NCPA - National Center for Policy Analysis


May 14, 2010

Despite assurances the Medicaid expansion included in the health care legislation signed into law by President Obama in March is not an unfunded mandate foisted on the states, many states will find their budgets bloated with new Medicaid spending, says John C. Goodman, President, CEO, and the Kellye Wright Fellow of the National Center for Policy Analysis. 

The new reform is projected to cover the insurance costs of 32 million previously uninsured U.S. residents.  Almost half this number will be enrolled in Medicaid, the public coverage program for the poor. 

  • ObamaCare expands Medicaid eligibility to virtually all legal U.S. residents with incomes under 133 percent of the federal poverty level, around $30,000 per year for a family of four.
  • To make the legislation more palatable to the states, the federal government has promised to cover all costs until 2016 and 90-95 percent of Medicaid expansion costs beginning in 2017, in addition to sweetheart deals for selected states as an inducement to garner their representatives' support. 

Although the federal government will cover much of the cost of the expanded eligibility, those already eligible but not yet enrolled (estimated nationally at 10 million plus) will be the responsibility of the states under the original federal matching program. 

A good case in point is Texas: 

  • Just over four million people, mostly pregnant mothers and children, are enrolled in the Texas Medicaid Program.
  • Under the new laws expanding eligibility, 2.1 million additional adults and children are expected to enroll.
  • Of these, 655,000 were already eligible but not enrolled; this group is likely to be swept up and enrolled when the individual mandate takes effect. 

The cost of expanding Medicaid enrollment in Texas is estimated to be $191 billion over 10 years.  Of this, Texas' share comes to $27 billion, according to recent testimony by Thomas Suehs, executive commissioner of the Texas Health and Human Services Commission.  Medicaid currently accounts for about 27 percent of Texas' state spending, or $862 dollars per Texas resident. 

A simple, back-of-the-envelope calculation suggests it is likely Medicaid will consume nearly one-third of Texas' budget when the expansion begins in 2014 and perhaps four-in-ten dollars by 2023. 

This amounts to about $3,500 per Texas resident, depending on future patterns of population growth.  And Texas is likely to grow at rates faster than other states, so this estimate is probably too conservative, says Goodman. 

Source: John C. Goodman, "As Medicaid Rolls Rise, State Budgets Will Soar, Access Will Sink," Heartland Institute, May 14, 2010.


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