Naked City

Was Medicaid the motive? One explanation for George W. Bush's lack of enthusiasm for the Children's Health Insurance Program (CHIP) last legislative session has to do with Medicaid. Medicaid provides health insurance for the poor. CHIP provides health insurance for the working poor -- children whose parents earn too much to qualify for Medicaid. In 1999, Bush would have insured 300,000 children with CHIP; House Democrats led by Austin Rep. Glen Maxey wanted 500,000. Democrats argued that with 1.4 million uninsured children, and CHIP providing three federal dollars for each state dollar, the larger program made sense. "Congratulations … you shoved it down our throat," Bush told Maxey, after the Democrats won. The CHIP-Medicaid connection is simple. CHIP outreach, with the pitch "your child might be eligible for medical coverage that is almost free," attracts parents of children too poor to qualify for CHIP but eligible for Medicaid. CHIP is a Medicaid magnet, which worried Bush.

That was last session.

This session, a group of House Democrats, including the entire Travis County delegation, is pushing the state to enroll 80% of the 600,000 Texas children who qualify for but do not receive Medicaid coverage. (Austin Rep. Terry Keel is one of three openly pro-Medicaid House Republicans.) Led by Maxey and Patricia Gray, D-Galveston, the "Medicaid Caucus" was recently slowed down by a Medicaid scandal that Gray argues has nothing to do with the state's failure to provide Medicaid for children who qualify.

The scandal: National Heritage Insurance, the company handling the state's Medicaid billings, was recently criticized for keeping more Medicaid money than it should have. National Heritage's contract allows it to keep money it saves administering Medicaid -- and requires it to pick up some unanticipated cost increases. It now seems that the company was more zealous about pocketing savings than about helping the state cover cost increases. Last year, National Heritage kept approximately $4 million in Medicaid savings.

Some critics have noticed that no other state has cut a deal as sweet at the one Texas cut with National Heritage -- a subsidiary of EDS. Appropriations Committee Chair Rob Junell complained that the 1998 contract was tailored to fit National Heritage -- the only company that bid on the Medicaid program. Why the good deal? Texans for Public Justice's Lobby Watch suggests that the devil is not only in the details of the contract. In the report, "Medicaid Raid" (www.tpj.org/Lobby_Watch/), the Austin-based group tracks EDS influence to campaign contributions and the lobby. It turns out that the biggest beneficiary of EDS funding was the current president of the United States, George W. Bush. In the two campaigns Bush ran for governor, EDS gave Bush $39,700. And Bush wasn't the only recipient of EDS cash. The company hedged its bets on the 1999 lieutenant governor's race, contributing $8,500 to Democratic loser John Sharp and $7,500 to Republican winner Rick Perry, who became governor when Bush moved on to Washington. Texans for Public Justice also found that just before the Medicaid-NHI contract was negotiated in 1998, 36 lobbyists reported between $1.3 and $2.1 million in EDS earnings.

EDS was also one of the companies behind Bush's failed 1997 attempt to completely privatize the state's public assistance programs. At that time, the governor argued that private companies are always preferable, because they have an incentive to save the state money -- perhaps using the same methods National Heritage used to save itself $4 million.