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Fact Checking on Rick Perry and Texas Medicaid Costs

by Benjamin Domenech on August 16, 2011 criticizes Gov. Rick Perry of Texas for, from their perspective, exaggerating the incoming costs of Medicaid in his state thanks to President Obama’s Affordable Care Act. Here’s what they have to say:

Also in November, Perry exaggerated how much Texas’ share of Medicaid costs would increase as a result of the new federal health care law. Perry said the new law would cost Texas “$27 billion more, over and above what we’re already paying over the next 10 years, $2.7 billion every year.” That’s not true, according to a May 2010 study by the nonpartisan Kaiser Family Foundation. The new law expands Medicaid eligibility to cover more Americans. But the federal government will pay most of the extra cost: 100 percent in the first three years, phasing out to 90 percent by 2020. Kaiser estimated that Medicaid enrollment in Texas will increase 63.5 percent by 2019. The total Medicaid cost for the state would be $4.5 billion — but that’s only 5.1 percent more, or $219 million, than it would have been without the new law.

Several corrections are in order. First, one minor detail: the study references was not actually conducted by Kaiser, but rather by the Urban Institute. (We have no quarrel with the generally center-left Urban Institute, perhaps the least harmful creation of Lyndon B. Johnson, but it’s a fact, and gets it wrong – Kaiser merely helped fund the study.) More importantly, Urban’s study is out of sync with the balance of other data from Texas itself, and it is based on assumptions which are inconsistent with those of state administrators and cover a more limited period of time, when the portion of state funding is significantly smaller than it will be in out years.

Urban was estimating based on national figures which largely ignored expected significant increases in current eligibles – the so-called “woodwork effect.” A right of center Texas think tank, by comparison, found a much worse picture: two separate analyses conducted for the Texas Public Policy Foundation indicate even higher costs, depicting significantly higher costs for the state than Urban found. Additionally, Urban’s estimates have come under criticism for a more rosy picture of Medicaid costs than the reality created under the current economic downturn, which has outpaced expectations in raising costs for the program, and for neglecting the fact that studies by Avalere and others show the new additions to the program are expected to be more expensive to cover than current Medicaid recipients.

But let’s set all that aside. What really counts is not the estimates from ideological think tanks in Washington or New York, but rather those from state officials themselves, whose job it is to analyze such things. The House Energy & Commerce committee collected a listing of estimates conducted by state administrators, which are in nearly every case higher and in some cases much higher than the Urban Institute figures. According to analysis conducted by the Texas Health and Human Services Commission (HHSC) in December 2010, the expected cost figure is indeed $27 billion for Texas, starting from when the ACA’s Medicaid expansion begins in 2014 (emphasis mine):

For Texas, HHSC has reported that the ACA could increase agency expenditures by $27 billion in state spending over 10 years beginning in 2014, the first year that the Medicaid expansion will be implemented. HHSC projects that the ACA will add about two million clients to the state’s Medicaid rolls. This growth will come directly from newly eligible adults and, indirectly, because enrollment simplification and publicity about the individual mandate will lead to greater participation from the population that is currently eligible for but not enrolled in Medicaid (mostly children and families). The cost to states increases substantially in 2020, when the state share of Medicaid expansion more than triples from an average of 3% annually to a permanent level of 10% annually.

Note a key detail about that last line: the Urban Institute study cites measures only the first five years of the plan, from 2014 to 2019, not the first ten as HHSC did, and Perry cited. The important difference is that the state share of costs grows dramatically after 2019, a measure not included in Urban’s report. Additionally, HHSC notes that they included in their estimate expectations regarding currently eligible Medicaid recipients as well (a reasonable assumption which has been the subject of other think tank studies), not merely the newly eligible as Urban did.

To summarize: is faulting the governor of Texas for basing his remarks on the calculations of his own state administrative office assigned to make such estimates, as opposed to a study conducted by a center-left think tank in Washington, D.C. – one the think tank itself readily admits concerns a more limited period of time and assumes a more limited Medicaid population, assumptions which are limited to the period prior to a dramatic increase in the state percentage of costs, and are inconsistent with the methodology of other state commissions.

This seems rather unfair.

  • Dportye slants left in a lot of their “evaluations”. I don’t trust them for honesty anymore than I trust MSNBC.

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