Cost-Benefit Analysis of Medicaid Changes in National Health Care Reform: Huge Positive Gains for Texas

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Anne Dunkelberg /(512) 320-0222 x 102

October 9, 2009

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In explaining why they oppose national health care reform, specifically the Senate Finance Committee’s version, Governor Rick Perry and Senator John Cornyn both point to the increase in the cost of Medicaid for the state budget based on a preliminary estimate by the Texas Health and Human Services Commission (HHSC). HHSC says costs would increase by “$20.4 billion over 10 years.” In this paper, we analyze HHSC’s cost estimate and compare it to the benefit to Texas’ economy from Medicaid expansion. We explain that HHSC’s estimate includes paying for already eligible but unenrolled children and a shift of certain costs from local to state. We also explain that the estimate cannot be compared to other national estimates because it covers a longer time. We conclude that the agency estimate is unrealistically high, but that by any measure, including the estimate itself, the economic benefit to Texas dramatically outweighs the cost to the state budget.