Study: ObamaCare Significantly Increases Texas Medicaid Spending

Published April 1, 2011

Already facing a challenging budget picture, Texas received more bad budgetary news with the release of the Texas Public Policy Foundation’s study Final Notice: Medicaid Crisis, A Forecast of Texas’ Medicaid Expenditures Growth.

The study by Jagadeesh Gokhale, a senior fellow at the Cato Institute, warns President Obama’s Patient Protection and Affordable Care Act (PPACA) will vastly increase the amount of money states have to spend on their Medicaid budgets.


Big Impact on Texas’ Budget

Gokhale’s study forecasts Texas Medicaid expenditures will increase by between $2.5 to 3 billion per year over the next decade if Obama’s law is implemented in its current form, primarily because people who are currently eligible but not enrolled will be forced into the program due to the individual mandate to obtain health insurance.

“The PPACA will increase Texas budget expenditures on Medicaid because the law will induce many more of those previously eligible for Medicaid to enroll into the program,” writes Gokhale. “Unlike those who are made newly eligible for Medicaid under PPACA, the federal government will not fully pay for the Medicaid benefits of new enrollees among such ‘old eligibles’.”


Problem Not Limited to Texas

Gokhale also examined the Medicaid trends in Illinois, New York, and Florida, finding those states are facing similarly dire situations. This is one of the reasons Texas Gov. Rick Perry (R) and other governors have spoken publicly about possibly opting out of the program—something Gokhale does not find fiscally feasible.

“State lawmakers have been considering opting out of Medicaid; but that option is not practical because it would involve the loss of billions of federal dollars that go toward supporting the health care needs of the indigent, elderly, the blind and disabled, those in nursing homes, pregnant women, children, and so on,” Gokhale writes. “State governments do not have the resources to pay all of those costs.”


Limited Cost Control Options

Gokhale finds the domino effect of Obama’s law will likely result in dramatic cuts in other areas outside of health care.


“The federal expansion and takeover of health care through PPACA risks forcing many states into cutting education and other key public services,” warns Gokhale.

Gokhale notes a possible way for states to deal with this problem is to recover income taxes their residents pay that go toward funding federal Medicaid matching grants to the states, or pushing for the federal government to block-grant the Medicaid funds directly to the states. But he notes organizing such a change would require substantial altering of current law and hence may not be feasible.

“Alternatively, states could apply for waiver programs to cover the health care needs of these populations, including capped federal financial support in lieu of their current Medicaid programs,” Gokhale notes.


Silver Lining?

Arlene Wohlgemuth, executive director of the Texas Public Policy Foundation, says although Gokhale’s study indicates dire figures, the cloud has “a silver lining.”

“PPACA forces states to examine sooner rather than later their participation in Medicaid. The federal government is forcing their hand, and the states are looking at their cards,” Wohlgemuth said. “Just as there is a national cry to ‘repeal and replace’ because the PPACA is too misdirected and convoluted to repair, the states are helpless to innovate under the current Medicaid program.”

Wohlgemuth suggests that by burdening the states with this heavy financial cost, Obama and his allies created significant pressure for further reform as states face daunting budget challenges.

“We need true reform of health care. It must be simple, as opposed to hundreds and hundreds of new bureaucrats and huge costs to the states, and it must reconnect the patient with the provider in a financial relationship,” Wohlgemuth said.

“Consumers make value decisions every day, from grocery store purchases to the cars they drive. They are perfectly capable of making decisions about their health care,” she added.


Sarah McIntosh, esq. is a constitutional law scholar writing from Lawrence, Kansas ([email protected]).


Internet Resources:

Final Notice: Medicaid Crisis, A Forecast of Texas’ Medicaid Expenditures Growth: