Senator Eliot Shapleigh - El Paso, Texas

Judge William Wayne Justice

AUSTIN – All of the Legislature's careful preparations to put away billions in surplus funds could blow up when an IOU for as much as $5 billion comes due this year.

Key budget writers predicted Tuesday that U.S. District Judge William Wayne Justice will order improvements to children's Medicaid services this spring or summer in the climax to a class-action lawsuit filed in 1993.

"It could be anywhere from $1 billion to $5 billion, we just don't know," said Houston Rep. John Davis, a leading GOP writer of the social services budget, referring to a possible hit to the two-year state budget from Judge Justice's expected order.

Though House Appropriations Committee Chairman Warren Chisum, R-Pampa, suggested the tab might run as high as $7 billion, a Dallas-area senator said he and state lawyers separately calculated a maximum price tag of $5 billion – mostly to increase how much Medicaid pays physicians and other health-care providers.

The judge's order could complicate GOP leaders' plans to set aside $3 billion of the state surplus to pay future costs of school property tax cuts passed last year, said Sen. Bob Deuell, R-Greenville, one of three Senate Finance Committee members drafting the Medicaid budget, and Finance Committee Chairman Steve Ogden, R-Bryan.

"It's another reason not to spend all our money," Mr. Ogden said. GOP leaders had attributed the surplus – which was predicted to reach $14.3 billion – to strong economic growth and fiscal restraint. And they had designs for the funds.

Dr. Deuell, a family physician who has tracked the lawsuit closely since its inception, said he expects Judge Justice to grant most of what is being sought by the plaintiffs' lead attorney, Susan Zinn of San Antonio.

Ms. Zinn declined to estimate the cost of fixing children's Medicaid in Texas, though she believes lawmakers' high-end estimates are "too high." She referred a reporter to about a dozen proposed orders she filed last month.

Though the orders have no dollar amounts attached, they call for increased reimbursements not just to physicians but dentists, pharmacists and medical-equipment suppliers. One suggested order requires the state to provide better transportation for poor children to their health-care appointments. Others require that the state better educate families about benefits children are entitled to receive; make sure a contractor's toll-free hotlines work; and demand that Medicaid HMOs it hires stop denying needed care to children.

For instance, Ms. Zinn said, she knows of one Medicaid HMO's recent "refusal to provide a heart transplant to a child who needs it."

A state is not required to offer Medicaid, the nation's main health care program for the poor. But if a state does, it must cover poor children and meet federal standards for ensuring that they receive care – especially a series of medical, dental, vision and hearing tests to prevent chronic physical and mental health problems.

Ms. Zinn said state reports show nearly 1.5 million children on Medicaid failed to get required check-ups with a doctor in 2005 – up from 941,000 children in 1993. The number of children not getting dental check-ups increased to 1.7 million, from 1 million in 1993, she said. Medicaid reimbursements are so low that few providers are willing to see Medicaid patients, she said.

Attorney General Greg Abbott has argued that Texas complies with federal Medicaid laws and that every eligible child who's requested treatment has gotten it. An Abbott spokeswoman said Tuesday that Judge Justice's expected remedial order – to come after a multi-day hearing that starts in Austin on April 9 – is likely to be appealed.

Dr. Deuell said he sees no escape from a big budget hit.

"We could comply," Dr. Deuell said. "We could opt out of Medicaid entirely."

Dr. Deuell, Mr. Chisum and Rep. Dan Gattis, R-Georgetown, criticized former Texas Attorney General Dan Morales, a Democrat, for agreeing to a settlement in 1995.

"Morales gave away too much," Dr. Deuell said.

But Ms. Zinn noted that the consent decree "was approved when now-President Bush was the governor.

"This is more important than partisan politics," she said. "We don't need scapegoats. We need a solution."

How to pay for Judge Justice's expected order in the case – known as the "Frew suit" for Linda Frew, the mother who filed it – set off a tiff among House Appropriations Committee members Tuesday.

Mr. Gattis warned that "we have limited funds" and other programs might be cut.

House Speaker Pro Tem Sylvester Turner, D-Houston, responded, "The way to be preventive is, on the front end, take care of these children so that they don't have to go get lawyers to fight their battle."

Mr. Chisum, the committee's chairman, retorted, "Not to have the attorney general sign us into contracts we shouldn't enter into, that's real prevention."

Mr. Abbott set the Capitol abuzz with a gloomy assessment of how the lawsuit is likely to end.

He and aides briefed House Speaker Tom Craddick, R-Midland, Mr. Gattis and Mr. Davis about two weeks ago. Last week, Mr. Ogden and Lt. Gov. David Dewhurst received separate briefings that involved key senators such as Dr. Deuell.

Mr. Dewhurst spoke about the lawsuit to reporters.

He wants to salt away nearly $7 billion of the state's $14.3 billion surplus to pay for the property tax cuts over the next four years, plus use $2.8 billion of it to end various accounting gimmicks used by budget writers in 2003 and 2005.

Simply to pay for caseload growth in Medicaid, enrollment growth in public schools and the continuing cost of last spring's school reforms would eat through $2.1 billion more, Mr. Dewhurst has estimated. That would leave only $2.5 billion for prisons, parks, border security, higher education – and Medicaid provider rate increases.

House budget writers discussed a plan to give physicians a 10 percent rate increase for treating Medicaid patients, which would cost the state $190 million over the next two years. Paying them the same as Medicare, the federal health program for the elderly, would cost the state about $450 million in 2008-09.

"I believe the judge is going to be looking at how we are approaching the situation," Mr. Turner said.

1993 –Several impoverished mothers sue Texas Medicaid officials.

1994 –The case is certified as a class-action suit.

1995 –Texas agrees to a settlement and promises to improve health care for poor children.

2000 –U.S. District Judge William Wayne Justice finds the state is not living up to the consent decree and orders improvements.

2005 –The state says the consent decree is no longer needed, but Judge Justice disagrees. The state appeals but loses.

April 9 –A hearing on remedial action is scheduled to begin before Judge Justice.

SOURCE: Dallas Morning News research