Texas has a history of balancing its state budget during even the worst of economic times, but if a U.S. Senate Finance Committee proposal to expand Medicaid passes, the state might have no choice but to raise taxes dramatically.
“Congress simply can’t expand Medicaid without sending substantial new federal dollars to Texas to improve our Medicaid program and its payment rates,” said William Fleming, president of the Austin-based Texas Medical Association.
The federal health care reform proposal authored by Sen. Max Baucus (D-MT) would broaden eligibility for Medicaid to include all low-income individuals within 133 percent of the federal poverty level, or even higher.
Under current law, a person must belong to one of certain population groups, such as low-income parents or people with long-term disabilities, to qualify for the program.
If the bar is set at 133 percent, the new patients joining the Medicaid roster will cost Texas $3.4 billion a year, according to Federal Funds Information for States (FFIS), a research service of the National Governors Association and National Conference of State Legislatures.
That would take up 8 percent of the state’s $41 billion total budget. And the actual cost might run even higher, warns Arlene Wohlgemuth, a senior fellow at the Texas Public Policy Foundation in Austin. That’s because agencies responsible for the expansion would have to hire large numbers of new employees to process applications and determine applicants’ eligibility.
“It’s an underestimation because you’ve got to change over all your bureaucracy to handle the eligibility,” Wohlgemuth said. “I can’t imagine how many state employees are going to have to be hired because of this. It’s much more labor-intensive, and I doubt very seriously they were able to include an assessment for computer programs [and] the sharing of data it’s going to have to have to go into effect. That’s going to have to be one big ol’ system.”
Wohlgemuth says an 8 percent increase in taxes is likely, or else the state will have to scrimp on most of its other services in order to accommodate Medicaid costs.
“Medicaid is going to continue to gobble up more of the state’s budget. Education, transportation, prisons system, courts—those things are going to start having more strain on their budgets as the cost of Medicaid goes up,” Wohlgemuth said.
Texas is running a budget surplus this year, though only after Lt. Gov. David Dewhurst (R) and House Speaker Joe Straus (R-San Antonio) ordered a $500 million reduction in expenditures because of the economic downturn. A massive increase in Medicaid expenditures could be a heavy burden for what has traditionally been a balanced-budget state.
Wohlgemuth also notes the longer-term problem of demographics. Two-thirds of Medicaid expenditures cover the one-third of patients in the category of Aging, Blind, or Disabled. Aging populations are about to start growing rapidly, and as they do, so will Medicaid’s price tag.
“We baby boomers are going to be a real problem in five years,” said Wohlgemuth. The Census Bureau already has documented an uptick in Texas’ 65 and older demographic, from 8.4 percent of the state population in 2000 to 10.2 percent in 2008.
Not Just a Texas Problem
The Medicaid cost hikes in the Senate Finance Committee bill won’t be limited to Texas. FFIS projects states overall would be required to spend a combined $33 billion more on Medicaid in the first year alone, over and above an expected increase in the federal government’s contribution to Medicaid of $45.2 billion.
The nonpartisan Center for Public Policy Priorities in Austin reports Medicaid is now the primary source of federal funding in the budgets of all 50 states. Demand for Medicaid continues to grow.
According to the Texas Public Policy Foundation, since September 2008 the Medicaid program has added 200,000 recipients nationwide because of population growth and the economic downturn. Yet the Texas Medical Association’s surveys find only 42 percent of Texas doctors currently accept Medicaid patients.
“Texas physicians have had too much experience with our problem-plagued Medicaid system [not] to know that coverage does not equate to access,” said Fleming.
Rick Docksai ([email protected]) writes from Washington, DC.