Why Rick Perry’s Proposal To Opt Out Of Medicaid Doesn’t Make Any Sense

Texas Governor Rick Perry (R) has been floating the idea of resisting the requirements of the health care law by opting out of the Medicaid program entirely, claiming that such a move would “save $60 billion between 2013 and 2019.” He explained his thinking on Sunday to CNN’s Candy Crowley:

CROWLEY: You think perhaps dropping out of Medicaid, a state dropping out of Medicaid, and you have even talked about dropping out of the Children’s Health Insurance Program, otherwise known as CHIP. You’ve got, by the last time I looked, about 3.6 million children disabled or poor in Texas who would then lose their health benefits. What happens to them if you opt out of Medicaid? […]

PERRY: We would create our own insurance program for them, and I’ve had a waiver request for four years.

CROWLEY: But the government gives you 60% of the money to fund this. How does that add up to help you?

PERRY: We understand that’s our money. You talked about us taking stimulus dollars. We send hundreds of billions of dollars to Washington, DC, and generally don’t get much of it back. We’d just as soon not send as much money to Washington, DC. Let us come up with the idea. I can promise you Pawlenty and Jindal and Barbour and some Democrat governors across this country as well will come up with really good ideas about how to deliver health care. Why not let us pick and choose rather than this one size fits all mentality that comes out of Washington, DC with string attached… Let the states be the laboratories of innovation and the good ideas will come out of that.

Watch it:

All of this makes very little sense, which has led several health care wonks I’ve spoken to seriously question the legitimacy and sincerity of these proposals. However Perry wants to define the chain of ownership behind federal tax dollars, the reality is that under health care reform, states that offer the skimpiest Medicaid programs — in Texas, parents qualify for Medicaid only if their family income is below $5,720 — will receive the largest infusion of federal funds to help them expand their programs. Texas, for instance, “can expect to see Medicaid enrollment rise by 46 percent while state spending on Medicaid rises by about 3 percent.” The federal government will pick-up most of the tab, as its costs will increase by 39 percent!


So under Perry’s proposal, the state would give up millions of dollars in federal funds and dedicate its remaining state share to cover individuals and families with disabilities. The poor who are currently enrolled in the program would find private coverage from the new health care exchange. Or at least that’s the theory. In reality, the poorest Texans would never be left uninsured because under the ACA, individuals under 100% of the poverty line are not eligible for federal tax credits. And even if they were, they would have to contribute 2% of their incomes to health insurance.

Meanwhile, the state, in all its “innovation,” will have to stretch its contribution to cover Texans with disabilities and seniors in the face of rising health care costs. Even if it somehow managed to do that — and that’s a big if — the state will face the challenge of dealing with the uptick in uncompensated care. As Judy Solomon of the Center for Budget and Policy Priorities explained to me, by opting out of the Medicaid program, Perry would be “taking billions out of the state economy that goes on to support hospitals and other providers,” ensuring a revolt from the provider community. Hospitals and doctors would have to swallow the costs of caring for uninsured individuals who will continue to use the emergency room as their primary source of care.

In other words, it’s a lose-lose for everyone involved, and, since it’s cheaper to cover individuals in Medicaid rather than through the private exchange, shifting the eligible Medicaid population out of that program, will also force the federal government to spend more on federal tax credits.

But of course, if Perry believes that Medicaid is such a bad deal, he can continue petitioning the government for a waiver that would allow the state to alter some of the rules of the program — so long as he can demonstrate that his ‘Texas solution’ is comparable to Medicaid’s coverage standards. Perry hasn’t proposed anything remotely plausible during his first term as governor and while he talked a lot about states acting as “laboratories of innovation” in the above CNN interview, he didn’t list a single “good idea” for how Texas would provide care more efficiently than Medicaid.