AUSTIN — Lawmakers from both parties are rolling out bills this month to overhaul the Texas Medicaid system, introducing protections for vulnerable patients who are denied treatments, increasing state oversight and signaling a crackdown on health care corporations that get richer by providing less care.

A package of about a dozen bills aim to fix widespread problems exposed by a Dallas Morning News investigation last year. That series, "Pain & Profit," showed how companies that Texas pays to care for millions of sick, disabled and extremely poor people were skimping on treatments and medical equipment to boost profits.

“We need to take a step back and just look at the entire system,” said Rep. Sarah Davis, the Houston Republican leading the House effort to address systemic failures.

She plans to file her bill Tuesday, as parents of sick and disabled children host a rally on the north steps of the Capitol.

Among other things, her bill would toss out the state's broken medical appeals system, give patients more ways to fight back when they're refused services and tear down some of the hurdles that make it harder to get treatments such as physical therapy.

Under a program called Medicaid managed care, Texas and the federal government pay about $22 billion a year to companies and a few non-profits that act as middlemen, deciding which doctor bills to pay and which services to approve. The state pays up front, and companies make billions in profit from what they don't spend on patients.

In exchange, those companies promise to provide better and cheaper care by cutting costs for unnecessary services and connecting patients with doctors and specialists.

But years of inept state oversight allowed those companies to refuse or take away medically needed services and force patients and families of sick and disabled children through a maze of endless appeals — sometimes with dire consequences. Those managed care companies vastly overstated how many doctors and specialists were available to their patients, The News found, and they routinely failed to meet the terms of their contracts.

Yet, top health officials publicly denied problems and wiped away hundreds of millions in fines that companies faced for not delivering services taxpayers had already paid for.

Davis and Rep. Richard Raymond, D-Laredo, held public hearings over the summer that included raw testimony from patients and advocates who said the managed care system isn't working. In those hearings, officials at the Texas Health and Human Services Commission acknowledged failures and pledged to improve oversight of Medicaid companies.

Raymond filed a bill that would allow parents of about 160,000 sick and disabled kids to opt out of a managed care program called STAR Kids and instead receive traditional Medicaid, where the state approves treatments and pays doctor bills with no middleman.

Fort Worth Rep. Matt Krause, a member of the far-right Republican faction known as the Freedom Caucus, says he’s carrying a similar bill, a sign that the state’s managed care woes have swelled enough to breach the partisan divide that typically surrounds the government insurance program.

Hannah Mehta’s son is in the STAR Kids program, which launched two years ago as lawmakers sought to reduce state spending on care for its most expensive patients.

"We are deeply grateful to those lawmakers who are listening and have shown leadership in working with us to make changes and address this moral issue with life-and-death repercussions," said Mehta, who leads Protect TX Fragile Kids, a shoestring nonprofit that's urged lawmakers to address problems in that program.

“It is extremely concerning to watch children suffer at the expense of an insurance company’s profits, and disheartening and short-sighted to see our state balance the budget on the backs of very sick kids.”

Last week, Raymond filed a second bill that would standardize rules for what is and isn't covered, instead of allowing more than a dozen managed care organizations to write their own rules.

“Currently, a child could be denied under one plan and accepted under another,” Raymond said. “Hopefully this will help us move in a direction where that child will be approved under both plans.”

Raymond’s legislation would also call for a deeper financial review of these health companies and expand oversight for a team of nurses that travels the state and checks on patients in STAR Plus, the program for elderly and disabled people.

His bill also would give that team responsibility for checking on the STAR Kids population and foster children, all of whom are in managed care. That team found hundreds of patients across the state who were suffering at home, waiting for medical equipment and nursing help. The News analyzed data compiled by that team and found at least 8,000 patients had needs that weren't being met by managed care organizations, or MCOs.

“There’s no reason in the world the MCOs should be against this bill,” Raymond said, “unless they’re bad actors."

The omnibus bill

On Tuesday, Davis plans to file what some lawmakers are calling the “Managed Care Accountability Bill,” which includes pieces of other bills but is much more sweeping in scope.

She wants to completely redo the state’s medical appeals process. When health care companies hired by the state refuse to cover doctor-ordered medical treatments, patients and their families are supposed to be able to fight back through a so-called “fair hearing.”

Rep. Sarah Davis during a House Committee General Investigating and Ethics public hearing in June. (Tom Fox / Staff Photographer)

In these proceedings, health commission staff weigh testimony from the patient and from the company, typically by phone. Experts say this system is crucial to making sure companies that manage the Medicaid health-care system aren’t boosting their profits by refusing to pay for treatments patients really need.

But The News found this system, rife with arbitrary decision-making and changing rules, heavily favored companies that deny care.

Davis’ bill would instead send patient appeals to a third-party arbiter, an independent contractor with no financial stake in the outcome.

"I didn't feel any confidence that the decisions were really medically driven," said Davis, who shared a copy of the bill with The News. "It seems like it was completely unfair, not only to the patient but also to the providers."

That provision is likely to be a sticking point with Senate budget writers because it could cost the state hundreds of millions of dollars a year, according to early estimates the health commission gave to Davis’ office.

The omnibus bill would also:

Do away with the health commission's haphazard system for fining managed care companies when they fail to properly serve patients, codify those penalties and require the state to disclose the amounts before and after any reductions.

Empower the health commission's Office of Inspector General to assist in financial reviews of managed care companies and to track and publish fines for failing to meet the terms of their contracts.

Beef up the state's tracking of company refusals to provide care, patient complaints and appeals. Over the last decade, this data has been inconsistently collected and hadn't been properly analyzed to identify alarming trends.

Require the state to compare patient experiences under for-profit vs. nonprofit managed care outfits. (In one program, The News found companies that answer to Wall Street made record profits and spent less on health care than nonprofits.)

Prohibit one company's rule that foster children must get approval before they can even see a specialist to be evaluated for physical, occupational or speech therapy.

Davis, who chairs the powerful subcommittee that controls the Texas health commission budget, said she’s optimistic that many of these measures will pass the House.

“You have Republicans, Democrats, Freedom Caucus,” she added. “The House seems to be building momentum behind these changes.”

But the Senate, the driving force behind rapid managed care expansion in the last decade, is another story.

Wild card in the Senate

Two years ago, despite a groundswell of complaints about the managed care system, lawmakers didn't take up reforms.

But a shakeup of leadership in the Senate has opened new channels for these bills.

Sen. Jane Nelson, R-Flower Mound. (Deborah Cannon / Austin American-Statesman)

Sen. Lois Kolkhorst, R-Brenham, has replaced Sen. Charles Schwertner, the Georgetown Republican who chaired the powerful Health and Human Services Commission last legislative session.

Kolkhorst has been receptive to concerns of Protect TX Fragile Kids, Mehta says, and is expected to introduce a significant reform bill this week.

The senator’s team has kept her bill under wraps, but Kolkhorst Chief of Staff Chris Steinbach said she “intends to file legislation and hold hearings to address how to improve managed care.”

The vice chairman on that committee, Sen. Charles Perry, R-Lubbock, is also expected to file as many as six bills aimed at increasing patient protection and penalizing health care companies that don’t follow the rules.

His office has also not yet provided comment on those bills, but early drafts obtained by The News indicate Perry wants to improve care coordination and stop companies that aren't following the state's drug formulary, which ensures certain medications are covered under Medicaid.

This interest from Senate Republicans, as well as support from key Democrats, makes advocates more optimistic for their passage this year.

But lawmakers are bracing for a significant tug of war between two powerful lobbying groups: Doctor and hospital groups vs. managed care companies.

Groups like the Texas Medical Association are generally supportive of more regulation of Medicaid plans, which are known for driving down health care provider payments and creating bureaucratic hurdles. Conversely, the managed care lobby, led by the Texas Association of Health Plans, has had great success in selling the idea that they save taxpayers money and that Medicaid providers are charging too much for services.

Those competing forces, combined with a potentially large price tag to fix Texas’ managed care mess, portend that much could come down to convincing one powerful Republican Senator: Jane Nelson of Flower Mound.

She is the lead architect and defender of managed care expansion in recent years, and she has close ties to the industry’s lobby group. And as the chairwoman of the Senate Finance Committee, she will likely influence any bill that will require more state spending.

Early this month she told The News that problems exposed last year are "inexcusable."

“We’ve got a long ways to go,” she said. “We need to meet the needs of every child, every recipient, not just children. But we need to do it in a way that is efficient, and by efficient I’m not talking money savings, necessarily.”

CORRECTION: 10:35 a.m., February 26, 2019: "A previous version of this story said the state has no data to support industry claims that managed care saves taxpayer money. In fact, a recent report from an outside consultant, using hypothetical scenarios, estimated that the program might have saved between $5.3 and $13.9 billion over the last decade."