Preliminary Estimates of General Revenue Availability Under Medicaid Expansion

FOR IMMEDIATE RELEASE March 12, 2013

New Medicaid Coverage Will Free Up $1.2 Billion in Available General Revenue in 2014-2015 Biennium

Newest numbers from Billy Hamilton Consulting provide conservative preliminary look at GR impacts of extending Medicaid to low-income adults

AUSTIN, TX--Extending Medicaid to low-income adults could free up substantial amounts of General Revenue (GR) currently expended on this same population according to a study Billy Hamilton Consulting prepared for Texas Impact and Methodist Healthcare Ministries of South Texas, Inc. The study estimates that a minimum of $454.4 million in GR would be available in FY 2014 and $749.5 million in FY 2015 for a total of $1.204 billion for the 2014-2015 biennium, assuming those funds are appropriated as set forth in the base budget. The funding is considered current spending and so would not be subject to the state's spending cap, allowing it to be used for any purpose.

Hamilton's analysis demonstrates that the 2015 estimated GR available of $749.5 million in offsets to current state programs serving the potentially Medicaid-eligible population would fund the state share of the Medicaid extension to adults for the next 10 years and beyond. The funds include only those identified in agency base Legislative Appropriations Requests and do not include exceptional items or rider appropriations requests that would result in even more funding availability if the Legislature otherwise appropriated those funds.

"More efficient health spending means there's more money available for other needs like water and education. Moving folks out of all the piecemeal GR-funded programs we have now into prevention-focused managed care will give legislators more resources to tackle the other big issues on their plate this session," said Texas Impact Executive Director Bee Moorhead.

Since the expansion would only require about $300 million in GR for the biennium for the state share of administrative costs, the remaining $900 million would be available to use as legislators see fit. Lawmakers could

  • Dedicate some or all of the funds to serve as future state match for adult Medicaid
  • Fund the ACA's federal primary care provider rate increase (to the Medicare rate) beyond 2013-2014
  • Provide match for the additional currently eligible children expected to enroll starting in 2014
  • Keep the money in current programs and expand services or populations
  • Spend it on other priority purposes such as water, transportation or education

The 100 percent federal match will completely supplant state funds in these programs for eligible adults from 2014 through 2017 and will provide 95 percent federal matching funds for 2017, declining to 90 percent by 2020.

"These are our estimates, and the issue needs to be examined closely by the affected agencies. The estimates are conservative but preliminary until we receive feedback from the agencies that that have access to much more detailed internal data and information concerning their programs and strategies," Hamilton said.

The expansion would affect certain programs in the Health and Human Services Commission (HHSC), the Department of State Health Services (DSHS), as well as the Texas Department of Criminal Justice (TDCJ) and The University of Texas Medical Branch. Some of the programs currently provide 100 percent General Revenue (GR) funding for adults who would be eligible under the extension that 100 percent federal funding would cover during the next three years. Others are Medicaid programs that currently fund these adults with a GR match rate of about 40 percent. Still others have federal block grant funding requiring a maintenance-of-effort match that triggers a reduction in the block grant by the amount of non-federal spending that the state reduced from the average of the previous two years' spending.

"Moving working Texans from the current piecemeal approach to managed care will save the state money, but more importantly it will save lives. Ministering to the least-served in our state, we see first-hand how often low-income Texans get too little care, too late, and we know that a cost-efficient managed care approach will prevent untold suffering," said Kevin Moriarty, CEO of Methodist Healthcare Ministries of South Texas, Inc.

Since the ACA is now current law, the affected agencies provided the Legislature with estimates of the impact of the ACA on these programs in Schedule 6.J. of their Legislative Appropriation Requests (LARs). Since adults with incomes above 100% FPL are eligible for purchasing subsidized insurance under the ACA, which is now current law, the agencies estimated these effects on their budgets. Although agencies sometimes provide the Legislature with estimates of optional decisions before them, such as the cost of continuing the federal provider rate increase to the Medicare rate that expires in 2014, they have not yet estimated the impact on their budgets of the optional extension of Medicaid to adults. This study is an attempt to fill that gap until the agencies, which have access to automated budgeting systems and more detailed knowledge of the complex funding rules and structures in these programs, can complete more refined estimates.

Download the Full Report - Available GR Estimates (110.8MB) (right-click and choose "Save File As...")

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Texas Impact is a statewide, interfaith advocacy organization. Texas Impact was established by Texas religious leaders in 1973 to be a voice in the Texas legislative process for the shared religious social concerns of Texas' faith communities. Texas Impact is supported by more than two-dozen Christian, Jewish and Muslim denominational bodies, as well as hundreds of local congregations, ministerial alliances and interfaith networks, and thousands of people of faith throughout Texas.

Methodist Healthcare Ministries (MHM) is a faith-based, 501(c)(3), not-for-profit organization whose mission is "Serving Humanity to Honor God" by improving the physical, mental and spiritual health of those least served in the Southwest Texas Conference area of The United Methodist Church. MHM partners with other organizations that are also fulfilling the needs of the underserved in local communities, and supports policy advocacy and programs that promote wholeness of body, mind and spirit. The mission also includes MHM's one-half ownership of the Methodist Healthcare System - the largest healthcare system in South Texas. This creates a unique avenue to ensure that the Methodist Healthcare System continues to be a benefit to the community by providing quality care to all and charitable care when needed, and it provides revenue to MHM for its programs.

Billy Hamilton is a consultant in tax, fiscal policy and related issues. He served for 15 years as Texas Deputy Comptroller of Public Accounts.