This commentary originally appeared in the Austin American-Statesman on September 8, 2015.
Medicaid rate cuts for therapy providers, which state lawmakers authorized during the recent legislative session in an effort to control Medicaid spending, have prompted a lawsuit against the state by some providers and patients who question the data the state used to justify the cuts.
But you can hardly blame the Texas Legislature for trying to address Medicaid costs by adjusting reimbursement rates. There’s little else they can do.
The problem is not that reducing reimbursement rates is inappropriate or unwarranted; the problem is that in an effort to contain Medicaid costs state lawmakers had to resort to this in the first place.
First, a word about the cuts themselves. The legislature examined rates in 2013 and found that the total amount paid for physical, occupational, and speech therapy for disabled children had risen from $412 million in fiscal year 2009 to $732 million in 2012 — a 78 percent increase.
Earlier this year the legislature instructed the state agency that runs Medicaid to reduce costs by $350 million and bring Texas Medicaid’s fee-for-service rates for therapy in line with commercial rates, rates in other states, and Medicaid managed care’s already reduced rates. Texas Medicaid was paying anywhere from 145 to 200 percent more than commercial plans and paying more than the 11 other states that were part of the study.
All this reveals how little control states have over Medicaid. When it comes to reining in cost growth, states have only one substantive — albeit rather crude — tool at their disposal: adjusting reimbursement rates for services mandated by Medicaid, like home health therapy.
Ideally, the state would use any number of other methods, including changes to benefits, cost-sharing, stricter eligibility verification, or structurally reforming how some Medicaid risk groups receive health coverage.
But, thanks to federal rules and regulations, none of those tools are available to state lawmakers. All they can do is cut rates and hope for the best.
It’s not working. Medicaid spending now consumes nearly 30 percent of the total state budget, and despite attempts at reform — including various rate cuts — Medicaid appropriations as a share of state revenue have gradually risen over the past decade, and continue to rise.
This year for the first time in Texas history, more state tax dollars will go toward paying for health and human services, mostly Medicaid, than will go to education.
If we don’t explore ways to control Medicaid costs that go beyond short-sighted and painful methods such as rate cuts, Texans will soon have to choose between funding education or an out-of-control Medicaid program.
A long-term strategy would pursue structural reform. The Legislature should authorize a Medicaid reform commission to explore options, work with stakeholders, and establish comprehensive and specific recommendations for how Texas can reform and improve its Medicaid program if given the flexibility to do so by the federal government.
At the same time, Texas should encourage other states to follow suit. That would send a strong signal to Congress and the White House that states need to be able to control their Medicaid programs, either through a block grant of federal funds or some other method that gives states freedom to innovate.
Fiddling with reimbursement rates, although necessary under the circumstances, isn’t going to cut it in the long run.
Davidson is director of the Center for Health Care Policy at the Texas Public Policy Foundation.