The Impact of Obamacare on Nevada’s Medicaid Spending

Executive Summary

Executive Summary

Medicaid is a state-operated program that originally was intended to provide critical medical services for highly vulnerable populations. Although the federal government assumes a large share of its financial cost, Medicaid still accounts for an increasingly significant proportion of Nevada's budget expenditures: More than 12 percent of general fund spending was allocated to Medicaid in fiscal year 2010.

As the number of people eligible for Medicaid has grown, so too has the range of services offered by Nevada's Medicaid program. It now offers benefits comparable to those of the most generous corporate health plans in America, providing comprehensive coverage to 10 percent of the state's population. Medicaid's growth is already crowding out state expenditures on other policy objectives.

The declining ability of taxpayers to support the growing costs of Medicaid is clearly evidenced by Nevada's current structural deficit. The state general fund began to experience negative revenue growth in fiscal year 2009, and projected revenues of $5.34 billion for the 2011-13 budget period are $1.1 billion less than budgeted expenditures of $6.42 billion for the current 2009-11 budget period. Despite this gap, state agencies initially requested a $2 billion increase in spending for the 2011-13 budget cycle, primarily driven by projected growth in Medicaid expenditures.

The Silver State's mounting long-term obligations also present a bleak picture: Official estimates of unfunded pension obligations now top $10.4 billion and even this figure significantly understates the true shortfall because it is based on unduly optimistic actuarial assumptions. In addition, the state's unemployment rate of 13.6 percent — highest in the nation — implies larger entitlement expenditures and slower growth in tax revenues compared to most other states. Serious as Nevada's budget problems already are, the Patient Protection and Affordable Care Act of 2010 — popularly known as Obamacare and hereafter referenced for brevity by the initials ACA — promises to compound them by further increasing the state's future Medicaid spending commitments.

This study estimates ACA's effect on Nevada's Medicaid expenditures. It does so by constructing and comparing state Medicaid spending projections with and without ACA mandates. The resulting detailed assessment shows that Nevada would spend $17.4 billion on Medicaid during the first 10 years (2014 through 2023) of ACA's implementation, which is $5.4 billion (45 percent) more than its projected spending without ACA during the same period. We also compare Nevada's Medicaid spending growth with Medicaid growth in other states — California, Illinois, Oklahoma and Texas

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Geoffrey Lawrence

Geoffrey Lawrence

Director of Research

Geoffrey Lawrence is director of research at Nevada Policy.

Lawrence has broad experience as a financial executive in the public and private sectors and as a think tank analyst. Lawrence has been Chief Financial Officer of several growth-stage and publicly traded manufacturing companies and managed all financial reporting, internal control, and external compliance efforts with regulatory agencies including the U.S. Securities and Exchange Commission.  Lawrence has also served as the senior appointee to the Nevada State Controller’s Office, where he oversaw the state’s external financial reporting, covering nearly $10 billion in annual transactions. During each year of Lawrence’s tenure, the state received the Certificate of Achievement for Excellence in Financial Reporting Award from the Government Finance Officers’ Association.

From 2008 to 2014, Lawrence was director of research and legislative affairs at Nevada Policy and helped the institute develop its platform of ideas to advance and defend a free society.  Lawrence has also written for the Cato Institute and the Heritage Foundation, with particular expertise in state budgets and labor economics.  He was delighted at the opportunity to return to Nevada Policy in 2022 while concurrently serving as research director at the Reason Foundation.

Lawrence holds an M.A. in international economics from American University in Washington, D.C., an M.S. and a B.S. in accounting from Western Governors University, and a B.A. in international relations from the University of North Carolina at Pembroke.  He lives in Las Vegas with his beautiful wife, Jenna, and their two kids, Carson Hayek and Sage Aynne.