87th LegislatureHealthcareState HouseMedicaid Expansion Again Brought Up for 87th Texas Legislative Session

Every year since Obamacare's inception, some have pushed Texas to expand Medicaid. And every session since, the state has declined.
March 5, 2021
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Every session since the U.S. Supreme Court’s landmark ruling in NFIB v. Sebelius that the federal government could not require states to expand their respective Medicaid programs, Texas has passed on expanding its own.

The expansion would increase both the number of people eligible under the government insurance program and the federal government’s share of financing.

Rep. Lyle Larson (R-San Antonio) has picked up that baton this session, arguing for Medicaid expansion in the San Antonio Express-News.

“When folks who don’t quite qualify for Medicaid need routine medical care, visiting an emergency room is often their only option. Using an emergency room for primary care is the most expensive way to obtain health care,” Larson wrote.

The expansion would open coverage under the program to anyone with an income at 138 percent of the federal poverty level — or for an individual making $17,600 per year and a family of four making $36,200 per year.

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The criticism of this, in the likely scenario that the given patient cannot afford their emergency room bill, is often that the taxpayer’s eventually left holding the bag.

Rep. Jacey Jetton (R-Richmond), a freshman who is on the Public Health Committee, told The Texan he sees “giant red flags” in a potential expansion of Medicaid in Texas. 

Jetton stated upfront he’s not a public health expert but comes from a business perspective — specifically citing the cost and operations of such an expansion.

“One thing about Medicaid expansion that is often overlooked is that the state must spend millions before the federal money comes back at all,” Jetton emphasized. 

“The argument that this is something we need to do now because we have a revenue shortfall is just wrong because we’re increasing our spending to try and get more federal monies. That’s not how we’re going to balance our budget.”

Federal aid is given to hospitals to help defray costs of care for patients who cannot pay their bills. In that respect, taxpayers foot the bill for uncompensated medical care. A 2017 American Hospital Association whitepaper marks that total at $57 billion nationwide.

But government-run insurance is also a cost fronted by the taxpayer, just through a different avenue. The current two-year budget for Medicaid in Texas is $66.5 billion — nearly two-thirds of which is paid directly by the federal government.

That amounts to $26.6 billion shouldered by the state. Medicaid also often costs more than was budgeted in Texas, requiring reconciliation. For example, the 2020-2021 budget requires a $2.1 billion reconciliation.

A Bush School of Government and Public Service analysis by Laura Dague and Constance Hughes estimates expansion would increase that total expenditure to $72.5 billion, with a state-financed increase of $600 million.

Dague concludes, “The experience of other states shows that it is feasible to implement an expansion with required state funding sourced in large part from budget offsets and provider taxes and very little general revenue. The potential fiscal benefits of expansion relative to its costs should be carefully considered by decision-makers in Texas.”

Jetton is not convinced, however, stating further, “We’ve also seen from other states that those initial projections haven’t come out as intended. They’ve all cost the states more money and they’re not seeing improved healthcare for those who need it the most.”

For perspective, that additional cost is roughly two-thirds of the state’s projected 2020-2021 biennium budget shortfall — and that’s on top of Texas’ current Medicaid costs. The higher federally financed proportion only applies to the potential expansion and would not apply retroactively.

Larson’s case is largely built on the fiscal argument behind expansion. “With an increase in health-related spending, reduced uncompensated care costs and rises in productivity, Texas would experience gains of $45.3 billion in gross product and $29.4 billion in personal income for the 2022-23 biennium,” Larson wrote, referencing an analysis by Waco-based economist Ray Perryman.

But that money, whether from the state or federal government, ultimately has one origin: the pocket of the taxpayer.

Jetton stated, “The increased federal spending is very worrisome and our children and grandchildren down the road will be footing the bill on this. It’s unfair to look at the federal government as an everlasting flow of dollars to the states to keep us afloat.”

“There are other things we need to work on to improve affordability and access,” Jetton added, pointing to the expansion of healthcare cost-sharing programs beyond religious affiliations.

Jetton also suggested price transparency and the elimination of “surprise billing” — when a patient is stuck after the fact with a bill for the difference between their healthcare provider’s charge and what their insurance will cover — as options to reduce costs.

According to the left-leaning Kaiser Family Foundation, 771,000 of Texas’ uninsured population fell within the Medicaid expansion gap before the pandemic. Had Texas expanded Medicaid, those individuals would have been eligible to draw Medicaid benefits.

However, just because the option is there doesn’t mean an uninsured person will exercise it. That same Kaiser analysis found that 662,000 Texans were eligible for Medicaid as it is currently constituted.

The Bush School analysis estimates an increase of eligible Texans due to COVID-19 related unemployment to 1.27 million total. But assuming every newly qualified person or family would choose to enroll is not supported by even recent history.

It is no small part of the healthcare story that so many choose not to enroll in the program even if it’s available. Healthcare, in Texas especially, is often viewed singularly through the prism of insurance coverage.

And despite the large numbers of patients choosing not to enroll in Medicaid, enrollment in the program dwarfed the original projections 2 to 1. According to the conservative Foundation for Government Accountability, the unexpected swell in both enrollment and costs per person has created 157 percent cost overruns.

On the flip side, Medicaid expansion has helped some hospitals balance their books for the first time. One example is Cook County Hospital in Chicago, which attributed its first-ever year in the black to the expansion.

Additionally, many doctors do not accept Medicaid patients due to the program’s burdensome compliance regulations. Dr. Barbara McAneny, president of the American Medical Association, said in Senate testimony that she lost $100,000 to compliance costs in an effort to qualify for the highest level of reimbursement.

Doctors like McAneny have declined Medicaid outright at their practices. This, to some degree, decreases options for patients enrolled in Medicaid and increases their reliance on the emergency room care at the center of the expansion calls.

The other question with expansion concerns potential fraud. An audit of Louisiana’s system found that after the state expanded Medicaid in 2016, thousands of ineligible patients received public coverage, costing the state as much as $85 million.

Earlier this year, Texas House Speaker Dade Phelan (R-Beaumont) was asked about Medicaid expansion. He stated a discussion could be had over the issue, but only from a revenue-neutral perspective that “doesn’t tie us to billions of dollars in future expenditures.”

Jetton sees the chances of Medicaid expansion passing as “pretty slim,” but warned that if it does, money will have to be taken from somewhere else in the budget to finance it.

“If it was a good idea for Texas, we would’ve seen it pass in past years,” Jetton concluded.

It is not as if the state has ample slack financially as it prepares its next-biennium budget. The pandemic has shrunken tax collections and left many unemployed.

Regardless of arguments on one side or the other, the issue polls well among Texans. A recent Hobby School of Public Affairs poll marked support for expansion at 69 percent.

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Brad Johnson

Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.