Texas public policy foundation
Medicaid Expansion Already Eyed for Budget Reductions
Jul 19, 2012  |  BLOG

Since the Supreme Court's ruling on ObamaCare, several governors including our own have made the decision to reject the law's Medicaid expansion. In addition to their concerns for health care outcomes, they cite the already unsustainable trajectory of Medicaid spending and the law's declining funding level for those made eligible under the expansion. There is another reason to be suspicious of the expansion. The funding levels envisioned under current law are far beyond the ability of even our federal government to maintain long term. The CBO projects that the Medicaid provisions in ObamaCare will cost just under $800 billion over 10 years. An honest look at the nation's financial situation makes it clear that the feds will be unable to afford this expansion.

In fact, that is the conclusion our President apparently came to. Last year during the debt ceiling debates, the President proposed combining federal funding for the individuals that were eligible prior to ObamaCare (58 percent in Texas) with the funding for the individuals that were made eligible by the law (the much-touted 100 percent) resulting in a net reduction in Medicaid spending of more than $100 billion over ten years. Furthermore, this same policy was proposed in the President's 2013 budget with a net reduction of $18 billion.

This is key for every Governor considering this Medicaid expansion. If you think current law is costly, you must consider this: the Feds are already exploring how to reduce payments and shift costs to the states. The Medicaid expansion is simply not the "free money" that advocates claim it is. Fortunately, Sen. Orrin Hatch and Rep. Fred Upton have written Sec. Kathleen Sebelius requesting detailed information on the formula proposed by the Administration by July 27. This will shed more light on exactly how the Administration proposes reducing Medicaid spending. However, each state's leadership should consider the fact that before the program has even started the feds are already considering reducing payments.