Is Auto Cost Shifting Complicated?


Last week Tom Suehs, Executive Commissioner of Texas Health and Human Services (HHSC), revised his numbers regarding the costs associated with the Patient Protection and Affordable Care Act (ACA). His new estimates are approximately $16 billion from 2014 – 2023. This represents an $11 billion reduction from his previous projection.

In fairness to HHSC, the ACA has many moving parts and Mr. Suehs was transparent in his modification disclosures to justify the new estimate. During this same 10-year period, he estimates Texas would receive $100.1 billion in federal payments, which is certainly significant. We should still assume the costs from 2014 – 2019 will be $6 billion, with $76 billion in federal matching funds (a $70 billion net amount to Texas).

Hopefully, the state will agree to the Medicaid expansion provision in ACA. If history is an indicator, only a handful of states initially opted for the Medicaid program included in the same 1965 legislation as Medicare. As we know, the entire U.S. eventually participated in this program to provide medical assistance for the most vulnerable in society. Last week, the Commonwealth Fund released numbers reflecting 20 percent of U.S. women (ages 19-64) were uninsured as of 2010, a significant increase from 2000. Texas uninsured women in 2010 was 30.3 percent. Added to the 5.8 million Texans without insurance, including 1.2 million children, for an overall state uninsured rate of 27 percent underscores the need for Medicaid coverage expansion in 2014.

A friend who owns a car dealership told me he was confused about Medicaid expansion, uninsured Texans and hospital cost shifting. He asked if I would explain these health care issues to him. I answered, “Assume you sell four vehicles today and the fourth customer, or 25 percent of your business, received the vehicle free with no required payment.”

“I would go bankrupt if I gave away every fourth vehicle,” he responded. “I would have to raise the price of the other three to make up for the loss on vehicle number four.” My friend paused and looked at me with a grin and said, “When you put it that way, it’s easy to understand cost shifting and why we need to expand our Medicaid coverage in Texas.”

Helping our fellow Texans is not that complicated.