Health Care

Commentary: ObamaCare and the Cost of Medicaid, Texas as a Case Study

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Many of the arguments against the Patient Protection and Affordable Care Act, commonly referred to as ObamaCare, center on the constitutionality of the individual mandate, or the reduction in quality coverage stemming from the legislation’s provisions. Comparatively overlooked, however, is the fact that the United States cannot sustain ObamaCare economically, either in the short or long run.

In particular, the PPACA massively overburdens states’ Medicaid costs by placing an additional 16 million more American in an already strained Medicaid program, while leaving the door open for even more to enroll. Jagadeesh Gokhale, a Senior Fellow at the Cato Institute, together with the Texas Public Policy Foundation, has produced a case study of the dire effects of these new changes to Medicaid on the state of Texas. The report’s findings have ominous implications for Texas and the rest of our nation.

The most salient of Mr. Gokhale’s findings is that even before the passage of ObamaCare, Texas would not have been able to sustain its Medicaid costs for much longer without massive tax increases, and even then, Medicaid was steepening the path towards insolvency. With ObamaCare, however, the situation is even more precarious. The statistics highlight the urgency of the situation. Prior to the passage of ObamaCare, the projected total Medicaid spending in Texas over the 2014-2023 time period would have increased by $44 billion on the state’s General Revenue basis, and by $112 billion on the All Funds basis, which includes federal grants. These vertiginous increases come from rising health care costs and higher projected enrollments.

Under the stipulations of ObamaCare, Texas’s General Revenue Medicaid spending will increase by an additional $31.2 billion during the first ten years of its implementation. On an All Funds basis, Medicaid spending will increase by a mind-boggling $198 billion over the first ten years of implementation.  This equates to a 71% increase in General Funds spending and a 177% increase in All Funds spending.

The federal government will help alleviate the burden of increased state Medicaid spending for the first three years of implementation, but then the individual states will essentially be on their own. This will inevitably lead to much higher taxes and sharp cuts to a variety of services, such as education, infrastructure, economic development, and law enforcement in order to offset the added weight of new Medicaid enrollees. Such a move in the middle of an economic recession/recovery will only further hurt the prospects for economic growth. For example, the 2010-11 Texas budget accounts for a 4.4% increase in funding for Medicaid, but also features a 3.7% reduction in business and economic development spending.

Gokhale offers a few possible methods for undoing some of the PPACA’s damage on Texas’s economy, but the outlook is grim as long as the legislation remains intact. Essentially, Texas is being subjected to an unfunded mandate which will result in $31 billion in additional spending over the first ten year period. Gokhale proposes reducing extraneous costs by eliminating waste and fraud in the system, as well as restructuring the state’s Medicaid system as much as possible. Lamentably, these are superficial measures as long as ObamaCare remains the law of the land.

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