Image: U.S. Republican presidential candidate Texas Governor Rick Perry
Jim Young  /  Reuters
U.S. Republican presidential candidate Texas Governor Rick Perry attends a campaign stop in Cedar Rapids, Iowa, August 15, 2011.
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updated 8/22/2011 2:57:15 PM ET 2011-08-22T18:57:15

With the highest percentage of uninsured residents, Texas would be one of the biggest beneficiaries of President Barack Obama's health care overhaul.

But Gov. Rick Perry blocked moves to lay the groundwork for expanded coverage. And among the alternatives he's supported is an untested regional solution that could put states in charge of Medicare, an approach potentially as controversial as Obama's.

With Perry running for the Republican presidential nomination, health care in Texas and his own ideas as governor will get fly-speck scrutiny on the national stage.

Video: Gov. Daniels on Perry’s ‘treason’ statement (on this page)
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His state is a study in contrasts, boasting world-renowned facilities like the MD Anderson Cancer Center in Houston, along with 6.8 million uninsured residents, or 26 percent of the population.

As a national candidate, Perry has made total repeal of "Obamacare" central to his fledgling campaign. Less clear is what he would put in its place. But if the Supreme Court ultimately upholds all or parts of the law, Perry has signaled he would help carry out key provisions to avoid defaulting to the federal bureaucracy.

Texas has already received various grants under Obama's law for planning, insurance regulation and consumer education. The state employee benefits system says it expects to draw $60 million in federal subsidies this year to help cover its early retirees, cashing in on a provision of the law.

Story: Romney playing hands-off on Perry

But when Republican state Rep. John Zerwas tried to move legislation to set up an insurance purchasing pool required by the national overhaul, he ran into a veto threat from Perry.

The purchasing pools — called exchanges — are one of the key features of Obama's law. Close to 4 million Texans stand to gain coverage under the law, nearly half of them through exchanges.

Run by the states, exchanges would let consumers buy coverage from a choice of private plans. Most individuals and families participating would be eligible for federal tax credits to lower their premiums.

Exchanges are supposed to open in 2014. If a state doesn't act in advance, the law authorizes the federal government to set up and run its exchange. And since the Texas legislature meets only every other year, this past session was seen as perhaps the state's only opportunity.

But Zerwas said Perry told him he was concerned that moving ahead with the exchange legislation would undermine a multistate lawsuit against the federal overhaul that Texas is part of, not to mention creating other political problems. The lawsuit challenges the constitutionality of the law's requirement that Americans obtain health insurance — the so-called individual mandate — an issue on which lower courts have split.

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"Unfortunately, whether we like it or not, health insurance exchanges have become synonymous with Obamacare," said Zerwas. An anesthesiologist from the Houston suburbs, Zerwas said he believes it's worth taking the flak to guarantee that Texas will retain control of its insurance market. The governor disagreed.

"The position (Perry) was taking veers into some political considerations," said Zerwas. "He felt it would not ring well with some of the constituents and grassroots out there, and frankly, he was concerned it could potentially weaken the arguments in the lawsuit."

In the end, Zerwas said Perry reassured him that as governor he could put the exchange legislation into place through an executive order, should that become necessary. A spokeswoman for the federal Health and Human Services department agreed that would be possible.

A spokeswoman for the governor, Lucy Nashed, said Perry believes there are too many unknowns about the federal law to move ahead. "It's premature to be setting up anything that has to do with the federal health care bill because so much of it is still up to the courts with regard to its constitutionality," she said.

Story: Gov. Rick Perry mines Texas system to raise cash

That still leaves Texas with the nation's lowest rate of insurance coverage, even when compared to other states that have high immigrant populations. Experts say one of the key problems is a relatively low level of employer-sponsored private coverage.

Nashed said Perry has advocated a range of health care fixes, including national caps on malpractice lawsuits, conversion to electronic medical records and efforts to keep patients healthy and out of hospitals. He also signed legislation this year that would clear the way for Texas to explore a health care overhaul in conjunction with other states.

What sounds like an innocuous experiment in federalism could turn out to be more difficult than Obama's overhaul.

The idea behind so-called state compacts is for the federal government to turn over Medicare and Medicaid funds to a group of states to use as they deem best for their citizens' needs. The biggest re-engineering since the giant health care programs were created in the 1960s would have to overcome AARP's disapproval.

Video: Obama campaign adviser on Perry, Bachmann (on this page)

"We oppose interstate health care compacts because they could result in the loss of guaranteed benefits, similar to turning Medicare and Medicaid into block grant programs," said David Certner, legislative policy director for the seniors lobby, which sees "especially grave concerns for Medicare."

Industry consultant Bob Laszewski says even if Congress were to approve of the idea, it's unlikely that groups of states could agree on how it would actually work.

"How could any one state control its costs?" asked Laszewski. It's like the Euro zone, he added, referring to Europe's troubled economies. "It's not states' rights anymore. These states would have to cede a lot of authority to a new entity."

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: Gov. Daniels on Perry’s ‘treason’ statement

  1. Transcript of: Gov. Daniels on Perry’s ‘treason’ statement

    MS. GUTHRIE: Well, let's talk about the rhetoric among the candidates who are in the field. And here you are talking to conservative activists back in February about your concerns about rhetoric in our politics in general.

    GOV. DANIELS: I urge a similar thoughtfulness about the rhetoric we deploy in the great debate ahead. I suspect everyone here regrets and laments the sad, crude, coarsening of our popular culture. It has a counterpart in the venomous, petty, often ad hominem political discourse of the day.

    MS. GUTHRIE: And yet it would appear, sir, that many of your Republican colleagues in the presidential race aren't necessarily heeding that warning. Here is Texas Governor Rick Perry this week accusing the Federal Reserve chairman of near treason.

    GOV. PERRY: If this guy prints more money between now and the election, I don't know what you all would do to him in Iowa , but we'd -- we would treat him pretty ugly down in Texas . I mean, printing more money to play politics at this particular time in American history is almost treacherous, or treasonous, in my opinion.

    MS. GUTHRIE: Governor, did Rick Perry cross the line?

    GOV. DANIELS: He made a serious point in an unfortunate way. I think everybody, including, I guess, the president has given him a mulligan on the, on the adjective. You know, the point he's making about flooding the world with printed money, borrowing unlimited quantities, using it for trickle down government, which is the policy of this administration, is a bad one. But sure...

    MS. GUTHRIE: But is this a...

    GOV. DANIELS: Sure, he shouldn't have said it. And I still, I still believe very much -- you know, I went on in that, in that talk that you just played a sliver of to say we can't beat the other side. There's nobody more effective than the president and his allies at vilifying people, challenging their character. And they've a...

    MS. GUTHRIE: Are you sure about that? I mean, Rick Perry just accused the Fed chairman of near treason.

    GOV. DANIELS: And I join the, the -- those who agree that that was the wrong thing to say. But I'm just, I just told our folks as a matter of effectiveness, you can't. You can't outdo them. Besides, here's the more serious point, Savannah , we sure have found in Indiana if you want to make big change, you need big majorities, you need a big consensus, and you need to try and unify and reach out to people. And, you know, that's what I hope that our party would do. If the, if the goal is results and not just scoring points, and not just the emotional satisfaction of zinging somebody, or not even just the very, you know, partial victory of winning an election, if we're going to save this country, if we're going to redeem the American dream , then we're going to have to gather together people. Once again, we are in this together. The, the, the dangers we face are, are of equal, I think, threat to every one of us . And, and I just hope that we will find a vocabulary, first as a party, then as a nation, for saying so.

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