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The effect of health care reform on Texas

Here’s an email from the Legislative Study Group, via State Rep. Garnet Coleman, who has been a constant source of health care reform updates:

LSG Policy Update: CBO Estimates of Impact of Healthcare Reform to Texas

With the United States House of Representatives poised to take a vote on health care reform [today], we wanted to provide you with some data on the expected financial impact on Texas state government.

Congressman Henry Cuellar provided us with a letter from Congressman Henry Waxman, Chairman of the Committee on Energy and Commerce. The Chairman responds to an inquiry from Congressman Cuellar on the fiscal impact of the Medicaid provisions in health reform on the State of Texas.

The House will take two main votes [today]: one on final passage of health insurance reform, and one on a sidecar reconciliation bill that improves upon the main legislation. Taken together, these measures will have an historic impact on our country and especially in Texas where almost 28 percent of the population is uninsured.

One important provision is the Medicaid expansion that will bring a million Texans living at or near the poverty level into coverage. Currently, Texas covers parents with incomes up to 26 percent of federal poverty level (FPL). The legislation will increase that to 133 percent of FPL while covering 100 percent of the costs of new enrollees until 2018, then stairstepping down the reimbursement level to 90 percent by 2020.

There have been various estimates of the proposed impact on the Texas state budget – Congressman Cuellar’s letter sheds some light on the projected state impact as viewed by the nonpartisan Congressional Budget Office (CBO). To begin with, the legislation under consideration would be in effect for ten years – through the end of 2019 – at which point Congress would have to reauthorize it. Going on the timeline of the bill (2010 – 2019), Texas should expect to spend around $1.4 billion over ten years, the bulk of which would not come until after the changes go into effect, after 2014.

This stands in contrast to estimates by HHSC you may have seen cited in the press that peg the cost at approximately $24 billion. That estimate is on a different timeline: going from 2014 – 2023, or four years past the legislation’s life. It also includes approximately $6 billion in possible cuts to Medicaid Disproportionate Share Hospital (DSH) funding that is generally used to compensate hospitals that perform uncompensated care. The HHSC estimate also does not include many of the provisions in the proposed reconciliation improvement bill – for instance, Medicaid DSH reductions are smaller in the Medicaid bill. The CBO projects a $1.2 billion reduction in DSH funds over the course of the legislation (2010-2019).

All told, Texans and Texas state government stand the chance to benefit greatly from federal healthcare reform legislation. Most of the 5.9 million uninsured Texans will gain health insurance, all insured Texans will gain protection from the worst practices of the insurance industry, and Texas will likely receive over $120 billion in federal dollars.

Economist Ray Perryman noted that spending on CHIP and Medicaid has a 3.25 multiplier effect – meaning every dollar spent generates 3.25 times that amount in economic activity. The legislation has the potential to create jobs and boost economic activity in our state while also ensuring the health and well being of all its citizens.

Thank you again to Congressman Cuellar for passing along Chairman Waxman’s analysis. You can view a pdf of the letter here.

So there you have it. Now pass the damn bill already, and let’s get on with it.

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8 Comments

  1. Jeff N. says:

    Amen. Pass the damn bill today.

  2. John says:

    I am trying to figure out how this bill will result in more jobs, can someone enlighten me? Plus we have already heard from Caterpillar it will increase their costs $100mm in the first yr. I assume the COH, County, HISD and others will also see increased costs on strained budgets. So will private employers, just trying to figure out how this will result in more jobs. We are just increasing the cost side of the equation but not to revenues (or at least not in direct proportion.

  3. Jeff N. says:

    John, it’s not a jobs bill, it’s about making more and better health care available to more people.

    If you’re calling for more financial stimulus from the feds, or meaningful tax reform on all levels that will allow governments to help meet their strained budgets, I share your concerns.

  4. John says:

    I know it is not a jobs bill. My #1 concern is the economy (I have no health insurance in full disclosure). But I think the economy is and should be the #1 issue. I think this health care bill is going to prevent any job growth/hiring. The underemployed number (17% or so now) will probably go up to 25-30% once this bill takes effect.

    I just broght up the Caterpillar numbers and contrasted that with Obama’s statements that this HC bill will result in hiring. Yet I have not heard one explanation how this will be the end result and I want someone to explain how it will. The economy will have a double dip recession. If one thinks the housing problems in CA, AZ are over think again go out there and see how many people still aren’t paying their mortgages yet the banks are not foreclosing

  5. blank says:

    The underemployed number (17% or so now) will probably go up to 25-30% once this bill takes effect.

    Do you have a reliable source for that “25-30%” number?

    I am trying to figure out how this bill will result in more jobs, can someone enlighten me?

    More people with insurance will result in expanded capacity. Also, the small business tax break will probably help too. That’s my guess, but I can’t say for sure what their reasons are.

  6. John says:

    that 25% is just estimate from a few wall street analyst, definitely grain of salt. But I still don’t believe in job creation. If you just think in terms of a profit equation, the expenses are going up and the incremental hire is costing you more than a few yrs ago. I personally think this bill will be the impetus for round 2 of the recession.

  7. Jeff N. says:

    John, if you’re calling for a bigger jobs bill, we’re on the same side.

    I agree that jobs are the highest priority. The prosperity of the 90s resulted from job growth. We haven’t seen jobs like that since the 2001 recession. The small jobs bill that the Senate managed to pass a couple of weeks ago will generate some jobs growth. But we need a bigger jobs bill.

    There’s no reason to delay health care reform, however. There’s lots of work to do in turning the country around, but health care reform is necessary on economic and moral grounds.

    Round two of the 2008-09 recession, if we’re unfortunate, will result from the continued deflation of real estate values around the country and the wave of foreclosures that may accompany it. HCR won’t be the cause of a second dip in GDP.

  8. blank says:

    I personally think this bill will be the impetus for round 2 of the recession.

    Well, if the CBO can’t convince, then it’s not likely I can either. Nonetheless, if you really believe this, then you should (a) dump your investments (the DOW is down 0.09% so investors don’t seem to be reacting as strongly as you are) and (b) go to intrade. com play the futures market (The US Economy will go into Recession during 2010 is selling under 20).