Medicaid Expansion Could Mean $5.4B in Federal Funds for TX

Under Medicaid expansion, Texas could receive around $5.4 billion from the federal government to cover Medicaid costs. The state could also cover a larger portion of its significant uninsured population, a Texas A&M University Bush School of Government and Public Service study found.

Twelve states have chosen to not engage in Medicaid expansion under the Affordable Care Act and Texas’s officials have been stalwartly against Medicaid expansion.

State leaders strongly oppose the Affordable Care Act in general. Texas’s attorney general is leading the charge against the Affordable Care Act which has reached the Supreme Court.

More specifically, however, Texan leaders have expressed budgetary impacts of Medicaid expansion as a primary reason for refusing to expand the program.

“In this brief, we summarize the research on fiscal impacts of Medicaid expansion and provide estimates of the number of currently uninsured Texans who would be eligible for Medicaid expansion, by county, as well as how much new federal annual Medicaid spending would be expected if those Texans enrolled in Medicaid,” the researchers noted.

The Texas A&M study used data from the Census Bureau’s American Community Survey (ACS) combined with the Census Bureau’s Small Area Health Insurance Estimates (SAHIE) from 2018. At the time, 45 percent of Texans between the ages of 19 and 64 who were under 138 percent of the poverty line were uninsured.

The study determined that 1.4 million uninsured Texans would be eligible for Medicaid under Medicaid expansion along with 103,000 Marketplace enrollees, according to 2018 data. After factoring in restrictions on immigrants and uptake probabilities, the study estimated that 954,000 Texans would enroll in the expanded Medicaid program.

At present without Medicaid expansion, Texas reimburses hospitals $5 to $6 billion in federal and state Medicaid dollars for uncompensated care and waiver programs. It also spends another several billion dollars on Medicaid disproportionate share hospital payments.

Starting in 2020, the federal government offers to cover 90 percent of state Medicaid spending on Medicaid expansion if the state covers ten percent.

Thus, under Medicaid expansion, Texas would receive around $5.4 billion in federal spending plus a $601 million state share.

Medicaid expansion would be particularly critical for rural residents, who make up 11 percent of the Lone Star State’s Medicaid expansion-eligible population. These areas are seeing local hospitals close, damaging not only health outcomes but also local economies.

However, according to the Texas A&M study, over 121,000 rural Texans would enroll in Medicaid expansion which would channel over $689 million into their economies.

“These statewide case numbers are lower than other recent estimates although similar to prior, older state-specific projections,” the study explained.

“The Kaiser Family Foundation recently published an estimate implying roughly 1.45 million adults newly eligible for Medicaid; they do not calculate estimated enrollment. Differences from our estimates are likely due to definitions of household income and assumptions about immigration eligibility status.”

However, the calculation that Texas would receive $5.4 billion from Medicaid expansion excludes costs that may offset this income such as new enrollees.

It also does not encompass multiplier effects — ways in which this funding could influence spending and income in other areas of the state’s economy. Previous studies demonstrated that Medicaid expansion was linked with decreased spending per enrollee, less uncompensated care, and even increased employment.

Furthermore, this does not account for the public health benefits of Medicaid expansion that have been demonstrated through various other investigations, the study noted. States have seen patient outcomes improve after Medicaid expansion and have successfully started closing gaps in racial health disparities.

States with Medicaid expansion do not need to spend as much on services which were previously state-funded, including mental health services.

“The idea of spending more state dollars on such a program in a recession may seem counterintuitive,” the Texas A&M study acknowledged.

“However, Medicaid can serve as an automatic stabilizer bringing federal dollars to states during times of downturns – as state needs increase because of higher enrollment or spending, federal spending automatically increases proportionately, if the state can fund its additional share.”

There is precedent for states transitioning to Medicaid expansion during the coronavirus pandemic.

Missouri and Oklahoma expanded their Medicaid programs during the coronavirus pandemic. Both states’ officials had been aligned against Medicaid expansion but voters put the option on the ballot and passed it.

Neither win was a resounding victory. In Missouri, the measure passed with 53 percent of the votes while in Oklahoma the decision passed by a sliver of less than one percent. The states will each have to be prepared to expand their programs by July 2021.

“The pandemic may be an opportunity for the state to better position itself to weather this and future crises because the federal government can cover a large portion of the costs automatically through Medicaid,” the study concluded.