This carrot and stick approach gives critics ammunition to claim that states that haven’t expanded are costing them dollars. The Kansas Hospital Association, which is in favor of Medicaid expansion, has a ticker on its website showing that the state’s choice not to expand has cost Kansas almost $750 million since January 1, 2014. This completely overlooks the fact that the state will face a growing share of the long-term costs, putting many Kansans’ on the program at risk.
Federal payments for Medicaid are based on matching state dollars depending on the state’s average per capita income. These payments range from 50% of the cost in Wyoming, to 57.13% in Texas, to 74.17% in Mississippi. The National Association of State Budget Officers recently noted that for the first time Medicaid represented a majority of federal funds to states in 2014.
In general, healthcare spending under Medicaid is rising at an unsustainable pace. Unless other budget priorities are forfeited, taxpayers may soon have to pay higher taxes. This has been the case in Texas.
While Texas didn’t expand Medicaid, the costs continue to skyrocket and during the last budget cycle increased healthcare spending to more than education spending for the first time in Texas history. The states’ share of General Revenue appropriations to Medicaid has increased by 42% to 23% in just over a decade.
Texas is now faced with how to best meet the needs of those on Medicaid and patients on the program are not receiving adequate care. Research shows that Medicaid patients have poor access to care and poor health outcomes. On the other hand, patients with private health insurance top both categories.
Considering these costs, the Texas Public Policy Foundation devised the Texas Medicaid Reform Model that first requires a federal block grant for Medicaid instead of matching funds. This would allow the state to allocate federal and state funds to assist non-disabled risk groups (i.e. kids, pregnant women, and adults eligible for TANF) purchase private health insurance based on a sliding scale determined by the federal poverty level (FPL).
As an enrollee’s income falls into a lower FPL category, the subsidy amount for monthly private health insurance premiums would increase until the subsidy covered 100% of the premium for the zero to 50% FPL range. At higher income levels for each risk group up to their maximum FPL under the current Medicaid program, enrollees would be required to contribute to the cost of their private coverage.
We based the coverage cost on gold or silver plans under the federal exchange. Enrollee contributions would be no more than 5% of their income on healthcare in most cases, which is substantially lower than the 8% maximum under Obamacare.
Using data from the Texas Health and Human Services Commission (HHSC) from 2013 to 2023, our cost estimates from our reform model compared with HHSC’s data show that Texas could save at least $4 billion per year, increasing to around $6 billion by 2023. Cost-savings will likely be much higher as more competition in the private health insurance market bid down prices and patients have more control over their future healthcare needs.
This patient-centered, market-based model should be a path forward for other states to follow so patients will be in the driver’s seat when it comes to controlling their healthcare costs. For the poor and disabled insured through Medicaid but who receive fewer positive outcomes and limited access to care and all taxpayers who pay more for this program than private coverage under our proposal, the time for reform is now.