Texas Medicaid spending is on an unsustainable trajectory. The program’s expenditures now consume 25 percent of the state budget, making it increasingly difficult to adequately address other vital state needs. With the recent recession and a slowly recovering economy, Texas is struggling to close budget gaps. The problem has been exacerbated by an increase in Medicaid enrollment and spending, which is a reflection of the tough economic times.
This is not the first time, nor is it likely to be the last, that the counter-cyclical nature of the Medicaid program has created a heavy burden on the state. Although reductions have been seen in services and provider payments, the state’s ability to meet other important commitments continues to be challenged. Even in good economic times, Medicaid spending has outpaced growth in state tax revenues. With new federal mandates and changing demographics, the budget needs of the program will consume more and more of the state’s available revenues. Under the existing program structure, there is no relief in sight.