Medicaid expansion could bring extra billions of dollars for Texas

The claim: “Expanding Medicaid, which if we had done at the beginning of the Abbott administration, would have brought in $100 billion to this state’s economy.” — Beto O’Rourke

O’Rourke, an El Paso Democrat, made the statement as he launched his gubernatorial campaign against Republican incumbent Gov. Greg Abbott.

PolitiFact rating: Mostly True. Projections rely on making assumptions for the number of people who would register, the reimbursement rate and additional funding. The figure O’Rourke drew from was based on a 2013 estimate made by the state and verified by current and former state government financial experts.

More recent research suggests the amount of forgone federal funding could be less than the $10 billion per year on average that the $100 billion suggests. It could be $5 billion to $6 billion a year.

Discussion

Texas is one of 12 states that hasn’t expanded Medicaid coverage, which is backed mostly by federal funding. Using 2020 data, roughly 1.4 million uninsured adults would be eligible for health care coverage under Medicaid expansion in Texas — 34 percent of the state’s uninsured nonelderly adult population, according to a February Kaiser Family Foundation fact sheet.

The $100 billion number appeared in a 2018 Houston Chronicle editorial, as well as in other news articles. It appears to have originated from research conducted in 2013 by a consulting firm belonging to Billy Hamilton, former deputy comptroller of Texas.

Commissioned by Methodist Healthcare Ministries of South Texas, the report found that legislators “must decide whether to accept $100 billion in federal funding over 10 years to provide additional Medicaid health care coverage under the Affordable Care Act (ACA) for our state’s neediest citizens.”

The firm analyzed federal funding under scenarios of minimal, moderate and high enrollment levels. The amount

of federal dollars Medicaid expansion brings depends on enrollment and enrollee costs per month.

Assuming moderate enrollment, the report looked at total federal spending from 2014 to 2017 and found that it would be nearly $23 billion for adults and $4.5 billion for children — a total of $27.5 billion for those four years. Under the Affordable Care Act, the federal matching rate declined from 100 percent of the cost to 95 percent in 2017 and to 90 percent of the expansion cost in 2020.

More recent estimates suggest Texas would receive federal funding between $5 billion and $6 billion annually if it expanded Medicaid. The state, meanwhile, would be responsible for 10 cents on every dollar, or $600 million to $700 million annually, according to an April article by the Austin American-Statesman. Two such estimates:

In a 2020 report for the Episcopal Health Foundation, the Texas Star Alliance and Randy Fritz, former chief operating officer of the Texas Department of State Health Services, found that if Medicaid were expanded to include 1 million enrollees, that would bring a total annual cost of $6.3 billion. Of that, Texas would pay $650 million per year, including $20 million for administrative, technology and state employee costs.

In a September 2020 policy analysis also funded by the Episcopal Health Foundation, Texas A&M University researchers estimated that if 73 percent of newly eligible uninsured people enrolled and 95 percent of current marketplace enrollees eligible under Medicaid expansion enrolled, there would be $5.4 billion in annual federal funding. The state’s share in costs would be $600 million.Though his office cited an editorial that focused on federal funding, O’Rourke most likely was referring to the larger economic effects of Medicaid expansion, which “would have brought in $100 billion to this state’s economy.”

O’Rourke then said the expansion “would have further fueled the Texas Medical Center— the jobs that are being created right there, would have brought more doctors to more big cities and more rural communities alike.” He then mentioned the number of rural hospital closures.

Medicaid expansion is expected to have a stimulus effect, or an economic ripple effect, that comes with an injection of money into the state economy, the Texas A&M analysis found.

Predictions for that effect vary. Nationwide research shows state budgets were positively affected under Medicaid expansion, with a “very small” increase in spending by states relative to federal spending.

A December 2020 report by the Perryman Group, funded by the Episcopal Health Foundation and the Austin-based St. David’s Foundation, looked at the economic effect. The Waco-based economic consulting group estimated the state could see gains of $244.7 billion over 10 fiscal years (2022 to 2031), as well as more than 2.1 million jobyears of employment.

Vivian Ho at Rice University’s Baker Institute for Public Policy also highlighted the multiplier effect, saying the economic effect of federal funding was likely more than $100 billion.

“That happens with any type of dollars put into an economy. And so, here it makes sense you have that,” Ho said. “These are federal dollars that the state would not receive otherwise, so they boost the economy in general.”

Economic effects also include less uncompensated care, increased profitability for health care providers- and improved financial security for lowincome adults, according to a review of recent academic research by the Kaiser Family Foundation. A July 2020 insight article in the Journal of the American Medical Association highlighted job creation as a result of Medicaid expansion as an economic stimulus.