Vivian Ho, "Public Medicaid Managed Care Organizations are Under Attack in Texas" (Houston: Rice University’s Baker Institute for Public Policy, April 24, 2023).
Medicaid plays an outsized role in Texans’ health care, providing 5.4 million low-income individuals (mostly children and the elderly) with health insurance. Yet two new bills recently introduced in the Texas House and Senate — House Bill 2401 and Senate Bill 651 — could jeopardize the care received by patients with Medicaid. If passed, these bills would remove the guarantee that county-owned health insurance plans that meet state regulatory criteria are allowed to offer Medicaid plans. Such action would threaten the ability of county-owned plans to continue to operate, reduce the quality of Medicaid services and prevent money from being invested back into Texas communities.
Competing health insurance companies operate managed care organizations (MCOs), which provide Medicaid coverage to beneficiaries and negotiate with health care providers to deliver care. MCOs earn profits when the annual premium paid by the state exceeds their health care costs. Medicaid beneficiaries choose between plans based on their network of providers and publicly reported quality ratings.
Not all insurance companies are allowed to offer Medicaid policies. Insurers must apply to the state and meet criteria in the government’s request for proposals, after which the state certifies a limited number of MCOs to serve each local market. County hospitals in Dallas, Houston, San Antonio and El Paso operate private companies that offer Medicaid plans to those who qualify. These four public MCOs comprise 11% of the Texas market (by revenue). In contrast, for-profit insurers such as Amerigroup, UnitedHealthcare and Molina control 73% of the Medicaid market. These for-profits are publicly traded national companies headquartered outside of Texas.
Current law requires the state to guarantee Medicaid contracts to county-owned insurance companies that meet the government’s contractual requirements to sell Medicaid policies. These organizations receive preferential treatment, because they invest any profits earned back into the communities they serve. For example, Harris Health’s Community Health Choice has committed $3.4 million to help the Harris Center improve access to inpatient mental health. In contrast, for-profit insurers’ first obligation is to their shareholders. Profits are more likely to be returned to shareholders in dividends or invested in capital projects that expand market share.
Lobbyists representing for-profit insurers have convinced certain Texas legislators to file HB 2401 and SB 651, which would remove the guarantee that county-owned insurance plans that meet state regulatory criteria be granted permission to offer Medicaid plans. Adopting this legislation would endanger the likelihood that county-owned plans will continue to operate, despite the fact that they have consistently tied or out-performed the for-profit companies in the Texas Health and Human Service Commission’s report card rating system.
Losing any one of these county-owned plans means that more dollars earned by for-profit insurers will flow into the pockets of investors rather than to Texas communities. Furthermore, the elimination of county-owned insurers threatens the quality of Medicaid services. Recent research found that nationally the lowest-spending (i.e., highest-profit) Medicaid insurers tend to be for-profit companies that restrict access to a broad set of services, and patients covered by these low-spending insurers were more likely to be hospitalized for avoidable reasons.
Even more worrying, losing county-owned Medicaid plans reduces the subsidy that Texas receives from the federal government to pay for Medicaid. County-owned plans contract with their own hospital to care for Medicaid patients. For-profit plans have been known to exclude county hospitals from their provider networks in order to avoid the sickest (most costly) low-income patients, who gravitate toward public hospitals for care. Yet revenues earned by county hospitals are recognized under Medicaid rules as state contributions to the program, which are more than matched by federal dollars. For example, the $253 million earned by the four largest county health care systems led to $611 million in additional federal money paid to all 96 hospitals in Texas that cared for low-income patients in 2022.
Shifting more Medicaid patients to for-profit insurers means that Texas tax payers will pay more for Medicaid costs, while the federal government pays less. Don’t let for-profit insurers fool you into thinking that preferential treatment for county insurance plans dampens healthy competition in the Medicaid market. Those of us fortunate enough to have insurance through our job have become jaded with for-profit insurers. How can we trust for-profit plans to “do the right thing” for the least fortunate in our communities?
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