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In Texas, a surprising Perry plan for Medicaid reform

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Nati Harnik AP It’s a perennial complaint from Texas Gov. Rick Perry: The federal government places far too many restrictions on how states can run Medicaid, the entitlement program that provides health care to low-income Americans. “We know for a fact that, given that freedom, the states can do a better job of delivering health care,” Perry said in a Republican debate last month. He’s endorsed turning the entitlement program into a block grant and flirted with having Texas drop out of it altogether.

But back in Texas, Perry is actually pursuing a highly technocratic and pragmatic attempt at Medicaid reform that doesn’t much resemble the policy he’s floated in his presidential run. He is currently negotiating a waiver with the Obama administration that would net the state increased Medicaid funding if providers could hit certain performance metrics agreed to by the federal government. It’s an approach that has pleased just about everyone involved, from Medicaid advocates to major hospitals.

“As an advocate, if this is done reasonably well, it could be requiring more from hospitals for what they’re doing,” says Anne Dunkelberg of the Center for Public Policy Priorities. “It wouldn’t just be a cash cow. Hospitals would have to deliver care to the uninsured and have to participate in some payment and delivery reforms.

Medicaid is mostly financed as a state-federal partnership, with each state drawing down a federal match for whatever it invests. For every dollar Texas puts into Medicaid this year, it gets $1.54 from Washington.

But in Texas, that usually isn’t enough to cover what it actually costs to care for Medicaid patients. To address that, the federal government also pays supplemental payments meant to close the gap.

Those payments are significant. Texas received more than $2 billion in what are called Upper Limit Payments, a decent portion of the state’s $23.7 billion Medicaid budget. And those funds show up with no strings attached, allowing hospitals to use them as they see fit. “That money is free and clear,” says Jared Wolfe, executive director of the Texas Association of Health Plans. “It’s theirs to do what they want with it.”

The Medicaid waiver that Texas is currently negotiating with the federal government has a lot do with the supplemental funds. Specifically, the state wants a a lot more of them, about $12 billion more than it currently receives, over the next five years.

To get that extra money, Texas is willing to pay a price. The state proposes to implement greater restrictions on what that money can be used for. Under the waiver it has requested, hospitals would have to come together to draw up a Regional Health Partnerships, which would pick metrics that hospitals have to hit — such as reducing re-admissions or slowing emergency room use. The state then has to bless those plans. And the federal government has to sign off on the whole framework.

In other words, the waiver Texas wants would add two levels of bureaucracy to funds that currently show up with no strings attached. In certain ways, it even syncs with the health-care reform bill.

“It’s meant to change the system to be prepared for the Medicaid expansion before 2014,” says State Rep. Garrett Coleman, a Democrat who rarely finds himself on the same side of an issue as Perry. “It will pull down the [supplemental] dollars into more transparent and better uses. That’s the great thing.”

Hospitals see a slightly different, albeit equally positive, outcome. “The best thing about this is there is new money,” says Dan Stultz, CEO of the Texas Hospital Association. “There is new money that is coming from somewhere.”

In Texas, there are a lot of questions about whether the state will actually get the additional funds it wants. Many speculate that the waiver is being held up at the Office of Management and Budget because Texas wants so much money; others wonder whether Perry may not want to get a stamp of approval from the Obama administration in the thick of the Republican nominating contest.

But from hospitals to Medicaid advocates, there’s a surprisingly high level of agreement on what the waiver would do: bring in more Medicaid dollars to Texas. As for Perry, it shows a political side rarely seen in his presidential debate performances: pragmatic and technocratic, a leader who can craft a deal that brings together just about every disparate health-care interest in the Lone Star State.

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