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State Health Care Spending

An Examination of the Rise in State Health Care Spending and Steps to Alleviate the Pain

Key Facts and Stats

Health care accounts for more than 34 percent of Texas government spending from state, federal and other sources.

More than 50 state agencies and higher education institutions spend about $30.2 billion annually on direct health care services, such as Medicaid for the poor, disabled and elderly; mental health services; medical benefits for state employees and retirees; and health care for prisoners.

Texas Healthcare Expenditures

From fiscal 2005 to 2009, Texas’ health care spending rose by 36.1 percent – nearly four times the inflation rate and more than four times the rate of population growth.

Healthcare Expenditures versus poulation growth and inflation.

General Revenue Spending
on Health Care

Health care spending from general revenue rose by 22.3 percent from fiscal 2005 to 2009, to a total of $11.6 billion, or nearly 27 percent of all general revenue appropriations.

Five state agencies accounted for 89 percent of all health care spending and 87 percent of general revenue health care spending in fiscal 2009, in the following order:

  1. Texas Health and Human Services Commission (HHSC)
  2. Texas Department of Aging and Disability Services (DADS)
  3. Texas Department of State Health Services (DSHS)
  4. Employee Retirement System (ERS)
  5. Texas Department of Criminal Justice (TDCJ)
Share of All Health Care Spending, Fiscal 2009
Share of General Revenue Health Care Spending, Fiscal 2009

Medicaid Spending
Nearly all health care spending at the two top agencies, HHSC and DADS, supports Medicaid, and the Children’s Health Insurance Program (CHIP).

  • In fiscal 2009, Texas spent more than $23.3 billion on Medicaid and CHIP from all funds; Medicaid accounted for more than 95 percent of this total.
  • HHSC’s primary Medicaid responsibility is for acute care. HHSC spent about $13.5 billion on acute care in fiscal 2009.
  • DADS administers Medicaid long-term care for the elderly and the disabled. DADS spent $5.8 billion for this purpose in fiscal 2009.

Other Health Care Spending

In fiscal 2009:

  • DSHS expenditures for mental health care totaled $1.8 billion26.3 percent more than in 2005.
  • ERS expenditures for state employee and retiree medical benefits totaled nearly $2.1 billion34.0 percent more than in 2005.
  • TDCJ expenditures for prisoner health care totaled $548 million28.7 percent more than in 2005.

Cost Drivers

The spiraling growth in Texas’ health care costs is being driven by a number of factors, including:

  • technological advances, in the form of newer, more effective – and more costly – products, services and drugs
  • the increasing share of costs borne by health insurance, reduces consumer incentives to demand transparent and competitive pricing
  • increased reliance on expensive specialists for medical treatment

Cost Drivers (continued)

Additional factors in the spiraling growth of health care costs:

  • high rates of uninsured Texans and shortages of health care professionals, which force patients to seek more costly care from specialists or emergency rooms
  • lifestyle choices such as smoking, overeating, inactivity and alcohol consumption
  • increased enrollment in Medicaid due to job losses and declining income

How can Texas address rising health care costs?

Read the full report. »
(PDF, 2.56M)

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This report captures the total costs to the state of health care, including direct health-related services and the accompanying administrative costs. The report also will provide in-depth analysis of factors driving the cost of health care and examine regional differences in costs in the Employees Retirement System and Medicaid.

Read State Health Care Spending (PDF, 2.56M)

Appendix I: Project Overview (PDF, 113K)

Appendix II: State Agency Spending (PDF, 1.65M)

Appendix III: Regional Cost Variations (PDF, 1.5M)

Health Care Region Map (PDF, 1.73M)

End Notes (PDF, 170K)

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