A Second Look at Medicaid Expansion in Texas?

Written by:
David Moser
December 9, 2020

While the Attorney General of Texas seeks to repeal the Affordable Care Act at the federal level, state legislators see local value in adopting a piece of it, the expansion of Medicaid. A key feature of the ACA is the provision of federal funds to states to cover 90% of the cost of expanding Medicaid eligibility up to 138% of the Federal Poverty Level.

 However, states choose whether or not to opt in, and even as Texas turns purple, the Republicans who dominate state politics have not made the choice to accept the offer of federal money for Medicaid expansion. In the midst of an unprecedented public health crisis, attitudes around this may be starting to change.

Expanding Medicaid eligibility up to 138% of the poverty level (about $36,000 gross annual income for a household of 4) could cover 1 million additional Texans. Medicaid expansion would not simply cover people who are otherwise uninsured; in many cases, it would also shift the cost of emergency care from the state-funded Texas Indigent Health Care Program to Medicaid, which would be primarily federally funded. Even many legislators who are generally wary of expansive federal programs want their constituents to be able to access the programs already being funded by their federal tax dollars.

Additionally, while Texas prides itself on being business-friendly, in the absence of expanded Medicaid coverage, low wage workers are far more likely to be covered by their company’s health insurance than is the case in states that have adopted the ACA’s Medicaid expansion, including the neighboring states of Arkansas, Louisiana, New Mexico, and as of January 2021, Oklahoma. This means that Texas businesses are on the hook for large fees when employees are hospitalized or need costly medications. These private sector expenses could also be shifted to federally funded Medicaid claims as many Texans enrolled in Medicaid would waive off their expensive employer plans, easing the stress on household budgets and employer benefit funds alike.

Another argument for Medicaid expansion is that it protects hospitals, particularly in rural regions of the state, where COVID19 cases are the highest per capita as of early December. The ACA drew some of the resources for Medicaid expansion from funds previously dedicated to reimbursing hospitals for emergency care provided to patients unable to pay for it. In states like Texas that have not yet accepted expanded Medicaid, this leaves hospitals legally mandated to provide care but, in many cases, with nowhere to turn for reimbursement. To the extent that this dynamic leads to the closure of healthcare facilities, it not only leaves Texans with fewer options for medical care, it also means the disappearance of large employers that often serve as economic lifelines to rural communities.

None of this is to say that Medicaid expansion in Texas is inevitable. State legislators in favor of expansion will be up against a tight budget and underlying suspicion of big government. Nevertheless, the pressures outlined above are not unique to Texas, and every year since the passing of the Affordable Care Act, more and more states, and many with conservative leanings have decided that on balance they would rather be in than out. Eventually, Texans could reach the same conclusion.