AUSTIN — Medicaid is the health lifeline for more than 3 million of the most vulnerable Texans, but some Republicans, including Gov. Rick Perry, are talking about opting out of the program as a massive state budget shortfall looms.

The prospect, described by some as far-fetched, raises fears about the toll on poor children, people with disabilities, pregnant women and the elderly. Medicaid covers at least part of the cost for more than 60 percent of nursing home residents.

"What we're talking about is public policy that literally could turn people out of nursing homes," said state Rep. Garnet Coleman, D-Houston. "People who now receive care will have their care removed. So, imagine somebody who's on Medicaid, a child getting cancer treatment, and all of a sudden there's no payment for the cancer treatment. Imagine a woman with breast cancer. Imagine somebody with heart disease. Imagine anyone who's developmentally disabled."

Those looking to shake things up said they are not proposing to put existing Medicaid patients out in the cold. They said they want to find a way to deliver health care in a better, more cost-effective way as Texas bends under the burden of more needs than money.

"It's not a warning that we're going to throw momma out of the retirement home, it's just saying we've got to do something different, because this is not working for us," said state Rep. Warren Chisum, R-Pampa, who cited the Medicaid opt-out idea as he runs for House speaker.

The discussion highlights the frustration as Texas faces a budget shortfall that some project at $21 billion or more through the next two years and Republicans, who gained strength in the election, promising they will not raise taxes.

With their ability to touch Medicaid hampered by federal requirements and the federal health care law aiming to add to the Medicaid rolls in the future, some fear the impact on areas such as education and public safety.

"It sends a strong message to the federal government that what you've asked the states to do, even with the (funding) matches that you're proposing, is going to cause the states to go bankrupt — or certainly it's going to compromise our ability to deliver on education, public safety and infrastructure," said state Rep. John Zerwas, R-Richmond, an anesthesiologist.

Human, economic effects

The Texas Health and Human Services Commission is looking at what the effect would be if Medicaid were abolished in Texas or federal matching funds were slashed. Zerwas, who carried the legislation that called for the study, is saying not that he supports an opt-out but that the idea needs to be thoroughly studied, including the human and economic effects.

Details are unclear on what would replace Medicaid if Texas opted out. Groups, including the limited-government Texas Public Policy Foundation, are working on proposals with the idea that the state still would be able to pull down federal funds in addition to its state health care money, or the federal government would otherwise continue coverage options.

"It's not just opting out of Medicaid. It is replacing the Medicaid program with something that is affordable by the states and the federal government and can deliver better care," said the foundation's Arlene Wohlgemuth, a former state lawmaker.

Perry told Fox News that he thinks Texas could find a "private insurance solution" that would save the state and federal government $40 billion each over six years while covering more people. He did not give specifics.

Federal funds question

Advocates for the poor say they see no way for Texas to keep the program's federal dollars - projected to total $16.6 billion of $24.7 billion in total Medicaid spending in Texas this fiscal year - if it is not part of the federal program. Texas also would lose Children's Health Insurance Program funds if it did not have a Medicaid program, according to the Health and Human Services Commission.

"This is not a line of conversation that is based in reality," said Anne Dunkelberg of the Center for Public Policy Priorities. "There is no state that has done this. There is no federal option to do it at this point. It sort of seems like a distraction from the hard work at hand."

Coleman suggested the idea is being floated partly because other painful budget cuts are being contemplated, "so, if they do something less than getting rid of Medicaid, that makes it more acceptable."

GOP Lt. Gov. David Dewhurst cast doubt on the idea's prospects in a statement.

"In light of the revenue shortfall facing Texas, we need to take a serious look at any option that will help us balance the budget," Dewhurst said, "but preliminary indications from the Texas Health and Human Services Commission indicate that opting out of Medicaid may not be the most cost-effective alternative."

Opting out, some lawmakers say, would force local communities to bear increasing costs - with nowhere to turn but higher property taxes.

"They say they don't want to throw Grandma out of the nursing home. Well, the fact is that 70 percent of our elderly that are in nursing homes will be kicked out of care if we turn away the $20 billion of federal support," said Rep. Mike Villarreal, D-San Antonio. "They can't have it both ways. They can't talk down the federal government and have their hand out."

Health and human services make up nearly a third of the state's budget, and local health care providers depend on Medicaid reimbursements and Medicaid-related payments to help keep their doors open.

Cost shifted to counties?

Coleman said opting out of Medicaid "will crater communities," as people who become uninsured will turn to emergency rooms.

"This would be a direct unfunded mandate to counties, and it would be an unfunded cost to charity hospitals," he warned.

David Lopez, chief executive officer of the Harris County Hospital District, said local officials want to work with state officials considering a different approach. He said that any change would have to account for the significant support provided by Medicaid to the state and communities.

"If we are going to do something different, then we've got to talk about what happens to the need that we have for additional dollars that we are using right now in support of patient care," Lopez said.

If there is a way to restructure the program and protect federal matching dollars, he said, "we can certainly try to work with the state to identify what is feasible. We have to look at it in the context of the entire impact of what Medicaid does for our community and what it means going forward."

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