Treatment Goal #1: Accessible and Affordable Health Care for All Texans

Texas must provide access to affordable health care and an appropriate medical home to all of our residents. We must focus our efforts on working poor families - the uninsured and underinsured. This is the critical intervention, the lynchpin, of TMA's Healthy Vision 2010 . We must reduce dramatically the mounting rolls of uninsured Texans and the unrelenting pressure they apply to government-financed health care programs, safety net hospitals and emergency rooms, private practice physicians, and employers and employees who buy health insurance. Without this crucial change, we are just tinkering at the edges. Without universal access to affordable care, none of our other treatment recommendations can achieve their true potential.

Texas' health professionals must collaborate with the business community, public and private payers, employers, and employees to devise and test initiatives that make health insurance companies offer coverage that is more broadly accessible, affordable, and portable.

•  By and large, uninsured Texans are working Texans. Many of their employers - small and large businesses - can no longer afford to offer health insurance benefits. With no realistic alternatives available, the employers simply drop the benefit and leave the employees and their families to fend for themselves. Those families, likewise, have little choice but to "choose" to be uninsured.

TMA supports public policy initiatives that will expand employers' and employees' options. These include:

  1. Offering a supportive environment in which stakeholders feel free to develop and pilot-test basic benefit packages that can meet the health care needs of targeted employee populations. These could include combinations of health savings accounts, preventive care coverage, and catastrophic care coverage. We must test variations in premiums, copays, deductibles, and benefits to find the optimum configurations.

  2. Exploring variations on "3-share" programs such as that currently proposed for Galveston County, where The University of Texas Medical Branch is developing a health benefit program to provide coverage and improved access to care for the county's working uninsured. Like the name sounds, the 3-share plan divides the costs of care three ways: among the employer, the employee, and government funds. A 3-share plan is designed specifically for small businesses unable to purchase group insurance at affordable rates.

  3. Allowing Texas families who are ineligible for Medicaid or the Children's Health Insurance Program (CHIP) to buy in to those government-run programs. Another option is the TMA-supported legislation passed in 2003 that encourages blending Medicaid funds with employer subsidies to purchase affordable health insurance for uninsured workers. Texas should consider expanding this initiative and exploring other innovative options.

•  TMA also supports incentives for businesses to provide employee health insurance, including workers' compensation coverage, when the businesses contract with the state or receive state economic development funds. State government offers a variety of incentives, including hundreds of millions of dollars in grants, loans, and tax credits, for businesses to move to or grow in Texas. Local units of government also use property tax abatements to lure new businesses. State government itself awards contracts each year worth billions of dollars to various vendors. All these incentives and contracts include provisions with which the business or vendor must agree to comply. TMA recommends for consideration:

  1. Establishing tax incentives for businesses that contract with the state or receive state economic development funds to provide health insurance and workers' compensation coverage for their employees.

  2. Rewarding businesses that offer health insurance compensation coverage for their employees, and establishing tax incentives to encourage more businesses to do so.

•  For these public-private partnerships and innovations to work, Texas must impose no additional burdens on health care financing, including no new taxes on patient care. Taxing patient care is bad medicine. It will cost our state jobs in the health care sector and hurt our economy. Health care is a vital component of Texas' economy, generating tens of billions of dollars in revenue per year and providing hundreds of thousands of jobs. The cost of health care is high enough. New taxes on health care would drive those costs even higher or be an unrecoverable expense that would force more Texas doctors out of practice and worsen our state's access-to-care crisis.

Moreover, a robust medical system is vital for continued economic development in our state. Without a healthy workforce or ready access to high-quality medical care, Texas cannot attract new industries and employers. TMA recognizes that a sound public school system is essential to developing the physicians of tomorrow and that a well-educated Texas is a healthier Texas. However, a healthy Texas requires healthy physician practices. Increasing expenses and falling reimbursements already threaten the viability of many medical practices.

Ethically and legally, physicians must provide emergency care without inquiring into the patient's ability to pay. Texas physicians already pay a $1-billion-per-year hidden tax via unreimbursed charity care. This equates to a $1 billion savings to Texas taxpayers. Medicaid and CHIP payments to Texas physicians cover less than half the cost of providing care. The average Texas family practice physician loses about $50,000 per year in undercompensated care for Medicaid patients. For many specialists, in rural Texas and along the Texas-Mexico border, this figure is even higher.

  1. TMA strongly opposes any new taxes on physicians or medical services.

Texas must direct more of our precious health care dollars into direct patient care.

•  For much of the 1990s, managed care organizations and other insurers kept rates artificially low to attract new clients and members. The HMOs and PPOs obtained profits for their shareholders by severely limiting utilization and systematically ratcheting down reimbursements to physicians, hospitals, and health care providers. Once these tactics had been exhausted, health plans implemented double-digit premium increases so that premium inflation far outstripped the already soaring inflation rate for health care services.

The important measurement to focus on is the medical loss ratio. This is how the insurance industry defines the share of the premium dollar that actually goes for health care. In 2000, the national medical loss ratio was 84.8 percent: 84.8 cents of every premium dollar paid for actual care. That number declined to 81.5 cents by 2003. Unfortunately, the trend continues. United Healthcare, PacifiCare, WellChoice, and Coventry all recently reported continued "improvements" in their medical loss ratios - and their profits. Aetna stated a 78.6-percent commercial medical cost ratio for the third quarter of 2005.

In addition, the plans independently define what is included in their medical loss ratio. The industry has realized considerable success in convincing employers and major purchasers that many costs not directly involved with providing care still should be counted as such. The health plans argue that certain nonclinical expenses amounting to cost controls should be counted as the cost of patient care. Thus, they include in the medical loss ratio costs for such activities as maintaining records, supervisory and executive duties, and supplies and postage.

While the plans are spending a smaller share of the premium dollars they collect on actual patient care, they have become significantly more profitable. Collectively, the country's six largest health plans made nearly $2.4 billion during the first half of 2002, far more than the $1.8 billion they earned during all of 2001. In 2004, U.S. HMOs reported a 10.7-percent increase in profits.

Like all other HMOs operating in Texas, Medicaid HMOs pay the state a 1-percent premium tax. However, that tax is an allowable administrative cost for the Medicaid HMOs. The state actually pays them back for the premium tax.

To ensure that we spend more of the Texas health care dollar on health care, not elsewhere, TMA recommends:

  1. Requiring all managed care organizations to report and explain Texas medical loss ratios to purchasers and enrollees upon request.

  2. Establishing standard data elements for reporting medical loss ratios to allow for accurate comparisons among various health plans and workers' compensation carriers.

  3. Establishing reasonable medical loss ratios for Medicaid HMOs, which are paid using state tax dollars.

  4. Establishing reasonable medical loss ratios for workers' compensation carriers.

  5. Requiring the Texas Department of Insurance to regulate Medicaid HMOs as it does commercial HMOs.

  6. Protecting a patient's right to make treatment decisions in consultation with his or her physician.

•  On the public side of the equation, we need fair reimbursement rates to stop the exodus of physicians from Medicaid, CHIP, Medicare, and workers' compensation.

Medicaid and CHIP are essential elements of Texas' economic development. A 2003 study by Texas economist Ray Perryman, PhD, found that together, Medicaid and CHIP contribute nearly $31 billion to the gross state product and produce almost 500,000 jobs. Medicaid payments cover less than half the cost of providing services. Many physicians' practices, which are small businesses, cannot maintain their viability in the face of increasing expenses. (See  Figure 5 .)

Click on Figure to Enlarge Physician participation in Medicaid is dropping steadily and is perilously low in many parts of the state. Fewer than half of Texas physicians accept new Medicaid patients. The most severe shortages are among subspecialists, particularly those who treat children.

Patients' medical needs don't disappear just because the state cuts services and reimbursements. Local governments spend substantial tax dollars on health care for uninsured or underinsured patients. State Medicaid cuts increase the burden on local taxpayers. For every $1 Medicaid and CHIP cut, Dr. Perryman found, Texas loses $19.14 in business activity, local taxes jump 51 cents, and insurance premiums rise by $1.34.

Medicare payment increases for other providers have closely paralleled the Medicare Economic Index, which is Medicare's measure of the increasing costs of providing medical services. Physician fees, however, have fallen well behind the Medicare Economic Index and will trail the index further still in future years.

For the past 15 years, Medicare physician payment rates have fallen further and further behind the cost of running a medical practice. Today, Medicare reimburses a physician about two-thirds of what it costs to provide care to a patient. Every time Texas physicians see a Medicare patient, they actually lose money - an average of $20 to $35 on every typical office visit.

The problem is only going to get worse. The baby boomers, the biggest generation in American history, are about to enter retirement age. Millions of new Medicare patients will need medical care that Texas physicians very well may not be able to afford to provide.

Like any other business, a physician's practice cannot survive if costs exceed revenues, and Medicare payments are not adequate to cover average costs. Therefore, fees paid by private payers must be increased to cover physician losses on Medicare beneficiaries. When private payers are unwilling or unable to pay higher prices to cover these costs, physicians are forced to discontinue or drastically reduce their Medicare business, thus jeopardizing practice viability.

In the area of workers' compensation, costs, reimbursement rates, and access to care for injured workers have been flash points of debates among medicine, business, labor, and state government since 2001. Texas' cost-per-injured-worker claim is higher than other states, primarily due to poor return-to-work patterns and a high frequency of medical service utilization by some providers. Average price-per-service for physician services was at or below the median in 1999, before the Texas Workers' Compensation Commission imposed fee schedule cuts. Price-per-service for chiropractors, physical and occupational therapists, and hospitals, however, was above the median.

Due to the high administrative burden and low reimbursement rate for workers' compensation, the number of physicians who accept new injured workers plummeted from 46 percent in 2002 to 23 percent in 2004.

TMA's primary goal for workers' compensation is access to quality care for injured workers. The 2005 Texas Legislature passed House Bill 7 to reform the workers' compensation system. The bill allows for managed care-style workers' compensation networks, where participating physicians may negotiate their fees; out-of-network services will remain at 125 percent of Medicare allowable. The bill also applies some prompt pay provisions similar to group health standards. The new law guarantees payment up to $7,000 when compensability determination is challenged by a carrier. In the previous system, many physicians were left with no recourse when an injured employer claimed a work-related injury and the carrier later determined that the injury was not work-related.

Managed care networks are not a silver bullet that will fully reform the failed workers' compensation system in Texas. Under the new system, which is supposed to be based on market principles, physicians may negotiate fees with payers without regard to a fee schedule. The intended effect is for networks to attract quality physicians and to pay them appropriate fees for delivering quality services. There is growing concern, however, that insurance carriers will use this flexibility to push reimbursement even lower, further threatening injured workers' access to quality health care.

TMA's recommendations for fair reimbursement rates include:

  1. Enacting competitive physician reimbursement rates for Medicaid and CHIP.

  2. Restoring Medicaid and CHIP services and eligibility to 2003 levels.

  3. Replacing Medicare's sustainable growth rate formula with the Medicare Economic Index, which would allow payment adequate to cover physician costs.

  4. Monitoring workers' compensation fees to ensure that they at least cover the cost of patient treatment and the unusually high administrative burdens inherent in the system.

•  As the 2005 legislature was convening, state Medicaid officials were ready to repeal the popular Primary Care Case Management model (PCCM) and expand STAR+PLUS Medicaid HMOs to serve the elderly and patients with disabilities living in and around the state's urban counties. Local counties were about to lose hundreds of millions of federal dollars. Harris County, where Texas piloted STAR+PLUS, lost some $35 million as a result of the model and stood to lose another $20 million. Other urban counties - Dallas, Bexar, El Paso, Lubbock, and Tarrant - would lose at least $150 million collectively.

Faced with strong arguments that Medicaid HMOs are good for neither the health of patients nor the health of local economies or taxpayers, lawmakers decided to test an alternative. Integrated Care Management (ICM) is a noncapitated system of care that would achieve statewide savings and tax equity, maximize federal Medicaid matching dollars, provide high-quality and effective patient care, and simplify administration. The legislature required the use of ICM in Dallas and authorized it as an option in the other urban communities.

The state is moving ahead with plans to eliminate the PCCM model and use only HMOs to provide Medicaid services in and around most Texas urban areas. All patients who rely on Medicaid there - pregnant women, children, elderly men and women who don't live in nursing homes, and adult patients with disabilities - would have no choice but to seek care from HMOs.

PCCM and ICM are good values for the state. They put more money into direct patient care and spend less on paperwork and administration. PCCM receives very high marks from both patients and physicians.

To improve Medicaid care, TMA recommends:

  1. Directing the Texas Health and Human Services Commission to contract for an objective, third-party cost-benefit analysis of all Medicaid managed care delivery models, and require a legislative oversight panel to monitor the findings and their implementation. Any analysis of cost-effectiveness should include the impact on local taxpayers, hospital districts, and the health care safety net.

  2. Conditioning any further expansion of for-profit Medicaid HMOs on a clear expression of community need.

  3. Offering ICM - or another patient-centered, physician-directed model that relies on more efficient managed care principles to improve care coordination, assure appropriate utilization of services, and restrain costs - in all Medicaid service areas.

  4. Reenergizing physician participation in Medicaid by establishing a system that represents true collaboration between physicians and the state.

•  Transparency is a basic tenant of American business. "Let the buyer beware," certainly. But the buyer must know what to be wary of. As health care transactions among patients, physicians, hospitals, employers, health plans, and others grow even more complex, the various buyers and sellers of health care services must take extra pains not to mislead each other. Texas physicians call on all stakeholders to operate openly through appropriate disclosure, which (1) does not compromise the patient-physician relationship, (2) makes transactions more fully understandable at the point of service, and (3) facilitates communication among patients, physicians, other providers, purchasers, and plans.

To ensure that physicians' interests are always aligned with their patients', TMA continues to oppose any efforts to change Texas' longstanding prohibition against the corporate practice of medicine. Physician "employees" should not be held responsible for the bottom line of an organization managed or owned by nonphysicians.

To ensure transparency, TMA recommends:

  1. Requiring physicians to disclose to patients any ownership interest in a facility or service. TMA supports physician ownership in technology facilities, services, and equipment. Referrals to physician-owned entities or services must be based on the patient's medical needs, as determined by accepted utilization and quality-of-care standards.
  2. Requiring hospitals, health plans, and others to disclose to patients any ownership interest in a facility or service.

  3. Requiring health plans to provide employers, patients, and other purchasers with accurate, up-to-date lists of contracted physicians, hospitals, and other facilities. They must point out especially any contracted hospital for which the plan lacks adequate physician specialists, such as anesthesiologists, emergency medicine specialists, pathologists, and radiologists.

  4. Directing the Texas Department of Insurance to develop and enforce stricter rules requiring health plans to provide their members with adequate physician networks.

  5. Requiring health plans to use credible, reliable, understandable, and transparent evidence-based tools to measure quality, cost-effective care. They must share their measurement criteria openly with physicians, patients, and purchasers.

  6. Prohibiting health plans from using costs - or tools that cannot measure quality of care - as factors when developing networks they promote as providing higher quality care.

Texas must build an adequate, homegrown supply of appropriately trained physicians.

•  At 218 physicians per 100,000 population, Texas already trails the national average of 281 physicians per 100,000 by 22 percent. The federal government designates 132 of Texas' 254 counties - mostly in rural West Texas, along the border with Mexico, and in inner cities - as primary care Health Professional Shortage Areas. These counties are home to more than 5.4 million Texans. This diminished access to physician care will grow worse as Texans age and the population grows. While Texas State Demographer Steve Murdock predicts that the number of Texans will grow by almost 143 percent from 2000 to 2040, he likewise predicts that the number of physician contacts will increase by 170 percent.

Compared with the general population, Hispanic and African-American physicians are especially underrepresented. That discrepancy, too, will grow wider over the next quarter-century as Hispanics become the majority in Texas.

Each year, Texas' eight medical schools graduate about 1,300 new physicians. TMA strongly supports the schools' efforts to achieve more diverse student populations and to motivate and prepare students to practice in underserved areas of the state.

To help meet the demand for physician services, TMA recommends:

  1. Encouraging the state to partner with Texas medical schools to increase the representation of Hispanic and African-American medical students toward the goal of reaching their proportion in the Texas population.

  2. Increasing state funding for medical education to provide incentives for medical schools to increase enrollment of underrepresented minorities.

  3. Increasing state funding to increase the number of medical schools in Texas and/or increase class size at our current schools.

  4. Expanding medical student clerkships in rural medicine and loan repayment/forgiveness programs for students who practice in underserved areas of the state.

•  Graduate medical education (GME) is the specialized training physicians receive after completing medical school. It is a lengthy period of time during which they immerse themselves in learning a specific field of medicine. GME programs play an important role in giving physicians the skills they need to become independent practitioners; in providing patient care, often to the most needy; and in improving the health of all Texans through medical research and innovations. An investment in GME is an investment in the health of Texans and our economy.

Teaching hospitals are concerned about their ability to sustain - let alone expand - GME programs due to narrow operating margins and low financial reserves. This is largely due to the recent whittling-away of GME funding sources. Medicare is the largest financier of GME. The number of Medicare-supported GME slots is generally frozen at 1996 levels. In Texas, most state GME funds are allocated by the Texas Higher Education Coordinating Board for primary care GME. In 2003, the legislature cut $27 million of the Coordinating Board's $51 million in GME funding. The 2005 legislature restored those funds but made none available to allow for needed growth. Medicaid's longstanding role in support of Texas GME was eliminated for 2004-05 - a loss of $127 million in state and federal matching funds. Legislators in 2005 approved the first-ever state GME formula funding process but were unwilling to finance Medicaid GME with general revenue funds. Instead, they established a funding system that is not expected to restore the lost funding.

To strengthen GME, TMA recommends:

  1. Funding the newly established state formulas for GME at adequate levels.

  2. Reinvesting state funds in Medicaid GME.

Texas must invest in the public health infrastructure needed to protect the public in response to natural disasters, epidemics, and bioterrorism.

•  Texans discovered a whole new meaning of the word "homeless" when our state absorbed more than 300,000 evacuees from Hurricane Katrina. Although we welcomed our displaced neighbors from Louisiana and Mississippi, their rapid, unplanned arrival strained local and state health care resources. During Hurricane Katrina, emergency response, health care, and sheltering fell primarily on our large urban areas. These are highly populated cities with a large tax base and extensive health care facilities.

Much of the weight of responding to Hurricane Rita, however, fell on smaller, rural towns and counties in Texas that had never responded to a disaster of such magnitude. The deluge of evacuees, many of them individuals with special needs who were intentionally moved out of the storm's path, initially overwhelmed local governments. While Texas responded with a well-defined plan, certain shortcomings became readily apparent. In many cases, the chain of command was not clear. Local government agencies weren't certain of their responsibilities. Communication among those on the ground in East Texas, state and volunteer coordinating agencies, and medical volunteers was fractured and difficult. Local governments, hospitals, and health care workers could not keep up with the demands at special care shelters. Those who wanted to volunteer found it difficult and sometimes impossible to get to the areas of greatest need.

To improve our ability to respond to the next disaster, TMA recommends:

  1. Studying and updating our state and local disaster response plans with special attention to improving communication among responders at all levels; providing public health surveillance in shelters; tracking specific populations (e.g., severely ill patients, individuals with disabilities, sex offenders, methadone patients) to improve their access to special services; and improving evacuation routes and plans.

  2. Ensuring that the Texas Department of State Health Services (DSHS) involves county medical societies in its disaster response plans.

•  Scientists, health care professionals, and federal and state governments have focused their recent attention on preparing for a possible influenza pandemic. On average, three influenza pandemics occur in a century; the most recent was in 1968. DSHS defines pandemics as "explosive global events in which most, if not all, people worldwide are at risk for infection and illness [from] a new strain of influenza against which there is little or no natural immunity." [46]

The federal government's pandemic response priorities include ways to increase vaccine production capacity and limit vaccine manufacturers' liability. The Bush administration has asked state and local governments to develop plans for stockpiling and distributing vaccines and antiviral medicines, for tracking disease outbreaks, and for quarantining infected individuals in the event of an outbreak. DSHS has developed a draft state plan for pandemic influenza that addresses these issues and more.

To better prepare Texas for a pandemic, TMA recommends:

  1. Urging the Texas Department of State Health Services to complete and test its state plan for pandemic influenza.

  2. Appropriating sufficient funds to update the plan periodically and implement it rapidly in response to a flu pandemic.

Next: Goal 2: Increased Prevention and Personal Responsibility

[46] Texas Department of State Health Services. DSHS Plans for Pandemic Influenza. Accessed October 2005 at .