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Towards a Texas Solution: Effects of Implementing a Private Exchange Option for Newly Eligible Medicaid Recipients

Texas Medicaid Solution

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Recently, the federal government has indicated that utilizing Medicaid funds to purchase private insurance for newly eligible individuals could potentially be permissible, thus opening up another set of possible frameworks for states to craft workable plans. Local areas across the state would receive a significant economic boost if Texas expands coverage under the Affordable Care Act (ACA) using a private exchange option.

An exchange is a private-market solution where competition among insurance providers will stimulate innovation and cost reduction measures while avoiding some of the flaws of the Medicaid program. Utilizing the Federal funds designated for Medicaid expansion under the ACA to provide private insurance coverage for the newly Medicaid-eligible population through such an exchange would increase the economic benefits to the state by both decreasing the administrative costs to the state and increasing the potential gains.

The Perryman Group found that during the first 10 years after implementation, the total cumulative net benefits to the state economy from both higher enrollment in the existing Medicaid program and the use of the private exchange for the newly eligible population include $300.8 billion (in 2012 dollars) in output (real gross product) and more than 350,000 jobs in an average year over the timeframe. These benefits stem from health care spending, federal funds inflow, reduction in costs for uncompensated care and insurance, and enhanced productivity from a healthier population.

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