NCPA - National Center for Policy Analysis

Expanding Medicaid in Texas Would Hurt Patients

January 7, 2015

Expanded Medicaid coverage may sound good, but it ends up hurting the people it purports to help. Why? In a new report, NCPA Senior Fellow Devon Herrick explains the problems with the government health care program:

  • Medicaid provides enrollees with worse access to care than private health coverage -- one-third of physicians do not accept new Medicaid patients, and doctors are four times more likely to turn away new Medicaid patients as they are to turn away new uninsured patients willing to pay out-of-pocket.
  • Access is limited because Medicaid reimburses health care providers at much lower rates than private insurance does. On average, Medicaid pays doctors just 53 percent of what private insurers pay doctors for the same services.
  • Medicaid displaces private insurance, as some who previously had private coverage will choose the public option. This phenomenon is known as crowd-out. According to research from Obama administration advisers David Cutler and Jonathan Gruber, Medicaid eligibility expansion in the 1990s to mothers and children resulted in 50 percent to 75 percent of new enrollees dropping their private insurance coverage.

The Affordable Care Act provides federal funding for 100 percent of the costs of newly eligible enrollees for states that increase their programs in order to entice them to expand coverage. That funding drops to 90 percent by the end of the decade. Texas is one of the many states that has refused to expand its Medicaid program to 138 percent of the federal poverty level. While proponents of Medicaid expansion argue the additional federal funds would stimulate the Texas economy, Herrick says it would do the opposite: increased government spending crowds out investment and development in the private sector. Plus, the tax increases required to fund the additional spending lead consumers to cut their consumption in other parts of the economy. According to calculations from economist Robert Book, Texas would suffer $46 billion in reduced economic activity from 2014 to 2023 if it expanded Medicaid, in addition to employment losses.

If not expanding Medicaid, what should Texas do? Herrick says the state should create its own program to accommodate the uninsured but should "not be tempted to go after the cash grab of Medicaid expansion."

Source: Devon M. Herrick, "Medicaid Expansion: Texas Should Chart Its Own Course," National Center for Policy Analysis, January 2015.  


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