Medicaid Expansion Emerging as Strategy to Tackle Property Taxes, And Houston is Ground Zero

In 2012, the U.S. Supreme Court’s left it up to states to decide whether or not to accept Medicaid expansion funding from the federal government. Most states have accepted the funding, which was designed to provide an insurance option for construction workers, child care providers, and other workers with incomes between $4,000 and $24,000 per year (for a family of four). Texans in that income range don’t qualify for other insurance assistance programs, and many work in jobs that don’t offer health insurance. Since Texas leaders declined the funding, leaving 750,000 to 1 million Texans in this coverage gap, the push to accept the funding has largely focused on the opportunity to improve the well-being of these uninsured workers, save and create jobs, and bolster our health care system.

But there’s now growing attention on one other potential benefit: The opportunity to reduce local governments’ reliance on property taxes.

Local health programs and hospital districts currently use property taxes for uninsured patients who can’t pay their bills. If Texas accepted Medicaid funding so more health care was paid for by insured patients rather than property taxes, local governments would have more options. They could cut property taxes or shift freed-up property tax revenue to improve other local services without raising taxes.

The conversation is likely to pick up steam as Lt. Governor Dan Patrick prioritizes property tax reductions and reform for the next session. A new Senate committee he created to focus on the issue will hold its next hearing March 21 in Lubbock.

So far, the discussion has been loudest in Houston. Leading the charge are two Republicans, Harris County Judge Ed Emmett and County Commissioner Steve Radack, known as “one of the most outspoken conservatives on the court.”

The Houston Chronicle recently reported on Commissioner Radack’s promise to “keep up the drumbeat” on the issue. When asked at a recent meeting about his strategy for reducing property taxes, the Commissioner said:

"So, let's go after the state. Let them just simply accept the money, send it to us, we'll cut taxes."

The Houston Chronicle editorial board recently praised Judge Emmett and Commissioner Radack for their approach, noting:

“Both Radack and Emmett make the obvious point that the only way commissioners might be able to lower taxes for county residents is for the state to accept Medicaid expansion, thereby easing the burden on Harris Health System of caring for an estimated 70,000 uninsured patients. When uninsured patients can't pay their bills, the Harris County taxpayer assumes the burden, to the tune of more than $70 million annually.”

The argument is not entirely new. Back in 2013, former Deputy Comptroller Billy Hamilton (appointed by the Governor last year to lead his “strike force” on HHS contracting) explained:

“Counties and hospital districts also spend $2.5 billion in local tax dollars for indigent care, inpatient hospital care for jailed individuals and charity care, most of which the expansion would cover. Finally, local hospitals shoulder an additional conservative estimate of $1.8 billion in unreimbursed charity costs, some of which funds individuals that Medicaid would cover under an expansion. “ (See page 2 of this report.)

In recent years twenty-five Texas business groups have pushed the Legislature to address the coverage gap, but state leaders have offered no sign of developing a plan. Nonetheless, the property tax push is putting new wind in the Medicaid expansion sails. And other developments are creating pressure for action. Texas faces the potential loss of $1 billion in current hospital funding through the 1115 Waiver if the state doesn’t try to cover these uninsured Texans. Meanwhile other red states that accepted the funding are saving money and showing other signs of success.

As we approach the 2017 legislative session, those state leaders focused on easing property tax pressure should take a fresh look at accepting Medicaid expansion funding to close the coverage gap.