Facing a $25 billion deficit for their next two-year budget cycle, Texas lawmakers are considering closing the gap by dropping out of Medicaid. “This system is bankrupting our state,” State Representative Warren Chisum told The New York Times. “We need to get out of it. And with the budget shortfall we’re anticipating, we may have to act this year,” he said.
And Texas is not alone. American Legislative Exchange Council director of the health and human services Christie Herrera tells NYT: “States feel like their backs are against the wall, so this is the nuclear option for them. I’m hearing below-the-radar chatter from legislators around the country from states considering this option.”
Medicaid already eats up a huge share of state budgets. In Texas, for example, more than 20 percent of the state budget is spent on Medicaid. The crisis facing states across the country is that Obamacare forces states to massively expand their already burdensome Medicaid rolls. Starting in 2014 states must expand Medicaid to all non-elderly individuals with family incomes below 138 percent of the federal poverty level. At first, Obamacare picks up the first three years of benefit costs for expansion. But in 2017 states begin to shoulder a larger and larger share of these benefit costs, maxing out at 10 percent by 2020.
But that is just the benefit costs. Obamacare does not pay for any of the costs necessary to administer the expansion of the Medicaid rolls, rolls that are expected to increase by approximately 50 percent in states like Nevada, Oregon, and Texas. The Heritage Foundation’s Ed Haislmaier and Brian Blase found that just the administrative costs of the Obamacare Medicaid expansion will cost almost $12 billion by 2020. As Heritage visiting fellow Lanhee Chen details, some states are beginning to add the benefit and administrative costs together, and the picture isn’t pretty:
Texas recently concluded that the Medicaid expansion may add more than 2 million people to the program and cost the state up to $27 billion in a single decade. The Florida Agency for Health Care Administration estimated in April that Obamacare’s Medicaid expansion would require an additional $5.2 billion in spending between 2013 and 2019 and more than $1 billion a year beginning in 2017. In California, the Legislative Analyst’s Office concluded that Obamacare’s Medicaid expansion will likely add annual costs to the state budget in “the low billions of dollars.”
Mississippi, Indiana, and Nebraska each retained Milliman, Inc., a national health care econometrics firm, to perform a fiscal analysis of the Medicaid expansion on their states’ budgets. For Mississippi, Milliman estimates that between 206,000 and 415,000 people will be added to Medicaid, with a 10-year impact on the state budget of between $858 million and $1.66 billion. The seven-year cost of the Medicaid expansion in Indiana is estimated to be between $2.59 billion and $3.11 billion, with 388,000 to 522,000 people joining the state’s Medicaid rolls. Finally, Milliman estimates that Obamacare will result in nearly one of five Nebraskans being covered by Medicaid at a cost of $526 million to $766 million over the next decade.
Obamacare’s unfunded mandates are a fiscal time bomb set to explode state balance sheets across the country starting in 2014. States can prepare for the worst by slashing discretionary spending where possible and lowering existing health care costs by repealing their own burdensome health benefit mandates. But the only real solution is full repeal of Obamacare.
Source: Contributed by P Claw from North Carolina – The Heritage Foundation 11/12/2010 issue.
Bill, Texas to opt out of Medicaid; I have said this on day 1. States should absolutely get out of the Medicaid business. It is often the 2nd largest item in a state’s budget, right behind education. The reason President Obama says, with so much confidence, that the health reform bill will “not add one dime to the deficit” is because he created unfunded mandates of the cost of the program to State Medicaid programs, Employers and finally employees. He taxed the healthcare supply chain, ( Rx, Device companies, and insurance companies all pay more) increased the benefits to everyone ( no pre-existing conditions or lifetime maximums) which has driven up the cost of healthcare and then created a three tier unfunded mandate system to pay for the entire costs including the new taxes and penalties.
If I were Governor, I would do the same thing, drop Medicaid. So if you are in Texas and you want a free lunch (i.e. health insurance), then move to Louisiana, New Mexico, Oklahoma, or Arkansas ( or better yet Massachusetts since they have a state version of Obama care) . The rest of us who remain here in Texas are working and we will have a huge tax break because we will no longer have to support those who do not contribute to the tax base, but do not hesitate to take away any and all benefits our tax dollars will support. We will then have a wave of business growth and people all over America would flock to Texas because of the lower tax rates to the extent we pass the savings on to the citizens. Our unemployment would drop to 3% or less if we did this.
It is about time. Now let’s see if they have the spine to pull it off. My gut tells me they don’t have the courage to say no to those who take from the system but do not contribute. They are the same people who say “soak it to the rich” and the rich are the hands that feed them.
Dr. Alan M. Preston
Alan M. Preston, MHA, Sc.D.
Healthcare Policy, Biostatistics, Epidemiology