Economic impact of Medicaid expansion may be more than $100 billion

Announcing his candidacy for governor, former U.S. Rep. Beto O'Rourke said Texas has left billions of dollars on the table by failing to expand Medicaid during Gov. Greg Abbott's tenure.

"Expanding Medicaid, which if we had done at the beginning of the Abbott administration, would have brought in $100 billion to this state's economy," O'Rourke said at a Nov. 19 rally in Houston.

Texas is one of 12 states that hasn't expanded Medicaid coverage, which is backed mostly by federal funding. Using 2020 data, roughly 1.4 million uninsured adults would be eligible for health care coverage under Medicaid expansion in Texas — 34% of the state's uninsured nonelderly adult population, according to a February Kaiser Family Foundation fact sheet.

There's no doubt Texas passed up a lot of money by not expanding Medicaid. But is O'Rourke's statement accurate that Texas passed up $100 billion?

When we reached out to O'Rourke's campaign for evidence to support the claim, an official pointed us to a 2018 editorial from the Houston Chronicle that shared the opinion that turning down federal funding for Medicaid expansion puts the onus on counties to figure out how to serve uninsured people.

The editorial board wrote, "Under the plan passed as part of the Affordable Care Act in 2014, Texas would have received an estimated $100 billion over the course of a decade in exchange for increasing Medicaid eligibility to 138 percent of the poverty line."

In 2021, 138% of the federal poverty line works out to an income of $17,774 for an individual and $36,570 for a family of four.

Texas lags behind the rest of the nation when it comes to health care coverage. According to 2019 Census Bureau health insurance coverage data released in 2020, nearly 1 in 5 Texans, or 18.4%, are uninsured.

Adults without dependents or disabilities are not eligible for Medicaid regardless of income in Texas, and parents of dependent children are eligible up to about 14% of the federal poverty level, according to a 2020 Texas A&M study on Medicaid expansion for Episcopal Health Foundation, an advocate for Medicaid expansion.

So, Texas has a coverage gap between Medicaid eligibility and eligibility for a federally subsidized Affordable Care Act Marketplace plan that begins at 100% of the federal poverty line.

The $100 billion number in the editorial, as well as in other early news articles, appears to have originated from research conducted in 2013 by a consulting firm belonging to Billy Hamilton, former deputy comptroller of Texas.

Commissioned by the Methodist Healthcare Ministries of South Texas, the report found that Texas legislators "must decide whether to accept $100 billion in federal funding over 10 years to provide additional Medicaid health care coverage under the Affordable Care Act (ACA) for our state’s neediest citizens."

The consulting firm analyzed federal funding under scenarios of minimal enrollment, moderate enrollment, and high enrollment levels. The amount of federal dollars Medicaid expansion brings depends on enrollment and enrollee costs per month.

Assuming moderate enrollment, the report looked at total federal spending from 2014 to 2017 and found that it would be nearly $23 billion for adults and $4.5 billion for children — a total of $27.5 billion for those four years. Under the Affordable Care Act, the federal matching rate declined from 100% of the cost to 95% in 2017 and to 90% of the expansion cost in 2020.

In a footnote, the study cited a 2012 presentation made by the Texas Health and Human Services Commission before the Senate Health and Human Services and Senate State Affairs committees on the Affordable Care Act.

Bee Moorhead, executive director of the interfaith legislative network Texas Impact, was a researcher on that study who had worked under Hamilton at the comptroller's office. She said in a phone interview that the presentation did estimate just over $100 billion in federal funding — and that it also included year-by-year estimates up to 2023.

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Moorhead said that the methodology used by the agency was the same as that used by Billy Hamilton Consulting. She described the agency's estimates as a realistic outlook on how much Texas could depend on the federal government for funding if it expanded Medicaid.

Moorhead said, however, that more recent estimates on the amount of forgonefederal funding could be a lot less or more than what her study found. That's because other factors, like the state's population growth and poverty rates, could indicate greater possiblefederal funding.

More recent estimates suggest Texas would receive federal funding between $5 billion and $6 billion annually if it expanded Medicaid. The state, meanwhile, would be responsible for 10 cents on every dollar, or $600 million to $700 million annually, according to an April 2021 article by the American-Statesman.

Two such estimates:

• In a 2020 report for Episcopal Health Foundation, former chief operating officer of the Texas Department of State Health Services, Randy Fritz, and Texas Star Alliance found that if Medicaid were expanded to include 1 million enrollees that would bring a total annual cost of $6.3 billion. Of that, Texas would pay $650 million per year including $20 million for administrative, technology and state employee costs.
• In a separate September 2020 policy analysis also funded by Episcopal Health Foundation, Texas A&M University researchers estimated that if 73% of newly eligible uninsured people enrolls and 95% of current marketplace enrollees eligible under Medicaid expansion enrolls, there would be $5.4 billion in annual federal funding. The state's share in costs would be $600 million.

Though his office cited an editorial that focused on federal funding, O'Rourke most likely was referring to the larger economic effects of Medicaid expansion, which "would have brought in $100 billion to this state's economy."

O'Rourke then said, "[Medicaid expansion] would have further fueled the Texas Medical Center– the jobs that are being created right there, would have brought more doctors to more big cities and more rural communities alike." He then mentioned the number of rural hospital closures.

Medicaid expansion is expected to have a stimulus effect, or an economic ripple effect, that comes with an injection of money into the state economy, the Texas A&M analysis found.

Predictions for that effect vary. Nationwide research shows state budgets were positively affected under Medicaid expansion, with a "very small" increase in spending by states relative to federal spending.

A December 2020 report by the Perryman Group, and funded by Episcopal Health Foundation and Austin-based St. David's Foundation, looked at the economic effect. The Waco-based economic consulting group estimated the state could see gains of $244.7 billion over 10 fiscal years (2022 to 2031), as well as more than 2.1 million job-years of employment.

Vivian Ho, at Rice University's Baker Institute for Public Policy, also highlighted the multiplier effect, saying that the economic effect of federal funding was likely more than $100 billion.

"That happens with any type of dollars put into an economy. And so, here it makes sense you have that," Ho said. "These are federal dollars that the state would not receive otherwise, so they boost the economy in general."

Economic effects also include less uncompensated care, increased profitability for health care providers, and improved financial security for low-income adults, according to a review of recent academic research by the Kaiser Family Foundation. A July 2020 insight article in the Journal of the American Medical Association highlighted job creation as a result of Medicaid expansion as an economic stimulus.

So, if O'Rourke is talking about the potential economic effect of the federal funding, then the benefit is likely far more than $100 billion.

O'Rourke said "expanding Medicaid...would have brought in $100 billion to this state's economy" if it had been done at the beginning of Abbott's tenure.

Projections rely on making assumptions for the number of people who would register, the reimbursement rate and additional funding. The figure O'Rourke drew from was based on a 2013 estimate drawn up by the state government and verified by current and former state government financial experts.

More recent research suggests the amount of forgonefederal funding could be less than the $10 billion per year on average that the $100 billion suggests. It could be $5 billion to $6 billion.

But the ripple effect of even this smaller influx of federal money on the state's economy could be larger than $100 billion.

The statement is accurate but needs additional context. We rate it Mostly True.