Office of the Governor Rick Perry

Gov. Perry: Texas Sues Federal Government Over Unfair Medicare Policy

Friday, March 03, 2006  •  Press Release

AUSTIN - Gov. Rick Perry today announced that Texas has filed suit in the U.S. Supreme Court to protect taxpayers from an unconstitutional federal Medicare policy that would commandeer billions in state general revenue dollars.

“Today, all Texas taxpayers can be assured that we are standing up against an unconstitutional federal policy,” Perry said. “Texas will not foot the bill for a benefit that the federal government should responsibly provide to the American people.”

The Texas suit asserts that by mandating the payments, the federal government has levied a direct tax upon the states which usurps their sovereign power and interferes with essential state business.

At the center of the suit is the federal policy - known as “Medicare clawback” - which became effective in January. The clawback policy requires states to make payments to the federal government for the bulk of drug coverage for individuals who are eligible for both Medicare and Medicaid, known as “dual-eligibles.” Texas has an estimated 323,000 dual eligibles. States are currently required to cover 90 percent of the costs of prescription drugs for dual-eligibles, but the federal formula is not set in stone.

Using one formula provided by the federal government, Texas Attorney General Greg Abbott estimated that the “net loss” to Texas could be $100 million over the next four years; Perry said the stakes are even higher because the currently-mandated yet unconstitutional payments will quickly soar into the billions of dollars.

“Ensuring that seniors and Texans in need can access prescription drug coverage is our primary concern, but we will not continue to bear the burden for this federal benefit Texans deserve,” Perry said. “When Congress implemented the clawback provision it did so only so it could shift billions of dollars in costs of the program to states. This policy is an unprecedented, unconstitutional raid on state funding.” In January, Perry directed the state cover drug costs for dual-eligibles who were inappropriately denied coverage due to “transition glitches” when Medicare rolled out its new drug plan. The federal Centers for Medicare & Medicaid Services assured Perry that Texas would be fully reimbursed for that effort. Texas was joined in its suit by Kentucky, Maine, Missouri and New Jersey. Nine other states have joined a friend-of-the-court brief filed by Arizona in support of the states that have filed suit.

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