Boost Texas Health Outcomes Through Smart Spending

This brief is part of “Election 2024: Policy Playbook,” a series by Rice University and the Baker Institute that offers critical context, analysis, and recommendations to inform policymaking in the United States and Texas.

The Big Picture

• Rising health care costs and declining health outcomes require Texas to think differently about how it spends its annual $46 billion health care budget. 
• Texas can improve the value of its health care budget by investing more on health-impacting, non-medical services, similar to other states.
• Policymakers can build on recent improvements, such as laws supporting pregnant women’s health that incorporate non-medical services, to address broader determinants of health.

Summarizing the Issue

As health care costs continue to rise, health outcomes remain stagnant. Decades of research show that while access to quality health care is vital, it only accounts for 10–20% of overall health outcomes. Social and economic factors, health behaviors, and environmental conditions play a more decisive role. In Texas, these non-clinical factors are called non-medical drivers of health (NMDOH) and Texas can enhance the value of its health care investments by integrating NMDOH services into health care delivery. The state can take advantage of new policy options that allow Medicaid to cover NMDOH services — an approach already taken by other states with demonstrated success. Additionally, Texas’ substantial investments in mental and behavioral health, women’s health, and health insurance for state employees and teachers could also create valuable opportunities to incorporate these non-medical services into health care programs.

Expert Analysis

Texas Has Experience Integrating NMDOH Into Health Care Delivery

Texas has already used a variety of policy strategies to integrate non-medical services into health care delivery.

• Since the 1990s, the state has enabled Medicaid enrollees with significant disabilities to receive home meal delivery, home modifications for accessibility, and transportation assistance.
• Since 2022, the Value-Based Payment and Quality Improvement Advisory Committee (VBPQIA) has urged the legislature to direct the Texas Health and Human Services Commission (HHSC) to leverage Medicaid policy options that increase funding for non-medical services. 
• In February 2023, HHSC released an NMDOH Action Plan to advance the integration of these services into Texas’ Medicaid program.
• Also in 2023, the legislature enacted HB 1575, mandating that Medicaid managed care organizations screen all pregnant women for NMDOH needs and provide intensive case management to ensure they receive the requisite services.
• More recently, HHSC has also included requirements for NMDOH screening in its Directed Payment Programs, which are worth $5 billion a year to hospitals and other providers. 
• Health insurance plans and providers across the state are now implementing NMDOH programs, more than 140 of which are cataloged in the Texas NMDOH Consortium’s program index.

New Policy Opportunities That Texas Should Deploy

With $41 billion in annual funding, Medicaid offers numerous policy pathways for Texas to integrate NMDOH into its programs.

• Twenty-one states have used Section 1115 waiver authorities to include housing, food, transportation, and employment support for Medicaid beneficiaries.
• Since 2016, states have been able to use the “in lieu of services” provision, which allows reimbursement by Medicaid for non-traditional services that address social and economic factors impacting health. Recent federal guidance includes a roadmap for states to add services such as housing support, asthma home remediation, and home-delivered meals to their Medicaid programs, which six states have done.
• Three states have used Children’s Health Insurance Program (CHIP) health services initiatives to provide food and nutrition, asthma home remediation, and violence prevention services for their members.
• Other states use a variety of incentives to spur greater investment in NMDOH services within their Medicaid programs.

These programs are tailored to each state’s requirements, so Texas can design initiatives to address its unique needs. Opportunities also exist for similar tailored programs in women’s health programs ($150 million per year) and mental and behavioral health programs ($1.1 billion per year). In addition, Texas’ contributions to state employees’ and teachers’ health insurance premiums ($2.7 and $1 billion, respectively) can be directed to include NMDOH services, particularly those addressing chronic, high-cost health conditions.

Build on Early Wins To Advance NMDOH Integration

HB 1575, the directed payment programs, and HHSC’s NMDOH Action Plan are excellent starting points, for example:

• Case management services embedded in HB 1575 would benefit other populations, particularly those with high health care costs.
• Directed payment programs could be expanded to include providers who address the non-medical needs of priority populations through evidence-informed programs.
• With legislative direction, HHSC can broaden its NMDOH Action Plan to include services for food insecurity, housing, and transportation.

Policy Actions

To enhance the value of its health care spending, Texas would benefit from a comprehensive strategy that prioritizes investment in NMDOH services, including the following initiatives:

• Passing legislation requiring HHSC to use the existing flexibility in the Medicaid program, as recommended by its own VBPQIA committee, to integrate NMDOH services into the state’s Medicaid and CHIP programs.
• Including NMDOH services in the funding streams made available to support individuals with serious mental illness and other significant behavioral and developmental challenges.
• Directing the state employees’ and teachers’ health insurance programs to develop at least one NMDOH program for active members with high-cost, priority health conditions such as obesity, diabetes, and asthma.

The Bottom Line

Improving the value of Texas’ health care expenditures by investing wisely is as important as reducing overall health care costs. Integrating health-impacting, non-medical services into health care delivery can deliver results. Texas has already taken steps in this direction, and the upcoming legislative session presents another opportunity to claim more value.

This material may be quoted or reproduced without prior permission, provided appropriate credit is given to the author and Rice University’s Baker Institute for Public Policy. The views expressed herein are those of the individual author(s), and do not necessarily represent the views of Rice University’s Baker Institute for Public Policy.