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Gov. Abbott is Right to Hold the Line on Medicaid Expansion

By Tom Aldred, Executive Director. May 27, 2020

Last month, the Democratic members of the Texas Senate urged Governor Abbott to expand Medicaid in response to the health care and economic challenges posed by the COVID-19 pandemic. They cited a panoply of benefits from states that have already expanded Medicaid under the Affordable Care Act, ranging from increased state and local tax revenues to people becoming more “self-sufficient.” They also cited the fact that so-called “federal” dollars pay for ninety percent of expansion costs as a reason to expand.

Each of the reasons they give is a fallacy and Governor Abbott was correct to reject these misplaced overtures to expand Medicaid in Texas.

A few facts: Texas already has the third-highest number of Medicaid enrollees in the country with 4 million Texans enrolled. Only California (11 million) and New York (6 million) have more people enrolled. California’s Medicaid population has increased by almost 50 percent since its expansion and New York’s by seven percent. So, where are those increased tax revenues that Texas’ Senate Democrats claim accrue from expanding a health care safety-net program?

Back in January, New York Governor Andrew Cuomo warned of a $2 billion budget deficit in the Empire State because “the cost of Medicaid is rising much higher than anyone expected.” National Public Radio reported the Speaker of the New York State Assembly advocating tax hikes and requiring local governments – like the City of New York – to contribute additional funds to the state Medicaid program.

This is a familiar theme. According to research by the Foundation for Government Accountability, every single state that has expanded its Medicaid program under the ACA has found that the actual costs have exceeded projected costs. Every single state. On average, state expansion costs have exceeded estimates by 92 percent. In California it’s 278 percent. In New York, the number of new enrollees has exceeded projections by 276 percent.

What would this mean for Texas? In 2013, the Health & Human Services Commission projected that expanding Medicaid would cost the state about $6 billion over ten years. Based on national averages, this number is likely on the low side to the tune of about 92 percent (and likely much worse than that since those national numbers looked at most at the first three years of expansion.)

But remember, the Senate Democrats point out that the feds will cover ninety percent of the cost of expansion, so that old $6 billion number (which is more likely $12+ billion) is only ten percent of the total cost. The true cost to taxpayers? At minimum $60 billion (more likely over $120 billion). And while these might be nominally “federal” dollars, those dollars come from taxpayers across the entire country, including Texas. It is not free money. In fact, Texas taxpayers are actually the third-largest contributors to federal tax coffers, remitting around $300 billion per year to Washington.

The financial burden of Medicaid expansion would fall squarely on Texas taxpayers regardless of how you cut it. And there is not even room here to get into a debate about the national debt, which now stands at almost $26 trillion. The word “irresponsible” does not even begin to describe the notion of adding to that level of debt.

The Senators’ letter acknowledged that Texas would have to provide incentives to entice primary care providers to take Medicaid enrollees under an expansion. This is because Medicaid pays, on average, just 72 percent of what Medicare reimburses providers, and is lower than private insurance as well. The Senators did not elaborate on what the “incentives” to primary care providers would be, but it sounds an awful lot like they would make the program even more expensive (remember those costs exceeding projections?)

Crucially, however, research published in Health Affairs recently found that there “were no significant differences in provider acceptance rates of new patients between states that expanded their Medicaid programs and those that did not.” Put simply, expanding Medicaid is no guarantee of expanded access to care. Nationally, only 71 percent of providers accept Medicaid patients and only 68 percent of primary care providers do so. When states initially expanded Medicaid, the federal government funded rate increases for primary care providers, but only for two years. When the federal support expired, states were left on the hook to decide whether to continue funding the increase.

In short, expanding Medicaid continues to be the wrong choice for Texas. Expansion is extremely costly, will wind up costing Texas far more than any projection shows, and is no guarantee that enrollees will gain access to care. To claim otherwise is simply misleading. Governor Abbott has done a remarkable job leading the state’s response to COVID-19. Texas has the 14th-lowest rate of COVID-19 cases per capita the 11th-lowest mortality rate per capita.

Oh, and remember the Senators’ letter claiming that expanding Medicaid would make people “become more self-sufficient”? Well, leave it to the Democrats to confuse reliance on a government health care program with self-sufficiency, but know this: Texas is one of a handful of states where Medicaid enrollment was starting to fall prior to COVID-19. Experts credited this to “people moving to other coverage due to the improving economy,” or in other words, self-sufficiency. The only true path to increased levels of self-sufficiency is a strong and growing economy that gives Texans the opportunity to support themselves. No government program can ever be a substitute for that.

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©2020 by Texas Conservative Coalition Research Institute.