State lawmakers all over the country are slicing healthcare spending as they struggle to close multi-million dollar budget gaps without tax increases. Leaders of my home state of Texas did just that in June, balancing the budget without raising taxes. However, one of many spending cuts they approved was an 8 percent reduction in Medicaid reimbursement rates for hospitals and doctors. In doing this, they created a new trickle-down effect --Texas style.
Let's follow the money in El Paso, where the uninsured rate is 31 percent, even higher than the state average of 25 percent. El Paso County's hospital district provides healthcare for anyone and it also has taxing authority. Cuts in the state budget caused a loss of $22 million in state money for the fiscal year that starts Oct. 1, 2011.
The El Paso Hospital District is conservative fiscally, but this year its leaders resorted to proposing a tax increase for the first time in five years. El Paso commissioners approved a 7.9 percent tax hike Sept. 26 for the hospital district. This means about a $1 more a month for an owner of a $125,000 home, the average value in El Paso. This is a small amount, but it's not sitting well with the residents. El Paso's politicians are blaming the state for balancing the budget on the backs of counties.
But the story doesn't end there. An 8 percent reduction in Medicaid reimbursement rates is pretty hefty. Other hospitals without taxing authority are likely to demand higher reimbursement rates from health insurance companies. That's called cost shifting, and it's very common. In turn, health insurance companies will raise premiums. Employers then are likely to do one of two things pass some of the cost on to employees or, in the case of many small businesses in Texas, drop health insurance altogether. That's a big reason Texas has the highest uninsured rate in the county.
The issue isn't going away anytime soon. Medicaid enrollment will speed up as the new eligibility requirements under healthcare reform are implemented. Texas lawmakers have proposed reforms intended to reduce Medicaid costs, but look for tax hikes to continue trickling down to the local level.