opportunity to reform our state’s Medicaid program so that it better meets the needs of both the individuals it serves and the taxpayers who support it.”

The TexHealth proposal was contained in the Foundation’s new report, “Medicaid Reform: Constructive Alternatives to a Failed Program,” which was released at a 9:45 a.m. press conference at the Texas State Capitol. Lt. Gov. David Dewhurst and Texas House Public Health Chair Lois Kolkhorst also spoke at the press conference.

“This report marks the first time that anyone has laid out a full alternative to Medicaid that is not a single-payer model,” Wohlgemuth said. “A system where government makes all the decisions and holds all the authority is not the Texas way of doing things.”

Medicaid is a federal-state partnership to provide health care to two distinct populations: low-income individuals who are predominantly women and children; and aged, blind, and disabled individuals who require long-term care. While the federal government provides a majority of the funding for Medicaid in Texas, federal program rules are co-opting a growing share of Texas’ general revenue funds and crowding out other state functions such as education and public safety.

“This session, we are seeing the tug of war between education and Medicaid for limited state funds,” Wohlgemuth said. “If we do not reform Medicaid this session, it will require between $10 billion and $14 billion in additional state revenues two years from now.”

The Foundation’s TexHealth proposal would reform Medicaid along free market principles, converting the program in Texas from a defined benefit to a defined contribution for the purchase of health insurance. TexHealth would subsidize the costs of the insurance premium in the private market, providing support for individuals on a sliding scale tied to the individual’s income and assets. The state’s role would shift from that of a benefit provider to one of determining eligibility through a simplified application and then allowing individuals to select an insurance provider.

“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,” Wohlgemuth said. “Not only can TexHealth provide better health care, but we can do it at a lower cost to taxpayers.”

For long-term care benefits, all current recipients of long-term services and support would be grandfathered at the current eligibility level. However, the TexHealth model would apply a more stringent income and assets test to subsequent enrollees, as well as close a legal loophole that allows wealthier individuals to shift assets in order to be eligible for the low-income safety net.

“We want to make sure that our aged or disabled Texans know that the services they currently receive will continue uninterrupted,” Wohlgemuth said.

The report outlines three options through which Texas can gain control of its federal Medicaid funds and effect the transition to TexHealth:

– An interstate compact. The ideal method of financing available to Texas involves entering into an interstate compact stipulating receipt of the aggregated amount of funding that Texas received in 2010 from the federal government with allowance in the formula for inflation and population changes. Because the outlined plan would spend money more efficiently and provide better service to low-income people, Texas could go a step further and take only 95 percent of the aggregated amount of funding. The proposed plan will be budget-neutral but more likely budget-positive for both Texas and the federal government.

– Placement of Texas’ Medicaid population into a health insurance exchange. If Texas no longer operates a Medicaid program, the federal government has obligated itself to fully fund insurance for those whose incomes are below the federal poverty limit. Texas would then use the general revenue funds it had previously used for Medicaid to provide wrap-around benefits for long-term care to the aged and disabled. While this is the most easily achieved option in the short term, the long term financing of health care through this model may provide cause for concern.

– Section 1115 waiver. This waiver – named after a provision of the Social Security Act – would allow Texas to test policy innovations for five years, so long as the proposed reforms demonstrate no additional cost to the federal government and are approved by the Centers for Medicare and Medicaid, the Office of Management and Budget, and the U.S. Secretary of Health and Human Services. Texas used an 1115 waiver in the mid-1990s to implement welfare reform, which inspired the federal government to incorporate Texas’ successful principles on a national basis.

The Honorable Arlene Wohlgemuth is the Executive Director and Director of the Center for Health Care Policy at the Texas Public Policy Foundation, a non-profit, free-market research institute based in Austin. She served 10 years in the Texas House of Representatives, specializing in health care issues.

The Texas Public Policy Foundation is a non-profit, free-market research institute based in Austin.

Primary website: Facebook page: Twitter feed:

– 30 –