Senator Eliot Shapleigh - El Paso, Texas

WASHINGTON – The effort to insure tens of millions of uncovered Americans will almost certainly involve a sweeping expansion of Medicaid – with Texas probably feeling the impact more than any other state.

State lawmakers have for years limited Medicaid's reach to low-income adults, who under Texas rules don't qualify for the joint state-federal program. One proposal by U.S. House lawmakers would provide federal funding to extend Medicaid to about 1 million Texas adults, according to the Austin-based Center for Public Policy Priorities – a massive jump from the 38,000 who qualify today.

"Just by virtue of the fact that you are including populations that have never been included in Texas, you are going to expand the program significantly," said U.S. Rep. Michael Burgess, R-Lewisville.

Neither state nor federal officials have estimated the fiscal impact of Medicaid expansion on Texas. But the Center for Public Policy Priorities estimated it would amount to an additional $5 billion annually.

A spokeswoman for the Texas Health and Human Services Commission said the state hadn't completed a fiscal analysis, but added, "there is no question that it's billions."

Anne Dunkelberg, the center's associate director and a former Texas Medicaid official, said the additional monies could be enough to "take us out of tax donor status," meaning the state would receive more in federal tax dollars than it sends to Washington.

"The straight dollars that come in will be staggering, and will have a real effect on our economy," she said.

Texas Democrats, who are likely to support their chamber's health care overhaul, mostly favor an expansion of Medicaid to help cover some of the state's 6 million uninsured.

But Texas Republicans and some health care providers aren't enthusiastic, noting that many providers don't treat Medicaid patients because its reimbursement rates are the lowest among insurance programs.

Texas hospitals, which would typically support an expansion of insurance, are nervous about a trade-off under which increasing coverage triggers a reduction in supplemental payments for covering large numbers of uninsured. The hospitals say the payments help cover the cost of caring for illegal immigrants.

Texas' two senators, Kay Bailey Hutchison and John Cornyn, oppose a reduction in so-called disproportionate share payments.

"There is a lot of budget gimmickry about the federal government absorbing the full cost of the Medicaid expansion – and then after five years imposing that cost on the states," Cornyn said Thursday.

Under the House legislation, expanding Medicaid would provide insurance to an additional 11 million Americans by 2018. It would cost $438 billion over 10 years.

"You almost have to have the expansion of Medicaid to get coverage, but it is driving the cost up," said Burgess, an obstetrician who doesn't support the bill.

Some governors have objected to an expansion of Medicaid, wary of the future effect on their budgets. One Senate bill envisions states would have to absorb part of the cost of enrolling new people in 2015.

That could cause problems in Austin, where state lawmakers have routinely underfunded Medicaid. John Hawkins, a top lobbyist for the Texas Hospital Association, said the Senate's provision could translate to as much as $2.9 billion annually for the state.

"It depends on the total package – whether Medicaid expansion is a good deal or not," Hawkins said.

On Thursday, Texas Gov. Rick Perry likened health reform to the federally funded effort to expand unemployment insurance – an offer that Texas Republicans recently rejected. Perry told WBAP-AM, News/Talk 820 that he wouldn't shy from another standoff.

"My hope is we'll never have to have that stand-up," Perry said, according to a recording provided by his staff. "But I am certainly willing and ready for the fight if this administration continues to try to force their very expansive government philosophy down our collective throats."

Texans have also been critical of the legislation's lack of provisions for illegal workers. A federal program that sent about $46 million annually to Texas hospitals for illegal immigrant coverage expired last year.

Yet some states haven't spent their money from the program, prompting Hutchison and the Texas Hospital Association to call for an overhaul of the funding formula.

Hutchison tried, but failed, to extend the program earlier this year.

"The two health reform proposals do not address this issue at all, which is one of the senator's huge concerns," said Lisette Mondello, a senior adviser to Hutchison. "We have not seen language from the Senate Finance Committee yet, but we've been given no indication it's going to be included."