Affordable Care Act

Hospitals Will Have To Adapt To Texas Medicaid Shake-Up

Texas is fighting to control costs in Medicaid, the insurance program for the poor and disabled. Now the federal government has given the state permission to move almost all Medicaid patients into managed care, as a way to save money. But the new freedoms come with strings attached.


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Like all states, Texas splits the costs of Medicaid with the federal government. The state pays about 40 percent, and the feds pay about 60. Still, that 40 percent is a huge chunk of the Texas state budget, and it’s been growing.

Karen Love leads the Harris County Healthcare Alliance.

“Putting people in a managed care program where there is the incentive to keep people well instead of just having to pay for every cha-ching of the cash register, has the potential to save the state money. And is the reason why the state wanted to move in that direction.”

Texas got permission from the federal government to do all this, but in return the federal government asked for big changes from the Texas healthcare system. For example, hospitals in Texas currently receive billions of dollars every year in federal reimbursements for treating Medicaid patients and the uninsured. A lot of those payments came as lump sums, with no strings attached. Now those hospitals will have to do more to prove they deserve the money, and account for how they spend it.  

State Representative Garnet Coleman says he welcomes this new level of transparency. He also likes that hospitals will have to spend more money on outpatient care.

“Most of that money is going to be pushed into non-hospital care, a lot of it will be pushed into non-hospital care and it wasn’t before. It was only put into the coffers of the hospital and in a lot of places they built new wings with that money instead of providing care to patients with that money. So this creates a filter.”

The new plan is called a Medicaid waiver. The waiver will also give more power to the public hospital systems in Texas. They’ll take the lead in deciding how certain Medicaid dollars are spent.

David Lopez is president of the Harris County Hospital District.

“It’s an exciting day for us because ultimately we know this will transform the way care is being delivered.”

Under the new plan, private hospitals in the Houston area will have to cooperate with the Hospital District to qualify for certain funds. And, all the hospitals will be graded on whether they’re actually doing things to improve care – like building new clinics or reducing infections among hospital patients.

Lopez says the new system will help Texas get ready for 2014, when the Affordable Care Act comes fully into effect.

“In 2014, many of our population are getting Medicaid coverage. And that’s a good thing. But if there’s not enough venues for them to be seen, it’s not going to do them any good. So this allows us to start developing that infrastructure to allow individuals to get access to care.”

We reached out to Memorial Hermann Hospital and Methodist Hospital, but representatives said they couldn’t comment on the new rules right away.

This story is part of a project on health care in the states, a partnership of KUHF, NPR and Kaiser Health News.

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