This commentary originally appeared in the Austin American-Statesman on October 19, 2015.
Advocates of Medicaid expansion in Texas often highlight our state’s record of the largest uninsured population in the nation, according to a recent U.S. Census Bureau report. Though the uninsured rate is falling, advocates say, it would fall even faster if we expanded Medicaid.
However, expansion supporters overlook research showing that Medicaid patients have poor health outcomes, access to care is relative to private health coverage, and the growth of the program’s costs are unsustainable.
To address these concerns, for both Medicaid enrollees and taxpayers, it’s time to reform the Medicaid program to improve access to quality health care while saving taxpayers billions of dollars annually.
Skyrocketing Medicaid costs contributed to spending more on health care than on education for the first time in Texas history during the last budget cycle. Medicaid now accounts for 23 percent of general revenue appropriations in the current budget — up an unbelievable 42 percent as a share during the last decade.
If Texas expands Medicaid and receives dwindling federal funds to cover more enrollees, state costs will continue to soar. This has been the case in Ohio and elsewhere, where the actual expansion cost during the just first 18 months has exceeded the $2.56 billion projected amount by a staggering $1.5 billion.
With Medicaid already crowding out budget priorities, Texans might soon have to forgo other government services, even as Medicaid enrollees receive substandard quality care without substantial reform.
Fortunately, there is a solution: the Texas Medicaid Reform Model.
Instead of Texas receiving matching federal funds to pay for Medicaid, the state would receive a lump sum of federal funds, also known as a block grant. In exchange, the state would get more flexibility over the program.
For example, Texas could allocate federal and state funds to subsidize private health insurance for nondisabled children, pregnant women and adults approved to receive benefits from the Temporary Assistance for Needy Families program.
My colleague John Davidson and I calculated the savings this approach could achieve using coverage costs based on the federal exchange’s gold or silver Affordable Care Act (ACA) plans. Subsidies to pay for an enrollee’s monthly premium would be based on a sliding scale determined by the federal poverty level (FPLs) — with the amount decreasing as the enrollee’s income increases up to the nonexpanded Medicaid maximum FPL per risk group. An enrollee’s contribution would be no more than five percent of their income in most cases, which is substantially less than the eight percent maximum under the ACA.
For example, a pregnant woman enrolled in Medicaid today costs the state, on average, $718 per month. Since she’ll likely receive additional care throughout her pregnancy, making her health care costs higher, she could be offered a gold plan with a $435 monthly premium. Given her income of $920 per month is near 100 percent FPL, the state could subsidize 90 percent of the premium, lowering her monthly contribution to $44. This would be a cost-savings to taxpayers of $327 per month.
We used this approach to calculate the reform costs for all considered risk groups based on actual and projected enrollment data for 2013 to 2023 from the Texas Health and Services Commission (HHSC). Comparing HHSC’s cost estimates under the status quo to our reform model, cost-savings could be at least $4 billion dollars per year, increasing to as much as $6 billion per year by 2023.
Because the cost of private health coverage is artificially inflated due to government restrictions and mandates in Obamacare, health insurance deregulation could lower these costs. Choices made by enrollees who have more control of their health care could also increase savings through more efficient use of health care dollars. In addition, reforms to Medicaid long-term care could also help bend the cost curve.
By transforming a joint federal- and state-directed Medicaid program into one that allows some enrollees a path towards private, market-based, patient-centered coverage, those currently enrolled in Medicaid will receive higher quality health care and save taxpayers billions of dollars.
We owe it to all Texans to pursue such a reform.
Ginn is an economist in the Center for Fiscal Policy at the Texas Public Policy Foundation.