Lottery for Sale

Governor Wants Proceeds for Education, Health Care

Texas Medicine Logo(1)  

Legislative Affairs Feature - April 2007

By  Ken Ortolon
Senior Editor  

Gov. Rick Perry is ready to take a gamble. In his State of the State Address in February, the governor proposed selling the state lottery and dedicating the estimated $14 billion he thinks it would generate to public education, a health insurance premium assistance program for the uninsured, and cancer research.

While Texas Medical Association leaders applauded the governor for bringing what they say is much needed attention to the plight of the uninsured, political observers say the lottery sale may be a nonstarter in the legislature.

Harvey Kronberg, editor of the Austin-based online political newsletter Quorum Report, says the idea went over "like a lead balloon," even with legislators from the governor's own party.

Still, TMA officials say they believe the legislature is interested in addressing the fact that nearly one-fourth of all Texans lack health insurance. While the lottery idea may not be the ideal solution, it is at least kickstarting the debate on how best to provide health coverage for low-income Texans, they say.

  Healthy Vision  

"The Texas Medical Association is pleased Governor Perry recognizes the importance of investing in Texas health care - especially investing in the state's uninsured population," TMA President-Elect William W. Hinchey, MD, said following the governor's State of the State Address.

The governor's proposal would have the state sell the lottery to a private firm for the next 40 years, which he "conservatively" estimates would bring in $14 billion. Interest from investing those funds could bring in about $1.3 billion annually, or about $300 million more each year than the state currently makes off the lottery.

The lottery proceeds would be divided up into three trust funds, including one to help fund public education and a $3 billion trust fund for cancer research. The third fund would generate about $250 million annually for a statewide premium assistance program for the uninsured.

Under the so-called Uninsured Partnership Trust Fund, uninsured working Texans who earn below 200 percent of the federal poverty level could receive premium subsidies for purchasing private coverage or employer-based coverage. The state dollars also would be used to draw down an additional $375 million for the program through the Medicaid disproportionate share hospital program, meaning the state would have a total of $625 million annually. Governor Perry estimates 2 million uninsured Texans would benefit from the program.

The plan would work much like so-called "three-share" programs that have been tried in other states. Workers, their employers, and the state would all pay a portion of the premium costs. Workers' premiums would be set on a sliding scale based on income and need. All participants would be required to pay minimal deductibles and copayments, and unused funds would be distributed directly to hospitals to reimburse for uncompensated care. 

Where's the Mandate?  

While TMA, the Texas Hospital Association (THA), and others in the health care arena applauded the premium assistance proposal, many doubt the plan to fund it with lottery proceeds will fly.

Darren Whitehurst, director of TMA's Division of Public Affairs, says selling the lottery is "hugely problematic" in the legislature because lawmakers won initial approval of the lottery more than a decade ago by pledging that the proceeds would support public education.

"There is certainly some concern about using the proceeds for noneducational purposes," Mr. Whitehurst said.

Mr. Kronberg adds that there is no voter mandate for selling the lottery.

So far, the only real public discussion of the idea has occurred in the Senate Finance Committee, which gave it a rather cool reception, Mr. Kronberg says. 

Winners and Losers  

Still, TMA supports efforts to cover the uninsured, and TMA leaders like the fact the governor stressed the importance of a medical home when he laid out the idea.

"With 5.5 million uninsured Texans, many of whom are working, it is important that no Texan be deprived of a medical home," Dr. Hinchey said. "Having a primary care physician in charge of a patient's care is the most cost-efficient way to deliver health care."

But while primary and preventive care likely would be a winner under the governor's plan, Mr. Whitehurst says there also could be losers. One would be the public hospitals, because the disproportionate share funds the governor would put into the premium assistance program are not new dollars, but dollars already going to hospitals for Medicaid services.

THA President/CEO Dan Stultz, MD, applauded the governor's proposal as "working toward the right goal," but he sounded a cautionary note with regard to the disproportionate share dollars.

"Premium assistance is one step toward making health care coverage and personal responsibility for health a reality for all Texans," Dr. Stultz said. "However, it will take time to implement, and diverting Medicaid disproportionate share hospital funding could exacerbate the inadequacy of current state funding."  

Devil in the Details  

As with all legislative proposals, the devil is always in the details. Mr. Whitehurst says TMA's main concern with any plan to provide coverage for the uninsured is making sure people get the right bang for their buck.

"How do you ensure that the products people are buying actually provide value and that there's actually some sort of benefit associated with that premium?" he asked. "Right now, we have concerns whether current PPO products being offered to employers and their workers are putting together adequate networks of providers and providing real value."

While the governor has certainly fired the first shot in the debate over the uninsured, his likely will not be the only proposal floated this session. TMA officials expect to see other bills filed, including measures to allow working families to buy in to Medicaid, similar to a measure passed by Sen. Robert Deuell, MD, in 2005. Also expected to be debated are measures to expand eligibility for the Children's Health Insurance Program.

Ken Ortolon can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by email at  Ken Ortolon.


April 2007 Texas Medicine Contents
Texas Medicine Main Page