TMA Opposes Medicaid, CHIP Cuts

Feb. 24, 2010

The Honorable Rick Perry
PO Box 12428
Austin, TX 78711

The Honorable David Dewhurst
Lieutenant Governor
PO Box 12068
Austin, TX 78711-2068

The Honorable Joe Straus
Speaker of the House
PO Box 2710
Austin, TX 78768-2910

RE: Proposed 5-Percent Budget Reductions to the Texas Health and Human Service Commission and Department of State Health Services  

Dear Governor Perry, Lt. Governor Dewhurst, and Speaker Straus:

We are writing to you today on behalf of the more than 47,000 physicians and medical student members of the Texas Medical Association and the 20 undersigned state specialty societies to ask that you proceed judiciously when considering cuts to the state's health care infrastructure. Given Texas' tough economic climate, we understand the difficult fiscal decisions you and state lawmakers will face to balance the 2011 state budget. However, every decision you make regarding health care funding needs to be evaluated against the long-term and potentially dire consequences to the health and prosperity of Texas, our patients, and the communities in which we live. This is especially true at this time when Texas is at a fiscal tipping point.

State of Texas' health

As it stands today, the health care status of many Texans is precarious. We lead the nation in the number of uninsured people. And this is the root of critical health issues facing Texas, such as high rates of teen births, preterm births, diabetes complications, and child and adult obesity. In 2009, Texas ranked 43rd in the number of dollars spent per person on public health. Texas also ranks 49th in the nation for the amount it spends per person for mental health care. We cannot afford to slip any further. We must make healthy choices to protect the health of Texans and Texas.

Many of the state budget cuts enacted to address the 2003 budget crisis have never been fully restored. These cuts hurt the ability of working families to get the care they needed. Today, not only do we have more Texans needing care because of population growth, but also the economy is forcing even more Texans to turn to Medicaid, the Children's Health Insurance Program (CHIP), and other publicly funded mental and public health services for health care. Fundamental to Texas' long-term fiscal health is the health of the people. They are our patients and your constituents. Cutting publicly funded health care services as more hard-working Texans seek services will not help our state's health.  

Impact of proposed budget cuts

Our organizations believe it's short sighted to bluntly cut Medicaid, CHIP, mental health care, or public health systems. Cuts to programs such as Medicaid and CHIP, including physician and provider payment rates, are particularly penny wise and pound foolish as both programs bring generous federal matching rates to Texas. In addition to helping provide needed health care services to many of the state's poorest and most vulnerable citizens, these federal funds help support job and revenue growth for Texas. Analyses by leading state and national economists show that federal Medicaid dollars have an economic multiplier effect of 3.25 times. Moreover, if the state fails to provide funding, services still end up getting provided. Unfortunately, county taxpayers will have to pick up the tab, but without the benefit of federal matching funds. 

To meet their respective 5-percent budget reduction targets, the Health and Human Services Commission (HHSC) and the Department of State Health Services (DSHS) recommended cuts in vital public and mental health care services, services for children with disabilities, and physician Medicaid and CHIP payments, among others. We appreciate the exemptions you specified for Medicaid or CHIP benefits and eligibility, foster care, and eligibility workers. We also commend Commissioners Suehs and Lakey for their efforts to protect preventive and community-based mental health services. Yet, despite those efforts, we believe many of the proposed cuts, if enacted, will hurt the health of Texans and cost the state more in the long run.

Together, HHSC and DSHS have proposed:

  • Reducing the number of inpatient mental health beds by 200 : These cuts will not decrease demand for these services. Instead, patients will only end up in more costly settings - taxpayer-supported jails or rooms (ERs). Children of adult mentally ill patients also may end up in the Texas foster care system when a parent cannot care for them. According to a 2009 report titled The Consequences of Untreated Mental Illness in Houston, "the annual cost of caring for the county's incarcerated people with mental illness exceeded $48 million, which is more than twice as high as the cost of outpatient care for the same people." Reducing the capacity of an already strained public mental health system will only cost Texas more.
  • Reducing funding for the Children With Special Health Care Needs (CSHCN) program : This action will cause nearly 300 children to remain on the waiting list for services and prevent them from obtaining the medical care they need.
  • Delaying implementation of the Medicaid buy-in program for children with disabilities : A delay only means that hard-working families of children with special health care needs cannot get their children the care they need. Because of these children's extensive medical needs, preexisting conditions often keep them out of the private insurance market or the premiums are too high for their parents to afford. The buy-in program will help families provide affordable and needed coverage for their children.
  • Reducing funding for uncompensated trauma care by 10 percent.
  • Reducing Medicaid and CHIP physician payment rates by 1 percent for children's services and 2 percent for adult services : We know from previous experience that cutting physician payment rates only drops physician Medicaid and CHIP participation. Without enough physicians participating in Medicaid and CHIP, patients turn to emergency rooms instead of a physician's office for care, which only increases Medicaid costs and results in more fragmented care. According to data from HHSC, in 2006, the average Medicaid physician office visit costs $36.13 versus $144.51 for an ER visit.  Further, to achieve the state's goals of promoting greater accountability and coordination in the Medicaid program, particularly for high-cost services like diabetes and congestive heart failure, Texas will need a robust network of physicians to implement evidence-based reform goals. Without improving the availability of physicians participating in Medicaid, efforts to reform cannot succeed.

Moving forward

In your letter to state agencies, you stated: "We owe it to the taxpayers to be especially prudent with their hard-earned dollars during these difficult times." We could not agree more. We believe it's critical to achieve cost-savings through new, innovative models of health care delivery that emphasize prevention, early detection and intervention, and better health outcomes.  

In recent months, our organizations have met with key stakeholders to address how we can improve quality of care while lowering costs. Around the state, our members are working with hospitals and other stakeholders to develop and implement innovative models of care that focus on prevention and evidence-based, clinically valid efforts that reduce costs. Here are just a few of initiatives underway:

  • In Austin, Seton Healthcare System has implemented programs to reduce the incidence of late preterm births and birth trauma, resulting in more than $800,000 in savings from hospital charges. If replicated statewide, these programs could improve the health of mothers and babies while reducing Medicaid hospital neonatal intensive-care unit (NICU) charges.
  • An informal coalition of physicians, nurses, health educators, health plans, and prevention advocates, including the March of Dimes, are discussing ways to reduce Texas' high rate of avoidable preterm births.  Preterm/low birth-weight babies account for half of all infant hospitalization costs and one quarter of pediatric costs ( Pediatrics , Vol. 120, No. 1, July 2007). Given that more than half of all births in Texas are paid for by Medicaid, undertaking initiatives to prevent preterm births could yield substantial Medicaid savings.
  • In Dallas, physicians, hospitals, and community leaders are collaborating to develop and test Accountable Care Organizations to improve and coordinate care for patients with diabetes, congestive heart failure, or asthma.
  • HHSC will be piloting Medicaid "health homes" (also known as medical homes) starting midyear to test ways to improve health care coordination and management of children in Medicaid. Our organizations have long advocated for the medical home model as a means to improve primary care and prevention. 
  • Communities across the state are developing new ways to decrease reliance on ERs or county jails for mental health treatment by using state funds to improve crisis intervention and community-based mental health services. Expanding these programs to reach more mentally ill people can reap great savings.
  • In 2009, TMA and the Texas Association of Obstetricians and Gynecologists worked collaboratively with HHSC to devise a new ultrasound utilization management plan. The plan, based on sound clinical information, will help reduce Medicaid costs without creating unreasonable administrative burdens on physicians.

These are a few examples of innovations aimed at improving quality care while lowering costs. There are many more good ideas. We don't have access to the data needed to make further recommendations. However, with access to more specific data on the exact cost drivers in these programs, including utilization of high-cost services such as emergency rooms, we believe physicians and other stakeholders could be proactive partners in identifying strategic savings, eliminating the need for the many of the proposed cuts.  

The state budget for the current biennium is not insolvent. The state must avoid making decisions that may prove to be more costly in the long run.  Instead of adopting indiscriminate, broad-based cuts, we encourage you to have a careful and open review of health care spending in order to develop a comprehensive plan that in the end will save the state money. We respectively ask that many of these cuts are deferred until the larger implications can be carefully evaluated and new ideas considered.   To that end, we encourage you to convene a meeting of state agency leaders and stakeholders as soon as possible to comb through the state's data and use it to identify strategies for "bending the cost curve" and developing innovative, cost-effective new health care delivery models in Medicaid. 

In closing, our organizations encourage you to work with us as partners to find targeted solutions that achieve our mutual goal of better care and at more affordable price. We are committed to improving the health of all Texans. Together, we must make healthy decisions to ensure that all Texans can receive affordable and quality health care.

Thank you for your consideration.



William R. Fleming, III, MD, President
Texas Medical Association

Richard Lampe, MD, President
Texas Pediatric Society


K. Ashok Kumar, MD, President
Texas Academy of Family Physicians

Charles E. Lee Brown, MD, President
Texas Association of Obstetricians and Gynecologists


John C. Jennings, MD, Chair, District XI (Texas)
American College of Obstetricians and Gynecologists

R. Galen Kemp, MD, President
Texas Ophthalmological Society


Arthur S. Centeno, MD, President
Texas Urological Society

Patrick Giam, MD, President
Texas Society of Anesthesiologists


Richard Strax, MD, FACR, President
President, Texas Radiological Society

Tommy Yee, MD, President
Texas Neurological Society


Stephen Tyring, MD, President
Texas Dermatological Society

Rick Snyder, MD, President
Texas Chapter of the American College of Cardiology


David Mendelson, MD, President
Texas College of Emergency Physicians

John S. Early, MD, President
Texas Orthopaedic Association


Leslie H. Secrest, MD, President
Federation of Texas Psychiatry

William R. McKenna, MD
Texas Allergy, Asthma and Immunology Society


Wm. Kern Deschner, MD, President
Texas Society for Gastroenterology and Endoscopy

Rodolfo Laucirica, MD, President
Texas Pathology Society


Ron Kuppersmith, MD, President
Texas Association of Otolaryngology

Christopher Madden, MD, President
Texas Association of Neurological Surgeons


R. Steve Urban, MD, President
The Texas Chapter of the American College of Physicians



cc: The Honorable Steve Ogden
  The Honorable Jane Nelson
  The Honorable Jim Pitts
  The Honorable Lois Kolkhorst
  The Honorable Patrick Rose
  Tom Seuhs, Executive Commissioner, HHSC
  David Lakey, MD, Commissioner, DSHS

Last Updated On

January 06, 2020