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Medicaid Expansion Costs Will Be More Than “Modest,” Despite Kaiser Report Claims

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The Kaiser Family Foundation released a report today which makes the dubious claims that the Medicaid expansion called for under ObamaCare would cost most states very little, and that “many states are likely to see small net budget gains.”

According to the report’s authors, increases in state Medicaid spending would be, “modest compared to non-ACA Medicaid spending and relative to increases in federal funds.” According to their projections, total state Medicaid spending will increase by just $76 billion from 2013 to 2022, while federal Medicaid spending would jump by nearly $1 trillion.

By that count, yes, state spending increases would be “modest” compared to federal spending, which itself will have a deleterious effect on the economy. But saying increases would be modest is not the same thing as saying Medicaid expansion would be a good deal for the states, or the economy, or the people who get shoved into the newly-expanded program.

For Texas, Medicaid expansion would be a particularly bad deal, even using the Kaiser report’s numbers (which are by no means definitive). Under an ObamaCare scenario that assumes no expansion of Medicaid, Texas will spend nearly $163 billion between 2013 and 2022. If all fifty states expand Medicaid, Texas will spend about $5.6 billion more, according to the report.

Leaving aside the odd delineation of scenarios where either all the states expand Medicaid or none of them do, the report doesn’t give any compelling reasons for Texas to expand its already-struggling Medicaid program.

In fact, the central claim of the study—that Medicaid expansion won’t really be that expensive—is contradicted by a number of other studies (here and here, for starters) including our own, which projects the state will spend $7.3 billion more in 2020 than it would have without the expansion and $15.9 billion more in 2040. Moreover, we project the first decade of ObamaCare will be significantly more costly for Texas than the Kaiser report indicates, with the state spending an additional $31.2 billion in General Revenue and $198 billion in All Funds.

The plain truth is that Medicaid expansion isn’t a solution to the state’s health care problems. With or without ObamaCare, Texas Medicaid spending is on an unsustainable course, and if left unchecked will consume an ever-larger share of state spending, accounting for nearly 50 percent of the budget by the year 2040.

A number of the measures that the Kaiser Foundation study claims will reduce state Medicaid spending aren’t all that applicable to Texas. For example, the report estimates that increases in Medicaid expenditures would be offset by a reduction in uncompensated care worth $1.7 billion. But it is unlikely that Texas will realize such hefty savings simply because a large portion of uncompensated care expenditures in the state come from providing care to illegal immigrants, a group estimated to number nearly 1.8 million in Texas. That population will not be part of the ObamaCare’s exchanges or any Medicaid expansion, and Texas hospitals will continue to provide uncompensated care to illegal immigrants with or without the Medicaid expansion.

But the larger point is that Medicaid is our nation’s worst health care program, and forcing a million more Texans into it is a bad policy, even if it only costs the state a “modest” amount.