Fiscal Federalism VII: Texas to End Medicaid?

In a previous blog a new study by Mercatus found that federal grants often drive up state and local taxes because the federal funds dry up leaving them to pick-up the tab.  Another way this can happen is through programs with a federal match.  In the quest to get the federal dollars, state and local governments must raise some revenue of their own.  The largest of these is the Medicaid program–to see how various states are addicted to federal Medicaid money see this post.

Today the New York Times is reporting that Texas is planning to do something about this inversion of fiscal federalism–do away with the federal Medicaid program and put in place a state-run system.  Here’s why:

“With Obamacare mandates coming down, we have a situation where we cannot reduce benefits or change eligibility” to cut costs, said State Representative Warren Chisum, Republican of Pampa, the veteran conservative lawmaker who recently entered the race for speaker of the House. “This system is bankrupting our state,” he said. “We need to get out of it. And with the budget shortfall we’re anticipating, we may have to act this year.”

The Heritage Foundation, a conservative research organization, estimates Texas could save $60 billion from 2013 to 2019 by opting out of Medicaid and the Children’s Health Insurance Program, dropping coverage for acute care but continuing to finance long-term care services.

As the old saying goes, “Don’t Mess with Texas!”