IMPACT ON TEXAS IF MEDICAID IS ELIMINATED
A Joint Report Required By
H
OUSE
B
ILL
497
Eighty-first Texas LegislatureRegular Session2009
Strategic Decision Support
Health Insurance Initiatives
Financial Services Division Life, Health and Licensing
T
EXAS
H
EALTH AND
H
UMAN
S
ERVICES
C
OMMISSION
T
EXAS
D
EPARTMENT OF
I
NSURANCE
—Decembe
r 2010
—
I
MPACT ON
T
EXAS IF
M
EDICAID IS
E
LIMINATED
Prepared by:
Strategic Decision Support, Texas Health and Human Services Commission
I
MPACT ON
T
EXAS IF
M
EDICAID IS
E
LIMINATED
i
Prepared by:
Strategic Decision Support, Texas Health and Human Services Commission
H.B. 497
—
I
MPACT ON
T
EXAS IF
M
EDICAID IS
E
LIMINATED
EXECUTIVE SUMMARY
House Bill 497, passed by the 81st Texas Legislature, directs that the Texas Health and Human ServicesCommission (HHSC) and the Texas Department of Insurance (TDI) conduct a study “to determine theeffect on the health care infrastructure in this state if the state Medicaid program is abolished or asevere reduction in federal matching money under the program occurs.” This report also analyzes theimplications of a Medicaid termination in light of the recent federal legislation, the Patient Protection andAffordable Care Act (ACA).Medicaid is a jointly funded state-federal health care program administered in Texas by HHSC. Stateparticipation in Medicaid is voluntary; however, if a state chooses to participate, it must follow federalrules regarding which populations are eligible for benefits and the levels of coverage that must beprovided. States may opt to serve additional populations. The amount of federal Medicaid funds Texasreceives is based on the Federal Medical Assistance Percentage (FMAP), calculated using each state's percapita personal income in relation to the U.S. average. Currently, federal funds cover about 60% of thecost of Texas Medicaid, and state funds pay for the other 40%. The SFY 2012 FMAP is expected to shiftmore than two percentage points of Medicaid funding obligations from the federal government to thestate.Medicaid expenditures comprise about 15% of all personal health care spending in Texas, and certainessential health care services are particularly reliant on Medicaid funds:
Medicaid assists two-thirds of Texans in nursing homes.
Medicaid pays for more than half of all births in the state.
Medicaid provides billions of dollars to hospitals to help cover the cost of care to indigent, uninsured Texans and unauthorized immigrants.
Medicaid and its companion Children's Health Insurance Program (CHIP) provide insurance to 3.8 millionlow income Texans each month.
With a 9% annual rate of growth in Texas, the Medicaid program, according to the CongressionalBudget Office, is unsustainable at the state and federal level:
In SFY 2011, Texas Medicaid expenditures (state and federal) will exceed $30 billion, up from $11billion in SFY 2000. This 170% increase in just 11 years far exceeds growth in state tax revenue.
The program now consumes more than 25% of the state budget and increasingly strains funding available for other budget priorities.
New Medicaid spending mandated by the ACA will exacerbate the program's financial imbalances,especially beyond 2019, when the federal government transfers more of the cost of complying with the ACA to the states.
Texas has implemented initiatives to contain costs but has been limited by federal Medicaid policies that overly restrict the application of client cost sharing and do not reinforce individual responsibility in thehealth care decision making process.
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