Budget Drivers: The Forces Driving State SpendingArticle II: Health and Human Services

Cost drivers — rising population, caseloads and medical costs

For the 2018-19 biennium, Article II received $33.5 billion in GRR appropriations and $43.8 billion in federal funding; total All-Funds appropriations were $78.9 billion, including about $1.6 billion in other revenue from interagency contracts, rebates and other payments. The state’s Health and Human Services Commission, which administers Medicaid in Texas, received the largest share of both GRR appropriations ($28.7 billion or 86 percent) and federal funds ($40.9 billion or 93 percent) for the 2018-19 biennium.

Medicaid is the costliest Article II program by far, receiving $61.8 billion in All Funds for the biennium, or 78 percent of the total.

From fiscal 1996 through 2019, both GRR and All-Funds appropriations for Article II more than tripled, rising at an average annual growth rate of 5.2 percent (Exhibit 7). The rise reflects both the growth and the aging of the Texas population, the rising cost of prescription drugs and the prevalence of chronic disease such as diabetes, cancer and Alzheimer’s disease.

EXHIBIT 7: ARTICLE II APPROPRIATIONS VS. MEDICAL COST INDEX AND PERSONAL INCOME,
FISCAL 1996-2019 (1996=100)

Exhibit 7: Article II Appropriations vs. Medical Cost Index and Personal Income, Fiscal 1996-2019 (1996=100)

Fiscal Year	General Revenue-Related Funds Index	All Funds Index	Medical Cost Index	Personal Income Index
1996	100.0	100.0	100.0	100.0
1997	104.6	104.5	98.8	108.6
1998	100.4	102.6	95.2	118.7
1999	102.1	104.2	103.6	125.7
2000	106.2	110.1	98.5	136.5
2001	114.3	112.4	106.1	146.4
2002	132.3	142.3	124.0	148.9
2003	125.5	139.2	150.3	153.4
2004	147.8	161.0	165.7	159.3
2005	148.2	167.7	175.0	172.1
2006	167.7	193.0	182.8	189.5
2007	165.9	194.9	185.4	202.3
2008	215.9	225.1	193.2	223.6
2009	183.1	198.8	208.0	217.4
2010	236.8	261.2	233.7	221.6
2011	245.0	242.4	256.1	242.3
2012	262.9	260.3	272.0	260.1
2013	280.6	279.0	278.1	270.9
2014	285.8	293.2	292.4	285.9
2015	303.3	306.4	327.5	301.9
2016	315.2	310.4	341.9	304.3
2017	342.8	336.4	351.9	310.2
2018	332.8	322.6	361.3	323.1*
2019	320.5	319.1	372.9	340.7*

* Estimated

Sources: Bureau of Labor Statistics, IHS Markit, Legislative Budget Board and Texas Comptroller of Public Accounts

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Note, however, that appropriations rose more slowly than either the medical cost index (5.9 percent annually) or personal income (5.5 percent annually). This indicates that Texas’ Medicaid program may be comparatively cost-efficient due to relatively tight eligibility requirements, low reimbursement rates and the state’s increased use of managed-care service models.

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