Texas Health Care Spending

← Back to Texas Health Care Factsheets

Medicaid in Texas

State & Federal Medicaid Spending in Texas

Twenty six percent of Texas’ health care spending falls under Medicaid, which covered close to 3.9 million Texans - the vast majority of whom were children – in 2005.[1] The 80th Legislature approved $39.5 billion for the program (paid jointly by the state and federal governments), which provides health coverage for one out of every three children in Texas, pays for more than half of all births and covers two-thirds of all nursing home care.[2]


Medicaid is a federal-state partnership program. This means that Congress sets certain overall guidelines within which the state must operate and provides federal matching funds to the state to help operate the program. Federal funds accounted for about 60.66 percent of Texas Medicaid spending in SFY 2006.[3]


History & Background: Medicaid over the years

The federal Medicaid program was established in 1965 and in 1967 the Texas Legislature established the Texas Medical Assistance Program (MAP) to take advantage of the newly available federal funds. Accounting for less than $1 billion in its first year of operation, Medicaid spending totaled more than $13 billion in 2002 and more than $17 billion in 2005. Spending grew especially sharply in the early 1990s as Congress expanded the program at the federal level to include new population groups. Originally designed to serve individuals who were receiving cash assistance payments, Medicaid has expanded over the years to serve many population groups including many individuals who receive no other form of government assistance.


Texas historically has had one of the least generous Medicaid programs in the U.S. Texas’ program has more restrictive eligibility criteria, covers fewer services, and reimburses providers at lower levels than the national average. As a result, Texas has very low Medicaid expenditures both per capita and per recipient (see TX/US Medicaid Factsheet). Restricting the Medicaid program keeps state spending down, but it also prevents the state from drawing the maximum federal Medicaid funds possible. Some people argue that drawing more federal funds is not a good reason to increase state spending, and suggest that increasing spending would create an artificially higher level of demand. Others argue that federal Medicaid funds represent the income taxes paid by Texans, so failing to draw them back to Texas is tantamount to throwing money away. They also point out that many uninsured people end up receiving health care in emergency rooms; this care typically is paid for by local taxpayers. Finally, some people point out that allowing the level of demand for care to grow is not a bad thing: the Comptroller of Public Accounts estimates that every dollar spent on health care in Texas generates three dollars in overall economic activity.


After years of incrementally expanding Medicaid, the 78th Texas Legislature in 2003 made significant cuts to the program to help resolve the state’s budget shortfall. Funding has come up again since then. The recent 80th Legislature enacted a set of reforms for Medicaid under Senate Bill 10, which, according to the Health and Human Services Commission, are “designed to focus on prevention, emphasize individual choice, and increase the percentage of Texans with health-care coverage.”[4]


Enrollment: Children make up most of the Medicaid roll and least of the Medicaid bill

From 2004-2005, 12 percent of the non-elderly in Texas were enrolled in Medicaid, of which 72% were children.[5] The final count of Medicaid recipients in November 2006 showed that 2,789,906 Texans were enrolled in Medicaid, of which 1,941,861 were enrolled in the Children’s Medicaid program (see Figure 1 for complete breakdown of Medicaid recipients in December 2006).[6]


Figure 1: Medicaid Enrollment (December 2006 Final Count)

Source: Texas Health and Human Services Commission. Monthly Medicaid Eligibles File Extract and Texas Medicaid Historical (8-Month) Enrollment File. 30 July 2007 <http://www.hhsc.state.tx.us/research/MedicaidEnrollment/meByMonthCompletedCount.html#1>.


Month (2007)

Total Enrollment

Total Enrollment in Children’s Medicaid

Total Children Under Age 19 Enrolled

Aged & Medicare Related

Disabled & Blind

TANF Adults










While children account for the largest group of Medicaid recipients in Texas, they are on average the least costly to serve. Figure 2 below, which reflects information directly found in Chapter 5 of Texas Medicaid in Perspective (6th Ed, Jan. 2007), also known as “The Pink Book,” shows that the relatively small numbers of aged, blind and disabled Texans on Medicaid account for a disproportionate share of Medicaid spending – approximately 2/3 of program costs (see also top right panel on TX/US Medicaid Fact Sheet). In the case of Texans with disabilities, the services Medicaid provides are often an integral factor in helping individuals maintain employment and independence; in the case of the elderly, Medicaid services are often key to keeping individuals from entering nursing homes.



Figure 2: Medicaid Costs based on Source/Eligibility Category
Source: Texas Medicaid in Perspective, 6th Ed., 2007, Texas Health & Human Services Commission, 30 July 2007 <http://www.hhsc.state.tx.us/medicaid/reports/PB6/PinkBookTOC.html>.


SCHIP: Keeping Children Out of the System’s Cracks

For families who earn too much money to qualify for Medicaid, yet cannot afford to buy private insurance for their children, Children’s Health Insurance Program (CHIP) is designed to fill in. According to the Health and Human Services Commission, CHIP coverage provides eligible children with coverage for a full range of health services including regular checkups, immunizations, prescription drugs, lab tests, X-rays, hospital visits and more. While CHIP accounts for a relatively small portion of state health spending, the month of June 2007 saw a total enrollment of 300,798.[7] In 2007, the 80th Texas Legislature expanded CHIP by $1 billion.


[1] Texas & the United States: State Medicaid Factsheet, Kaiser Family Foundation,

[2] “Recap of 80th Texas Legislature.” Texas Health & Human Services Commission. Retrieved on 17 July 2007 from http://www.hhs.state.tx.us/news/release/80Legislature.shtml. (Texas Medicaid Funding Section).

[3] “Texas Medicaid in Perspective,” 6th Edition, 2007, Ch. 5, p. 6, Texas Health & Human Services Commission, 30 July 2007 <http://www.hhsc.state.tx.us/medicaid/reports/PB6/PDF/Chapter05.pdf>.

[4] “Recap of 80th Texas Legislature,” Texas Health & Human Services Commission, 17 July 2007 <http://www.hhs.state.tx.us/news/release/80Legislature.shtml>.

[5] “Texas & the United States: State Medicaid Fact Sheet,” Kaiser Family Foundation. 30 July 2007 <http://www.kff.org/mfs/medicaid.jsp?r1=TX&r2=US>.

[6] “Final Count: Medicaid Enrollment by Month,” Texas Health & Human Services Commission, 17 July 2007 <http://www.hhsc.state.tx.us/research/MedicaidEnrollment/meByMonthCompletedCount.html#1>.

[7] “CHIP Enrollment by Income Group.,” Texas Health & Human Services Commission, 17 July 2007 <http://www.hhsc.state.tx.us/research/CHIP/CHIPEnrollIncomeGroup.html>.