Big Lie: Healthcare Reform Won't Cost Texas $27B. More Like $1.4B

Last Updated Apr 5, 2010 5:49 PM EDT

The Republican health and human services commissioner in Texas has wildly inflated the extra health costs that the state will incur under the national reform legislation. As U.S. Rep. Henry Waxman (D-Calif.) has pointed out, Tom Sueh's estimate that reform will cost Texas $27 billion over 10 years is far more than the Congressional Budget Office's estimate of the cost for all states combined. But Texas will spend more than many other states to comply with the law, just because it currently underfunds Medicaid.

To give you some idea of how far Texas has to go, the reform law would require state Medicaid programs -- with enhanced federal subsidies -- to cover all of the uninsured in households earning up to 133 percent of the federal poverty level (FPL). That includes childless adults, who are generally not covered by Medicaid today. In Texas, children can receive Medicaid if their families are at 100 percent of the poverty level. But jobless parents are ineligible if they earn more than $2,256 a year, or 12 percent of the FPL. If they work, the cutoff is $4,824 a year, or 26 percent of the FPL. Clearly, Texas is going to have to raise its Medicaid spending more than many other states that have more generous programs.

Nevertheless, the Congressional Budget Office estimates that between 2010 and 2019, the reform plan will cost Texas only $1.4 billion. One reason for the difference between the CBO number and Sueh's figure is that he calculated it from 2014 to 2024, a period in which health costs will be higher than they are today because of inflation. But he also made some fairly huge miscalculations.

For starters, Uncle Sam will be footing almost the entire cost of adding about 1 million Texans to the Medicaid rolls from 2014 to 2017. After that, according to the nonpartisan Center for Policy Priorities, Texas will pay 5 percent of the cost of the Medicaid expansion, or $185 million. In 2019, the state will pay 7 percent, or $259 million, and its share will top out at 10 percent, or $370 million, in 2020.

Moreover, Sueh asserted that about $5.5 billion of his estimate involves extra payments to primary care physicians to take care of Medicaid patients and those in the Children's Health Insurance Program (CHIP). Under the reform legislation, primary care doctors would be paid at Medicare rates, which are higher than Medicaid payments, for treating these patients. But the federal government has promised to cover the difference between the old and new reimbursement rates.

In addition, Sueh disregarded the fact that, with millions of currently uninsured Texans covered by the government or private insurance, the state will not have to spend money from its tobacco industry settlement or collect higher traffic fines to pay for the care of the uninsured. When a Democratic lawmaker reminded him of this, Sueh admitted that he had overlooked it and allowed that reform might produce some other savings that he hadn't included in his calculation.

Well, I guess it just goes to show that they do everything bigger in Texas than anywhere else. Including exaggerating the financial impact of healthcare reform.

Addendum: Check out the latest edition of Health Wonk Review at Healthcare Technology News. It's all about flying pigs and healthcare reform.

Image supplied courtesy of Eric Lemerdy.

  • Ken Terry

    Ken Terry, a former senior editor at Medical Economics Magazine, is the author of the book Rx For Health Care Reform.