TMA Letter: Instate Health Care Compact

TMA Letter: House Bill 5 by Rep. Lois Kolkhorst (R-Brenham)

 Interstate Health Care Compact 
 Comments and Questions for Consideration  

Interstate compacts are commonplace contractual agreements between two or more states, used to handle regional and multistate problems, such as transportation issues, water rights, or environmental protection.   

Texas, like most states, has a number of compacts in place, addressing everything from wildlife management to adoptions to educational assessments for students in military families.     

To become law, interstate compacts must be passed by both chambers of a state legislature, signed by the governor, approved by the U.S. House and Senate, and signed by the president.    

As filed, House Bill 5 would authorize Texas to enter into an interstate compact with one or more states to establish greater control over nearly all health care services for which there is federal funding. The compact would encompass Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), mental health and substance abuse services, immunizations, maternal and child health care, pharmaceutical coverage, federally qualified health centers, primary care, and family planning services, among others. The bill broadly defines “health care services,” so the bill conceivably could encompass health-related programs governing medical privacy, health information technology, or others for which federal funding is available. The only programs exempted under the bill are those administered by the Department of Veterans Affairs, Department of Defense, or Native American tribes.    

If the interstate compact were approved, signatory states would have the ability to suspend the application of federal laws, regulations, rules, or orders contrary to the state’s legislation. Federal laws not suspended would remain in effect. The member states then would each receive super-block grants to replace all the federal funds spent previously in that state.  HB 5 computes Texas’ preliminary block grant at $60.4 billion, which was the total federal health-related spending in Texas in 2010. The block grant would be adjusted annually for Texas and other signatory states for population growth and inflation.    

There is no precedent for establishing an interstate compact or block grant of this magnitude or scope. As such, the Texas Medical Association has no official policy on the issue. We also can’t look to another state’s experience to assess the potential “real world” implications. The legislation raises significant health policy questions and concerns that we respectfully ask be considered as the committee deliberates upon this legislation.   

Specifically, we present the following observations and questions:    

  • The bill specifies states party to the compact may suspend federal laws, regulations, and rules that contradict state laws. The bill further states if a member state chooses to keep any federal law/rule/regulation/order in effect after the effective date of the compact, the member state will be responsible for the associated funding obligations of that law/regulation. The language is confusing and implies states can pick and choose federal programs, or subparts of programs, from which to opt out. Further, it is unclear whether the block grant funding would apply only to those federal laws the state chose to suspend or to all federal programs, regardless of whether the state continued to recognize the federal law.  
  • The legislation preliminarily sets Texas’ block grant as $60.4 billion. The bill indicates this amount is equal to federal health care funding in Texas in 2010. However, without knowing exactly how this figure was derived, we cannot assess whether this amount would be sufficient to maintain existing levels of coverage and benefits, particularly given the expansive array of health care services to be included under the block grant.   
  • The bill specifies that a state’s block grant base calculation will be binding on that state. Does this mean if the state makes an error in its initial base funding calculation, the state would not subsequently be able to correct it?  
  • HB 5 notes the block grant would be adjusted for population growth and inflation. There is general concern that given the federal deficit, Congress will not approve inflation or population growth factors favorable to a rapidly growing state like Texas. If Texas did not obtain favorable annual inflators, would Texas terminate its participation in the compact? If the population and inflation inflators envisioned under HB 5 are miscalculated even slightly, which is a likely scenario given the inherent challenges of accurately forecasting cost and population growth ― Texas could be faced with significant unanticipated costs.   
  • Over the past decade, the Texas population grew 20.6 percent, making it one of the top five fastest-growing states. What would happen under the block grant if Texas’ population were to grow faster than the rate of growth assumed in the block grant calculation?  
  • If Texas experienced a rapid surge in enrollment in publicly funded programs, which has occurred in Medicaid and CHIP during the economic recession, Texas would not be eligible for additional federal funding to offset those unexpected higher costs. Would Texas establish a reserve fund to allow the state to endure unexpected fluctuations in caseload that may occur during economic downturns?  
  • HB 5 specifies the block grant would be adjusted for inflation. The bill uses gross domestic product as a measure of inflation, instead of medical inflation.  Medical inflation historically is at least several points higher than the rate of general inflation. Pegging the block grant to general inflation would significantly diminish the block grant’s purchasing power.  
  • The block grant proposal would lock Texas into current federal funding inequities. According to the December 2010 joint report by the Texas Health and Human Services Commission (HHSC) and Texas Department of Insurance, Impact of Opting Out of Medicaid, 10 percent of the U.S. population living in poverty resides in Texas. That means13 percent of the nation’s uninsured live in this state. However, Texas only receives 7 percent of federal Medicaid dollars.  A block grant pegged to Texas’ 2010 federal health care funds would perpetuate this inequity in funding.  
  • Texas leads the nation in the percent of the uninsured. Twenty-six percent of Texans, or 6.4 million people, lack health insurance coverage. As currently proposed, the block grant provides no mechanism for Texas to receive additional funding to expand coverage for this population. 
  • Texans tend to be in poorer health compared with the national average. For example, compared with the nation, Texas has higher rates of obesity, diabetes, and heart disease, all of which contribute to higher health care costs. Additionally, Texas has higher rates of women who receive late prenatal care and babies who are born prematurely. And, over the next decade, the state demographer estimates seniors with self-care limitations will grow by roughly 50 percent, which means more of Texas’ seniors will need both expensive acute and long-term care services. While the block grant would be adjusted for inflation, it does not take into account the poorer health status of Texans and the investments the state will need to make over time to promote a healthier population.  
  • Under current Medicaid and CHIP funding formulas, the federal government pays a fixed share of the state’s total Medicaid and CHIP expenditures.  The matching rate for Texas Medicaid is 60 percent federal funds to the state’s 40 percent. For CHIP, the match rate is higher, 72 percent federal to 28 percent state. However, under a block grant, the federal government would pay a fixed dollar amount.  This means that Texas would be fully responsible for all costs over and above funds allocated under a block grant.     
  • The bill is silent on whether and how Texas would restructure its health care system, including what populations would be eligible for services, what the eligibility levels would be, or what benefits would be available. Would Texas maintain existing eligibility levels for Medicaid and CHIP? There is also no mechanism to pay for the costs of Texas redesigning its health care delivery system to administer and regulate programs that are now the responsibility of the federal government. For example, Texas currently has no regulatory authority over Medicare. The state would need to establish an infrastructure to administer Medicare services. 
  • In recent years, the escalation in Texas Medicaid costs has been due largely to the rising caseload fueled by the economic recession. According to the Kaiser Family Foundation, from 2000 to 2009, Medicaid costs per enrollee were lower than the rate of growth for employer-sponsored insurance premiums or personal health care expenditures.  Research from the Congressional Budget Office also indicates that Medicare costs are growing faster than Medicaid and private health care expenditures. Medicaid and private health insurance annual cost growth is largely tied. While health care costs across the public and private sectors are growing much faster than inflation, Medicaid costs per enrollee are not growing any more so than other payers.   

  Again, thank you for the opportunity to submit comments and questions.  

82nd Texas Legislature Testimonies