Texas Medicaid Reform Model: A Market-Based, Patient-Centered Approach

Abstract

We find that the Texas Medicaid Reform Model would provide substantial cost savings through a federal block grant that allows Texas to shift some risk groups into a defined contribution program that subsidizes private health insurance premiums and includes an incentive to choose a high-deductible plan with a health savings account. This model would ask Texans to have some skin in the game, providing an incentive to deter overuse of healthcare while providing quality, cost-effective health care and superior access to providers compared to the status quo. Our results show that the annual cost savings to the Medicaid program under the reform model will be in the $6 billion range after ten years. The Texas Medicaid Reform Model provides an approach that would satisfy these concerns and improve the well-being of all Texans. It could also help other states seeking to adopt a similar approach, although further modeling would be required to estimate cost savings in states that adopt such reforms.

Keywords: Medicaid, Defined-Contribution Model, Texas

JEL Classification: H72, I11, I18