Without Reform, Medicaid Expansion Will Bankrupt Texas


What’s the catch?

Whenever something seems too good to be true, it usually is.

Our country, since the FDR era, has believed in entitlements as an earned benefit that serves as a safety net for all Americans. Unfortunately, those programs, created in the 1940s and only modestly changed since then, are unaffordable, promising more in benefits that the revenue they receive.

This leaves two options: reduce benefits for future beneficiaries or increase revenue.

To date, the Obama administration has done nothing to reform entitlements – thereby making the problem worse.

In fact, they began a new entitlement in Obamacare, which adds to the deficit, is causing higher premiums, is resulting in employers refusing to offer health care and is forcing charities and religious-based employers to violate their moral beliefs by requiring they offer contraception as part of their heath care plans. Next year, the IRS will begin going after any American without health insurance.

Together, Social Security, Medicare and Medicaid take up roughly two-thirds of the federal budget, and that amount is rising rapidly. Federal spending on Medicaid alone, according to the Congressional Budget Office, is expected to more than double over the next ten years.

In a flawed effort to cover more uninsured Americans, the federal government has offered an expansion of Medicaid – a program that primarily covers 60 million low-income children, pregnant women, seniors and the disabled – by doing two things. First, it sets the bar (federal poverty level) for Medicaid eligibility at 138 percent. Second, it would pay for 100 percent of the expansion for the first three years, declining to 90 percent, with future reductions a near-certainty given our rising national debt.

Medicaid expansion is free money, right?

Read the small print.

The federal government – which runs trillion-dollar deficits, will surpass $17 trillion in debt this year and saw a shocking 0.1 percent growth rate in the last quarter of 2012 – says they will pay a reduced share of the Medicaid expansion over the next two decades.

The decision every governor faces regarding Medicaid expansion should not be taken lightly. Ultimately, millions of Americans will be affected by each state’s decision.

Facing this pressure, some Republican governors from Midwestern states have agreed, albeit reluctantly, to the expansion. High profile governors like Chris Christie of New Jersey and Rick Scott of Florida have agreed.

But most Republicans have not, and Texas Gov. Rick Perry and Louisiana Gov. Bobby Jindal have steadfastly remained opposed.

An analysis by the Texas Public Policy Foundation shows that in the 2012-2013 state budget, state spending on Medicaid is 25 percent ($28.6 billion). By the expansion, it would swell to 33 percent ($160.4 billion), as the current 3.6 million people on Medicaid would increase by as much as 1.5 million Texans. Texas isn’t alone – the Heritage Foundation says that the Medicaid expansion will increase costs for 40 of the 50 states. The Texas Public Policy Foundation projects that Medicaid spending at the state and federal level will double every decade. This is unsustainable.

Another deeply troubling fact about Medicaid is that expansion will only worsen access to Medicaid providers, as 70 percent of Texas physicians currently do not accept new Medicaid patients due to low reimbursement rates. Where do they go? They seek primary care in hospital emergency rooms, the most expensive option. According to the foundation, last year uncompensated care totaled $5 billion – which would increase under expansion.

Meanwhile, the Texas Legislature is seeking a legislative solution, perhaps modeled on an Arkansas proposal that was designed to provide political cover.

Some supportive outside groups would like the public to see this as simply choosing to accept tax dollars paid by Texans for Texans without health insurance. They cite the state’s uninsured rate (24 percent, according to U.S. census data from 2011), the highest in the nation, as a reason to act. But the Texas Health and Human Services Commission predicts that under current federal law, by 2014 Texas’ uninsured rate will drop to 15 percent. Expanding Medicaid would only reduce it to 12 percent – at an enormous cost.

Governors face different choices, under different pressures, than presidents. Governors in 49 states have some form of balanced budget requirement. Governors cannot print their own money. They have to work within their own fiscal constraints.

So taking on an unfunded liability, which would cost Texas $4 billion in the first decade alone, and committing a state for decades, is an unwise and irresponsible course of action in a program that offers poor care and declining access.

Lost in this discussion is the appalling fact that the Obama administration has proposed absolutely no reform of Medicaid – only expansion.

What’s the moral of the story? There’s always a catch.

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