It’s only a matter of time before more GOP Governors fold on Medicaid expansion.

Why? State budget realities.

States that are refusing to expand Medicaid — like Texas — are hurting their hospitals by giving up funds that could help offset their uncompensated care, Dan Mendelson, president and CEO of Avalere Health, said at a POLITICO Pro breakfast briefing this morning.

“That’s very close to $2 billion for Texas hospitals,” Mendelson said. “They are severely disadvantaging their providers if they don’t take the expansion in the early years.”

He’s right. And it’s not just hospitals impacted — it’s also skilled nursing facilities (SNFs), which are America’s second largest health facility employer.

Besides the Arizona Senate race between GOP Rep. Jeff Flake and Democrat Richard Carmona, which has become a tight contest, the Virginia race between George Allen and Tim Kaine warrants attention in that Allen needs to focus his message and his rationale.

While Allen has time to focus his message, anyone paying close attention to the advertising dialogue in the DC media can see Kaine outgunning Allen on TV. Yes, Crossroads, the Chamber of Commerce and others are doing their part to attack Kaine, but the positive case for Allen is missing — and that’s essential.

The Allen campaign has noted it is attempting to save money for the end game, but it’s pretty clear he’s under performing in Northern Virginia and the primary reason is he’s nowhere to be seen on the airwaves — especially as Romney and Obama totally dominate the advertising landscape.

Walking back to Georgetown from Memorial Bridge, where I stood for at least an hour in silence watching the smoldering Pentagon, the first thing one could notice was that even M Street and Wisconsin Avenue had pretty much cleared out, as most, presumably, stayed inside to watch the ongoing news coverage.

While internet access was working well, land lines and cell service were jammed and inoperable throughout the day. Bill Kenyon, a political consultant friend from Texas, was in town, and wanted to have an early dinner. While not thinking much about eating, we agreed to meet at Nathan’s — at Wisconsin and M. Besides spacing out reflectively, and sitting quietly in my office the rest of the afternoon watching news, I don’t recall what I did until dinner.

But as soon as i walked down 31st Street for the two block walk to Nathan’s, i saw something I’d never seen except in movies: armored personnel carriers cruising around Georgetown. Vehicle checkpoints were being set up.

The dinner crowd at Nathans was unusually animated for the situation at hand, but then again, the gravity of the event was still sinking in. I ordered a filet and a bottle of Penfolds 389 Australian cabernet, and a strolling photographer walked by the table; one of those guys hoping you’ll spring for a cheesy photo with your date. Kenyon suggested getting a picture for historical purposes, and have saved it ever since.

Having just pulled that picture out to look at once again — now ten years gone by — the significance and raw emotion of that day has returned with a vengeance as I watch the 9/11 Ceremony in NYC, and the reading of the names from family members along with pictures of those who perished. God bless.

Later that night, unusual lights and what appeared to be aircraft were all over the skies above Washington. But there was no noise as these lights hovered about the city. These lights have been reported, but do not believe there was ever any official explanation. Watching the news into the early morning, and as world reaction set in, it was clear things would never again be the same.

Like millions of Americans, i was already at work that fateful morning. It was a sunny, beautiful day in Georgetown, and had just enjoyed a dark roast coffee on my porch overlooking the serene courtyard. It was just like any other day. Seated back at my desk right before 9am eastern time, i was, per usual, watching my three cable TV monitors when the first report came in about the first plane.

Looking at the live NBC video, and the initial speculation that a ‘small plane’ had hit the first tower, my first reaction was that the large indentation on the building was much larger than a small commercial aircraft. A commercial aviation buff, i noticed the wingspan of the aircraft was at least half the size of the building width. Small aircraft? Something did not seem right.

The NBC feed resumed regular programming — but then when the second plane hit minutes later, it was full tilt bedlam on the cable news stations, and i sat riveted in my chair watching history unfold for the next hour.

Just a while later, an unusual, ominous thud echoed up the Potomac and i walked outside on my porch to see what was up.

Five minutes later, dark smoke from the National Airport area — down river from Georgetown — filled the sky, just as it was now being reported a plane had hit the Pentagon. I began receiving calls from loved ones asking if I was OK, and began making some of my own calls to the NYC area, which were unable to be completed.

I left my office to walk down to the M Street Starbucks and the fear in people’s faces was palpable. I, too, was becoming uneasy as fighter jets were screaming overhead, and the sounds of helicopters permeated the normally serene morning air.

Back at my office, I watched the towers fall — one of which I’d just visited a month or two ago to have a drink at Windows of the World. I thought of that large elevator I’d gone up on to get to the top of the tower, and the horror that must have ensued as building tenants attempted to flea the building. My emotions got the better of me, and had to lay down on my office couch as i was feeling weak and faint.

By about noon, the time I usually go running, I decided to head  down to the Memorial Bridge for a clear look down the river towards the Pentagon. When I arrived, traffic had stopped, people were out of their cars, and a small crowd — in stark silence — stood on the south side of the bridge as smoke billowed up the river from the blast area.

I joined the crowd, climbed up on the massive stonework to get a better view, and stared down river. No one talked, no one said a thing. There was nothing to say. Everyone, by then, knew thousands of their countrymen had been killed. We were all there, standing on Memorial Bridge, frozen in time and frozen in thought as the acrid smoke from the burning Pentagon dissipated into the 9/11 morning sunshine.

I was greeted this morning by a crescendo of email alerts and tweets declaring that Mitt Romney and Michelle Bachmann “won” the CNN GOP presdiential primary debate in Manchester, NH — and that’s essentially correct.

It’s also true that Tim Pawlenty was the consensus loser in the media beauty pageant for not backing up his “Obamneycare” attack on Romney; he looked weak, tentative and indecisive. A National Journal header on an email alert even declared this “Pawlenty’s Manchester Meltdown”. That’s a bit of an overstatement: Pawlenty scored with several good answers, one of which related to Right to Work issues prevalent in the state media discussion. While not an auspicious welcome to the national debate circuit, he has time to recover.

But this all goes to show how quickly the narrative turns: three weeks ago, Mitt Romney was ‘faltering’; a ‘weak’ front-runner in an even weaker field. As a disclaimer, I support Romney, but even the most objective observer will agree that he was poised, on-message with jobs/econ, credible, and looked the part of potential President. His debate performance was a visual validation of the Wash Post/ABC News poll finding him with a 49-46 lead over Obama. The bottom line: Romney is gaining stature — and that is the type of coveted commodity earned over time.

So Tim Pawlenty has dug himself into a temporary hole with an error of both style and substance: he was weak, and let Romney off the hook. But there’s a long road ahead, and this bump in the road will, if they’re as good as they think they are, end up helping him and his staff. The one general truism in campaigns, which are subject to such rapid, volatile swings: things are never as bad as they first appear, and things are never as great as they first appear.

Alexandria, VA — As Senator Ben Nelson (D-NE) already faces an extremely challenging re-election environment, it will be even more difficult for him in a presidential election cycle, when he will be running alongside Barack Obama. In an off-year re-elect, extremely vulnerable incumbents like Nelson have a better opportunity to define their record and their brand unencumbered by top-of-the-ticket linkages.

But 2012 will ensure the National Republican Senatorial Committee (NRSC) and the aggressive third party groups who will again dominate the paid media landscape have an easy mark in tagging Nelson as a willing, leading partner of the “Obama team”. Is it fair? That will all get lost in the wash and the record itself will determine his survivability.

To be sure, the Nelson re-elect will be more complex than simplistic linkages, and can surely point to in-state successes and examples of breaking with Obama and Senate Majority Leader Harry Reid. But regardless, the structural parameters already framing the race and the dialogue to follow will make this a decidedly uphill contest — especially as Nebraska is a relatively cheap paid media state, which allows even marginal third party groups to get on the air with blunt advertising messages.

It was also interesting to note key Nelson staff are already leaving: it was recently reported that Mike Hogan, his deputy chief of staff on Capitol Hill, with a strong health care policy background, is joining Ogilvy as a senior Vice-President. Gordon Hensley

I lost my shirt on this race, and still don’t get it. How did Reid win while topping out at mid-40′s in his ballot w/ Sharon Angle while suffering an unfav that was rarely below 52?

Mark Mellman and Jim Margolis explain in this piece, courtesy of PollingReport.com:

Harry Reid: Withstanding the Wave

by Mark Mellman & Jim Margolis

Pundits and prognosticators, strategists and seers all said it couldn’t be done. Incumbents who garner positive ratings from fewer than four in ten voters and who post double-digit deficits in match-ups against opponents (in public polls) are not supposed to win—and they usually don’t. In fact, combing through the history of polling it is hard to find someone other than Senator Harry Reid who accomplished that feat.

Three prime factors account for this history-making result:

1. Senator Reid is a unique leader who spent decades fighting—and winning—for his state.

2. Reid put together perhaps the best Senate campaign operation ever.

3. Reid empowered a skilled team to devise a methodical campaign plan, long before the election, and the candidate and the team stuck to the plan, despite the naysayers and public pollsters who said the race couldn’t be won.

Setting the Scene
As election 2010 approached, Nevada faced desperate economic straits. At nearly 14.5%, unemployment was the highest in the state’s history and the highest in the nation. In the desert state of Nevada, some 60% of homeowners were underwater; holding mortgages that exceeded the value of their homes. Nearly half the electorate said their family was worse off economically than it had been a couple of years before and over half worried that they themselves, or a close relative, would have their home seized.

Such massive economic dislocation spells trouble for the party in power. Just 45% approved of the President’s performance and, in contrast to the rest of the country, slightly more voters harbored negative feelings about Democrats than about Republicans. While voters expressed intense hostility toward Congress as an institution, because of his position as Senate leader, Reid was precluded from running as an outsider.

Finally, while Reid has served Nevada for decades, the state’s explosive growth brought tens of thousands of new voters to the polls who knew very little about the Senator, his background or his accomplishments. His last competitive race was in 1998 against John Ensign, in which he prevailed narrowly. In ’04, Reid’s opponent never passed the credibility threshold in a Senate race that was also overshadowed by the presidential contest. In short, some two-thirds of the 2010 electorate was new to Nevada since Harry Reid ran his last serious race, and that one, by his own admission, was not executed well. Instead of defining himself for voters between elections, that task was left to the press including the virulently anti-Reid Las Vegas Review Journal, the state’s largest newspaper, whose commitment to defeating the Leader has been evident not just on its editorial page but in its supposed “news” coverage as well.

The Republican Primary
Given his apparent vulnerability, a number of Republicans sought the opportunity to take on Leader Reid. Understanding Reid’s appeal and his tenacity better than the pundits, the state’s strongest GOP officeholder, Congressman Dean Heller, passed up the race—unwilling to risk his career on what he obviously considered a long shot. With Heller out, the primary seemed like a contest between basketball scion Danny Tarkanian and former newscaster and former Republican state chair Sue Lowden.

Tarkanian never caught on, while Lowden foolishly suggested Americans barter chickens for health care services. Yes, bring a chicken to the doctor the next time you need a check-up she told Nevadans. The always effective Reid press operation put a national spotlight on her inane comments which became a staple of late night comedy routines. As a result, conservative former state legislator and Tea Party leader Sharron Angle won the nomination with 40% of the vote to 26% for Lowden.

Observers enjoy speculating about whether one of the other primary contenders would have proved a more formidable general election candidate. While we can never know for sure what would have happened, what is certain is that these other candidates never made it to the finals, thereby demonstrating considerable weakness. Indeed, Lowden lost the primary not because of ideological impurity, but because voters concluded her health care buffoonery rendered her unacceptable and unelectable.

The Reid Strategy
Although Leader Reid was notoriously suspicious of polling and voter research generally, by agreement of the campaign team, the Reid effort was data driven—from message development to ad testing to targeting to evaluation, to GOTV. After a series of focus groups and polls, and well before the GOP primary, we presented a strategy to the team focused around six imperatives:

· We face a tough race regardless of our opponent.

· Democrats, independents, moderates and Latinos are key to victory.

· Voters need to know that as Majority Leader, Reid uses his clout for Nevada, that he sees the world throughtheir eyes and that no one can do more for Nevada than he can.

· Though our positive message is important, we cannot allow this contest to be a referendum on Harry Reid—disqualifying our opponent must be a central component of our efforts. This election must be a choice for Nevada voters and the candidates must be evaluated against each other.

· Paid media is the most important tool with sufficient power to alter the outcome of this race.

· Turning out our voters by establishing a world-class ground operation will be vital to success.

While some cast a dismissive eye at the GOP field, our team never did. Our research made clear that the economic and political environments were such that anyone who emerged from the Republican primary posed a real threat. At no point did any member of the team take Reid’s reelection for granted; no one relaxed, ever. That attitude kindled a relentless focus on setting and achieving goals—a focus which never waned—and a recognition that every decision could be a win/lose moment that needed to be treated accordingly.

Goal setting extended to every facet of our work. Instead of merely looking at crosstabs that enabled us to say we were doing well or less well, better or worse among one group or another, we used historical election data (actual returns and exit polls) to devise vote goals for some two dozen subgroups. Each poll enabled to us to measure our progress toward these goals within each voter segment. Early on it became clear that four segments—Democrats, independents, moderates and Latinos—would prove critical to our success. At the outset, Senator Reid was far behind goal with each of these groups and specific tactics were employed to improve and cement his standing with each.

For example, based on a micro-targeting model, the campaign identified those independents most likely to move toward us, and Mike Muir, of Ambrosino, Muir & Hansen, used early mail to reinforce our TV messages with those select independents. Careful analysis revealed that those who received the mail were in fact moving to a greater degree than others, so the mail program was continued beyond its original expiration date. Later on, we used data from repeat contacts in polls and phone canvasses to model not just undecided voters but true persuadables—those whose vote intention actually changed over the course of the campaign.

Latinos, too, were a particular focus of attention. Several key insights emerged from a special poll of Latino voters which informed campaign activities. First, Spanish dominant Hispanics were even more likely than their English dominant brethren to support Senator Reid. Thus, we knew that monolingual polls of Latinos were much too conservative in stating the level of support for Senator Reid in this community. Second, we learned that while Hispanics (the label they preferred) were committed to immigration reform, economy/jobs and education issues were even more important to them. Finally, we determined that the anti-Latino demagoguery of our opponent, and of Republicans in general, was a powerful motivator for these voters. Again, all these lessons were integrated into the campaign’s advertising, field, political and coalition-building efforts.

Later in the campaign another critical segment was added to this list: defecting Republicans, who came primarily from the ranks of liberal and moderate GOPers. We went into the race assuming an electorate about evenly divided between Republicans and Democrats. If each candidate consolidated his/her base to the same extent, winning independents was the only way to emerge victorious. While Senator Reid earned the backing of almost every Democrat, a victory with independents afforded a nerve-rackingly narrow path to victory. After our first assault on Angle, we noted that she had not consolidated her partisans to the same extent Senator Reid had. Peeling off even a narrow slice of Republicans afforded the campaign a margin of safety and hence, generating Republican defections became a central imperative.

Fortunately Senator Reid had built strong relationships with key Republicans throughout the state. Other members of the GOP were simply frightened to death of Sharron Angle. Former Reagan aide and leading Republican Sig Rogich had developed a close relationship with the Senator and joined the effort early. The Republican mayor of Reno publicly added his voice in the fall, as did the Republican leader of the State Senate, the former head of the Clark County Republican Party, the former Republican sheriff of Clark County, and former RNC chair Frank Farenkopf. In addition, a number of Republican business leaders, well aware of what Reid has meant for economic development in Nevada, also joined the cause.

Some of these Republicans were used creatively in late television and radio advertisements not only to legitimize and reassure Republican voters who wanted to defect from their party, but also to fortify independents who were conflicted about the candidates, all while they delivered a credible, counter-to-type message about the danger of electing Angle.

Moving Nevadans into Senator Reid’s corner required a positive message that met voters where they were. Given the state’s desperate economic condition, it was impossible to say “Senator Reid is solving all your problems,” but it was credible to argue that he is focused on the problems voters are confronting and that no one—absolutely no one—is better able to help the state than the majority leader of the Senate.

Thus, our positive message had to make clear that whatever doubts, concerns or questions voters had, they would be losing something important if they fired Harry Reid. Merely asserting that, however, was worse than inadequate.

During Governor Jennifer Granholm’s 2006 reelection campaign in recession wracked Michigan, The Mellman Group team faced an analogous situation in which they learned some key lessons. First, tense is important—arguing that good things havehappened is not credible; suggesting that they will happen is believable. Second, big numbers or broad sweeping assertions don’t work, while individual stories of accomplishments do connect.

With these lessons in mind, the creative team at GMMB developed a series of future oriented ads around Reid’s influence and effectiveness that were then tested. What emerged from a long process was the notion that “no one can do more for Nevada”—an ambiguously tensed line that did not elicit counter arguments because it built on voters’ preexisting attitudes. Support for the theme was provided by a series of stories powerfully told through the eyes of individuals who had been affected by Reid’s efforts: a veteran who could get treatment in Las Vegas instead of driving to San Diego because Reid had gotten a veterans hospital built in Las Vegas; a worker whose job (and those of 22,000 others) at a major casino construction project was saved because Reid talked banks into extending loans; individuals who were working in the new clean energy industry which Reid is building in Nevada.

Just Too Extreme
As important as the positive message would prove to be in providing a backstop and rationale for Reid supporters, it was clear from the data that in this toxic environment we could not sustain an up or down referendum on Harry Reid. Disqualifying our opponent was central to our strategy. Having studied Democratic failures in Massachusetts and New Jersey during 2009, we concluded that once challengers picked up a head of steam in this climate, stopping them was exponentially more difficult. We therefore resolved to begin to define our opponent immediately after the primary. To that end we tested arguments against each of our potential adversaries in polling before the primary and developed a “first line of attack” against each.

Thus, when Sharron Angle emerged victorious from the primary, we were immediately on the air with a devastating attack highlighting her view that Social Security and Medicare should be wiped out.

Further polling assessed which arguments (uncovered by an amazing opposition research team) would prove most compelling to voters. Then, under an umbrella frame that “Sharron Angle was just too extreme,” the general election campaign was launched.

GMMB quickly produced a whole package of spots which were then tested, yielding another important lesson: Voters doubted anybody could be quite as crazy as we said Angle was. Spots that included Angle speaking in her own words proved most effective because they overcame these doubts. This finding was incorporated into most of the subsequent ads, which frequently featured Angle herself on video or audio tape (provided by our fearless trackers) stating her outrageous and extreme positions.

Showcasing her belief that Social Security, Medicare, the Department of Education and the Veterans Administration should be abolished combined to push Angle far out of the mainstream. As a result, her unfavorable ratings skyrocketed, jumping to 52%, up 32 points between March and August.

As we moved into the fall, the foundation had been laid to take Angle’s “extreme” positions to a new level: dangerous. In short, electing Sharron Angle would have real consequences for the electorate.

In part that meant paid advertising and earned media highlighting Angle’s vote against criminal background checks for those who work with children, and her vote against requiring insurance companies to cover breast and colon cancer tests. But we also moved the message directly to the economy, the area toward which Angle had been directing most of her firepower, trying to blame the world-wide recession on President Obama and Senator Reid (needless to say an argument with its own serious credibility problems). Earlier Angle had said she would not have taken action to save the troubled City Center project in Las Vegas, and its 22,000 jobs—action Reid successfully took, allowing the nation’s largest private development to open.

We used Angle’s videotaped comments repeatedly in ads making the case that she wouldn’t solve the economic crisis, she would make it worse. We also ratcheted up the tenor of our attack by putting Republican business leaders on camera (and on radio) saying bluntly that electing Sharron Angle would cost Nevada jobs. In a state where unemployment topped 15% on Election Day, that was a grave danger.

By the time voters cast ballots, Angles unfavorables were over 55% and Senator Reid’s net favorables were 10 points stronger than Angle’s. Team Reid had been successful in making the race a choice that was at least as much about Angle as it was about Reid.

The final strategic imperative we identified arose from the fact that consistent voters were less likely to support Reid than those with inconsistent voting records. Therefore insuring that our supporters actually cast ballots was vitally important, and Senator Reid’s campaign responded to the challenge by building the most effective turnout operation ever constructed for a Senate contest. It was a beauty to behold, devised and implemented by two of the most impressive campaign professionals we have ever worked with, campaign manager Brandon Hall and veteran Nevada strategist Rebecca Lamb (who oversaw every aspect of the campaign and were backed by an incredible team of communications, field and GOTV experts).

By the beginning of the early vote period the Reid campaign was in the process of meeting all its core strategic goals, giving the Senator a comfortable, better than 5-point win, despite predictions that his political career was coming to an end.

The Polls
The presumption that Reid was unelectable rested on a series of public polls, nearly all of which showed Reid behind Angle. Indeed, in October alone the Nevada press reported on 14 surveys, only one of which showed Leader Reid ahead. Using models based in part on these polls, The New York Times’ Nate Silver gave Reid less than a one in six chance of victory.

Lots of excuses have been offered for the inaccuracy of the public polls, from margin of error, to late shifts in the race and under-sampling Latinos. It should be clear that it was far from impossible to get this race “right.” As an article in the Las Vegas Sun headlined “How Harry Reid’s Pollster Got It Right” explained, our internal polling predicted the outcome exactly.

The public polls in Nevada were wrong because their methodology was fundamentally flawed. We were able to reproduce results close to those of the public polls by replicating those flaws and measuring the impact. Three core problems afflicted the public polls in Nevada:

Defining likely voters: A CNN/Time poll which gave Reid an 11-point lead among registered voters—a fact you’d be hard-pressed to unearth in the panoply of press generated by this survey—offers some data on the problem. Analysts focused on “likely voters,” and among those designated likely to vote by CNN/Time, opponent Sharron Angle eked out a 2-point advantage.

Distinguishing between likely and less likely voters is a complex task which some pollsters get wrong. For example, they may rely on self-reported enthusiasm to differentiate likely from less likely voters, despite the fact that research has demonstrated no link between enthusiasm and individual level of turnout.

Even if a researcher surmounts that problem, a steeper hurdle remains. Calling someone a “likely” voter is to make a probability statement. A likely voter may have, say, an 80% chance of turning out, while a “less likely voter” may have only a 20% chance of casting a ballot. In that scenario, 20 of every 100 likely voters will not show up, while 20 of every 100 less likely voters will. No real electorate is composed exclusively of “likely voters.” In Nevada’s early vote alone, over 30% of those who cast ballots were not consistent voters.

Consider the arithmetic impact. If just 30% of the Nevada electorate was composed of “less likely voters,” Reid would have held a nearly 8-point lead in the Time/CNN poll—much closer to the eventual result.

Polling only the easy-to-reach: Some people are harder to reach on the phone than others. Good pollsters go to great lengths to secure a completed interview with the respondent originally identified at random, while cheap, quickie polls survey the respondents who are easiest to reach. Willy-nilly substitution produces not a random sample, but rather a sample of easy-to-reach voters, who may differ from others. Lo and behold, they are different. At one point Senator Reid led by just 2 points among those interviewed on the first or second attempt, but by 9 points among harder-to-reach respondents who required three or more calls.

Cell phones: Robopolls, like those produced by Rasmussen, are precluded by law from calling cell phones. At one stage Reid led by 19 points among those reached on cell phones, but was nearly tied among those reached on land lines.

As a result of these methodological shortcomings, many public polls contributed to a net loss of knowledge about this race.

A Final Note
After the election one account of the race suggested the win was “lucky.” In fact nothing could be further from the truth. Senator Reid recognized the headwinds he was confronting long before November 2^nd. He was determined to tell his story and make sure voters knew the choice before them. He then empowered an amazing campaign staff that brought management skill, press savvy, astonishing fundraising expertise and a breathtaking ground game to work each day.

While we made errors to be sure, a dedication to research and a willingness to stick to our paid media plan ultimately combined to prove many pundits wrong and re-elect one of our nation’s most important leaders.

The Reid effort was many things. But the one thing it wasn’t was lucky.

Tim Graves, President of the Texas Health Care Association (THCA) in Austin, TX has taken a measured, rational, intelligent approach to opposing the Medicaid “opt-out” proposal being fanned by Governor Rick Perry and newly-emboldened House conservatives in the Texas Legislature.

This is a debate that’s worth having, though, as the electorate in Texas and across the nation deserve a debate about Obamacare — and the view of many that the vast expansion of Medicaid eligibility isn’t just wrong, it’s a federal infringement on states’ primacy in the health and well being of their citizens.

In the end, it will go nowhere — the practicality and feasibility of opt-out is a non-starter.

Regardless, Emily Ramshaw of the Texas Tribune and Marilyn Serafini of Kaiser Health News have written the seminal article on the subject thus far:

Can Texas and a Dozen Other States Drop Medicaid?

November 12, 2010

A week after newly emboldened Republicans in the Legislature floated a radical cost-saving proposal — opting out of the federal Medicaid program — health care experts, economists and think tanks are trying to determine just how serious they are and if it would even be possible.

The answer? It’s complicated. But that’s not stopping some conservative lawmakers in nearly a dozen other states, frantic over budget shortfalls and anticipating new costs from the federal health care overhaul, from exploring something that was, until recently, unthinkable.

“States feel like their backs are against the wall, so this is the nuclear option for them,” says Christie Herrera, director of the health and human services task force for the American Legislative Exchange Council, an association for conservative state lawmakers. “I’m hearing below-the-radar chatter from legislators around the country from states considering this option.”

Some Texas Republicans — bolstered by their expanded majority in the state House — say the strings attached to Medicaid and the Children’s Health Insurance Program are bankrupting the state, which is staring down a budget hole that some have estimated as high as $25 billion. They argue that states could provide more efficient and cost-effective care for children, the disabled and the impoverished by either giving up federal matching money altogether or getting federal officials to grant states waivers to provide health care as they see fit.

Jobless parents in Texas only qualify for Medicaid if their income is below 12 percent of poverty ($2,646 for a family of four), and working parents only qualify if their income is below 26 percent of poverty. Gov. Rick Perry “understands the frustrations of legislators as they deal with a program that consumes 20 percent of the state budget,” says Katherine Cesinger, his spokeswoman. “Their options are severely limited by a federal government that continues to tie their hands when it comes to administering Medicaid.”

Opponents argue that dropping Medicaid would have such a devastating effect on the state’s economy — not to mention the health of 3.6 million Texans currently enrolled in the program — that the idea is pure anti-Washington grandstanding.

The federal government covers 60 percent of Texas’ $45 billion biennial Medicaid budget. Without that money, critics say, any health care the state could provide would be so limited that undercovered patients would flood emergency rooms, and Texans would end up paying the costs through local property taxes or higher insurance premiums.

“The real benefit of Medicaid is it’s a shared expense, with the feds taking up a larger portion,” says Regina Rogoff, executive director of the safety-net People’s Community Clinic in Austin.

Speaking of a withdrawal from the program, Rogoff says: “This will raise local property taxes, because hospital emergency rooms can’t turn away patients. And it has the implication of us paying, through federal taxes, to subsidize care in other states, leaving people who live in our state without care.”

Such fears notwithstanding, the idea of dropping out of Medicaid is on the table in Texas and roughly a dozen other states, including Alabama, Mississippi, Washington and Wyoming. Options include remaking Medicaid with only state financing to give states broad flexibility in benefit and cost design, and, two, seeking federal waivers to allow states to change parts of their Medicaid programs.

“If people are in superbad poverty, that’s one thing,” says state Rep. Warren Chisum, R-Pampa, the state’s most vocal supporter of dropping out of Medicaid and a candidate for speaker of the House. “It breaks my heart when there’s someone who smokes, and who stays drunk half the time, and we’re supposed to provide their health care.”

Starting in 2014, the new health law extends Medicaid to those with incomes up to 133 percent of the federal poverty level, which is $29,327 for a family of four in 2010. Some conservatives believe that if states dropped Medicaid, many low-income people could instead receive federal subsidies to buy private insurance coverage through state exchanges, another piece of federal health care overhaul that takes effect in 2014. States would then become totally responsible for Medicaid beneficiaries who require nursing homes and other long-term care, for premiums and other Medicaid costs for Medicare beneficiaries — but everyone else would go into the exchange.

Edmund Haislmaier, a senior research fellow at the Heritage Foundation, a conservative research organization, estimates that Texas would save $46.5 billion from 2014 to 2019 under this model. In all, Haislmaier says, 40 states would come out ahead financially.

Others dispute that and note that switching millions of people from Medicaid to subsidized private insurance would be costly to the federal government, and may not be legal.

“The subsidies are explicitly not available for those with incomes below the poverty level,” says Jennifer Sullivan, senior health policy analyst at the consumer group Families USA.

Judith Solomon, co-director of health policy at the nonprofit Center on Budget and Policy Priorities, says the new health care law explicitly stated that only “applicable taxpayers” were eligible for subsidies, ruling out anyone whose income is less than 100 percent of poverty, except for legal immigrants.

Cindy Mann, director of the federal Center for Medicaid and State Operations, says the U.S. Department of Health and Human Services was trying to determine whether Medicaid recipients dropped by their home states would qualify for subsidies.

Critics say dropping out of Medicaid would be a devastating blow to the state’s medically underserved. Seven of 10 Texas nursing home residents rely on Medicaid, which also pays for more than half of all deliveries of babies in the state.

The state’s share of these expenses would not shift to the federal government, says Jose Camacho, executive director of the Texas Association of Community Health Centers, but to counties and local taxpayers, as hospitals would become inundated with more uninsured and underinsured Texans.

Others fear that cutting off the flow of federal Medicaid dollars could cripple the state’s economy: About a million Texans work in health care, and from 2005 to 2009, a quarter of the new jobs created in the state were in that field.

Tom Banning, chief executive of the Texas Academy of Family Physicians, says that without Medicaid, or with a less-extensive replacement program, health care providers would be forced to shift their costs to the private market, driving up insurance premiums and prompting more people to forgo coverage. “From a practical standpoint,” Banning says, “the downstream economic implications for Texas’ health care infrastructure would be decimating.”

Opponents also say that the theory that a Democratic administration would offer Texas a no- or few-strings-attached Medicaid waiver is a pipe dream. “A state’s choice to get out of Medicaid is to get all the way out, not to pick and choose,” says Anne Dunkelberg, associate director of the Center for Public Policy Priorities, a nonprofit group in Austin.

In the end, says Robert Reischauer, a former director of the Congressional Budget Office, the debate over Medicaid alternatives may be more about states’ leveraging additional federal financing than dropping the program.

“Some states will toy with it, think about it and reject it from the state perspective,” Reischauer says. “To the extent they don’t, I would hope Congress and the president work together to create very strong incentives against it.”