AUSTIN, Texas—Big in all things, Texas leads the nation in failing to provide health insurance. About one in four Texans are uninsured, the highest percentage in any state. That’s some 6 million people, the total population of Missouri.

Yet Gov. Rick Perry, back from his stumbles in the 2012 GOP presidential race, has insisted that Texas will not accept the federal money provided by President Obama’s health care law to expand Medicaid coverage. As Republican governors from Arizona to New Jersey have joined the program, Perry has amplified his opposition. In a bristling speech to conservatives last week, he said governors who accepted the money had “folded in the face of federal bribery.”

In no state does the decision to expand present such profound political and policy issues as in Texas. Whatever Perry decides, many Texans will benefit from the subsidies in the 2010 law that help the uninsured in lower-to-middle-income families purchase private insurance on health care exchanges. Perry has also refused to establish such an exchange, but the law allows Washington to step in, and Texans who qualify will receive those dollars. Rice University demographers Steve Murdock and Michael Cline recently projected those exchanges will cover up to 1.7 million of the state’s uninsured.

The law’s other mechanism for increasing coverage is to broaden Medicaid eligibility for adults near poverty, but Washington can’t mandate this expansion if states refuse it. Murdock and Cline project that another 1.5 million to 2 million Texans would receive coverage if the state participated. Because the law commits Washington to initially paying the expansion’s entire cost, and an elevated share thereafter, local analysts estimate that if Texas expands, it will receive $100 billion in federal dollars over the next decade, while committing only about $15 billion of its own.

The state medical establishment, reluctant to cross the governor too publicly, has been restrained in pressing for expansion. But Republican state Rep. John Zerwas, a health care leader who represents a district outside Houston, says legislators are getting an earful at home from providers and local officials worried about the state rejecting the money.

Story continues

Against that backdrop, Zerwas and some GOP state House colleagues are searching for ways to steer Texas into the expansion. They assume the state will not move more people into the existing Medicaid program. But they consider it misguided to simply reject the federal money and deny insurance coverage to so many people who could obtain it. “We are not going to make this better … without doing something that substantially reforms how we deliver Medicaid,” Zerwas says. However, “we have to have a solution for this group of people.”

Last week, Zerwas introduced legislation that would authorize state health officials to negotiate with the Obama administration to expand while delivering coverage for the newly eligible through new means. He likes the deal the administration is discussing with Arkansas, which could allow the state to use Medicaid expansion dollars to instead buy private insurance for its eligible adults, and he believes that approach could be “sellable to the governor.”

Key state Senate Republicans, though, are striking a harder line. Senate Finance Committee Chairman Tommy Williams says he will support enlarging Medicaid only if Obama allows Texas to transform the way it delivers Medicaid, not only to the expansion population but also to the current recipients. “The existing program is not sustainable,” Williams says.

That’s a hardball position, but not necessarily disqualifying: The administration has reached an agreement in principle with Florida, for instance, to move more Medicaid recipients into private managed care. Many here, though, wonder if Perry would take any deal. The widespread belief is that he intends to seek the GOP presidential nomination again in 2016, and accepting more Medicaid money would smudge his image of Alamo-like resistance to Obama.

Rejecting the federal money might not pose an immediate political threat to Texas Republicans, whose coalition revolves around white voters responsive to small-government arguments. But renouncing the money represents an enormous gamble for Republicans with the growing Hispanic community, which is expected to approach one-third of the state’s eligible voters in 2016. Hispanics would benefit most from expansion because they constitute 60 percent of the state’s uninsured. A jaw-dropping 3.6 million Texas Hispanics lack insurance.

Texas Democrats are too weak to much affect the Medicaid debate. But if state Republicans reject federal money that could insure 1 million or more Hispanics, they could provide Democrats with an unprecedented opportunity to energize those voters—the key to the party’s long-term revival. With rejection, says Democratic state Rep. Rafael Anchia of Dallas, Republicans “would dig themselves into an even deeper hole with the Hispanic community.”

In 1994, California Republican Gov. Pete Wilson mobilized his base by promoting Proposition 187, a ballot initiative to deny services to illegal immigrants. He won reelection that year—and then lost the war as Hispanics stampeded from the GOP and helped turn the state lastingly Democratic. Texas Republicans wouldn’t be threatened as quickly, but they may someday judge their impending decision on expanding Medicaid as a similar turning point.