Perry Backs Health Care Lawsuit Even With Texas in Line for Most Federal Dollars

WASHINGTON -- Texas would be among the biggest beneficiaries of President Barack Obama's health care overhaul, standing to gain coverage for nearly 4 million uninsured residents.

But Gov. Rick Perry blocked moves to lay the groundwork for that expansion of coverage, and among the alternatives he's supported is an untested regional solution that could prove as controversial as Obama's remake.

With Perry running for the Republican presidential nomination, health care in Texas and his own ideas as governor will get fly-speck scrutiny on the national stage. His state is a study in contrasts, boasting world-renowned facilities like the MD Anderson Cancer Center in Houston, along with the highest proportion of uninsured residents of any state -- 26 percent.

As a national candidate Perry has made total repeal of "Obamacare" central to his fledgling campaign. But it's unclear what he would put in its place. And if the Supreme Court ultimately upholds all or parts of the law, Perry has signaled that he would help carry out key provisions to avoid defaulting to the federal bureaucracy.

Texas has received various grants under Obama's law for planning, insurance regulation and consumer education. The state employee benefits system says it expects to draw $60 million in federal subsidies this year to help cover its early retirees, cashing in on a provision of the law.

But when Republican state Rep. John Zerwas tried to move legislation to set up an insurance purchasing pool required by the national overhaul, he ran into a veto threat from Perry.

The purchasing pools -- called exchanges -- are one of the key features of Obama's law. Run by the states, they would let consumers buy coverage from a choice of private plans. Most individuals and families in the exchanges would be eligible for federal tax credits to lower their premiums.

Exchanges are supposed to open in 2014. If a state doesn't act in advance, the law authorizes the federal government to set up and run its exchange. And since the Texas legislature meets only every other year, this past session was seen as perhaps the state's only opportunity.

But Zerwas said Perry told him he was concerned that moving ahead with the exchange legislation would undermine a multistate lawsuit against the federal overhaul that Texas is part of, not to mention creating other political problems. The lawsuit challenges the constitutionality of the law's requirement that Americans obtain health insurance -- the so-called individual mandate -- an issue on which lower courts have split.

"Unfortunately, whether we like it or not, health insurance exchanges have become synonymous with Obamacare," said Zerwas. An anesthesiologist from the Houston suburbs, Zerwas said he believes it's worth taking the flak to guarantee that Texas will retain control of its insurance market. The governor disagreed.

"The position (Perry) was taking veers into some political considerations," said Zerwas. "He felt it would not ring well with some of the constituents and grassroots out there, and frankly, he was concerned it could potentially weaken the arguments in the lawsuit."

In the end, Zerwas said Perry reassured him that as governor he could put the exchange legislation into place through an executive order, should that become necessary. A spokeswoman for the federal Health and Human Services department said that would be possible under a newly flexible approach the feds are taking.

A spokeswoman for the governor, Lucy Nashed, said Perry believes there are too many unknowns about the federal law to move ahead. "It's premature to be setting up anything that has to do with the federal health care bill because so much of it is still up to the courts with regard to its constitutionality," she said.

That still leaves Texas with the nation's lowest rate of insurance coverage, even when compared to other states that have high immigrant populations. Experts say one of the key problems is a relatively low level of employer-sponsored private coverage. Many of the Texans who would gain coverage under Obama's law would be middle-class workers and their families, newly eligible to join the exchange.

Nashed said Perry has advocated a range of health care fixes, including national caps on malpractice lawsuits, conversion to electronic medical records and efforts to keep patients healthy and out of hospitals. He also signed legislation this year that would clear the way for Texas to explore a health care overhaul in conjunction with other states.

That may sound like an innocuous proposal, but it could turn out to be more controversial than Obama's overhaul.

The idea behind so-called state compacts is for the federal government to turn over Medicare and Medicaid funds to a group of states to use as they deem best for their citizens' needs. It would be the biggest re-engineering since the giant health care programs were created in the 1960s -- assuming that groups of states could actually agree on what to do and Congress would give its consent.

"How could any one state control its costs?" asked Bob Laszewski, a health policy consultant to industry. It's like the Euro zone, he added, referring to Europe's troubled economies. "It's not states' rights anymore. These states would have to cede a lot of authority to a new entity."