Medicaid Expansion in Texas: Up to $10 Billion a Year Hangs on a Legislative Fight

Medicaid expansion could pour up to $10 billion a year in federal funds into Texas and cover more than 1 million uninsured residents — but Gov.-elect Gina Hinojosa can't simply sign it into being. Texas law bars the state from altering Medicaid eligibility without legislative approval, and the state Senate remains in Republican hands even after last week's Democratic sweep of every statewide office.

The political ground shifted overnight. Gov. Greg Abbott, who once called expansion "a tax increase waiting to happen," lost his seat after 12 years in office. During his tenure, Texas's uninsured rate never substantially dropped. Today, 16% of Texans lack health insurance — the worst rate in the nation — and the uninsured population has climbed past 5 million since 2015, according to Census data cited by Cover Texas Now.

What does this change for hospitals, counties and low-wage workers? Potentially a lot. Texas is one of only 10 states that still refuse expansion. Under the formula, the state would foot 10% of expansion costs to draw down 90% federal funding.

Who would actually get covered?

In Texas, Medicaid currently covers only low-income children, new mothers and the elderly. No childless working-age adult qualifies — a stricter design than most states. According to Cover Texas Now, expansion would cover U.S. adult citizens in a family of four earning between $4,000 and $44,000 a year.

That income band defines what policymakers call the Texas coverage gap: residents who earn too much for Medicaid but too little to qualify for ACA subsidies.

"The number of people who would gain coverage … it would remove the concept of the coverage gap," said Charles Miller, director of Health & Economic Mobility Policy at Texas 2036, a nonpartisan think tank. "As people gain coverage, they tend to seek out more care. They gain protection against medical debt."

Why an executive order probably won't work

Governors in Louisiana, Kentucky and West Virginia expanded Medicaid by executive order. Hinojosa's path is murkier. Texas statute requires legislative sign-off for eligibility changes, though it's not clear whether that law blocks her from directing the Texas Health and Human Services Commission to file an expansion plan directly with the Centers for Medicare and Medicaid Services.

Almost a week after her win, her administration hasn't spelled out its approach. Her commitment itself is unambiguous.

"What my healthcare position is to ensure every Texas child has quality healthcare. We have the most children without health insurance of any state in America. It is a sin," Hinojosa told KPRC in Houston after the election. "We are a world economic powerhouse and we can take care of our kids. The way we do that is expanding Medicaid and that's my position."

The federal work-requirement problem

Even if Texas expanded tomorrow, new federal rules would raise the price tag. The One Big Beautiful Bill Act of 2025, imposed a year ago, requires Medicaid recipients under 65 to work at least 80 hours a month and earn at least the federal minimum wage — roughly $580 a month — to keep coverage. Starting in January, expansion states must administer those reporting requirements, and some are already spending as much as an extra $15 million on staff to comply.

State Rep. Donna Howard, D-Austin, said those restrictions could add millions on top of Texas's 10% share. That's fueling talk of a "trigger" bill: expansion would activate only if the incoming Democratic majority in Congress repeals the harshest H.R. 1 restrictions.

"We can't pass something that is going to not achieve our goals," Howard said. In the meantime, she wants more mobile health clinics, more investment in federally qualified health centers, and fewer administrative barriers that discourage doctors from accepting Medicaid.

"We need providers, and yet, we have an onerous system that has delayed payments for, you know, up to a year," Howard said.

The economics for hospitals and local budgets

The fiscal case is where practitioners should pay attention. Local public health infrastructure, locally funded hospitals and nonprofits in Texas currently spend hundreds of millions of dollars a year caring for the uninsured. Expansion could let local governments repurpose that money.

"One of the positive benefits (of expansion) is improved operating margins for hospitals, because they have fewer uninsured patients, less uncompensated care," said Dr. Edwin Park, a research professor at Georgetown University's McCourt School Center for Children and Families. "They're more able to keep their doors open, avoid cutting staff and services."

The employer-based insurance argument that Abbott and other Republicans long relied on has also weakened. Only 38% of Texas small employers offer health coverage, and the federal minimum wage has sat at $7.25 for 17 years. Abbott's 2022 framing — "Medicaid was created to serve the most vulnerable, not able-bodied adults who can and should get healthcare through an employer" — now faces a legislature controlled by Democrats in the House and a governor's mansion that flipped on voter frustration over living costs.

One open question is the state's own 10% share. Abbott's agencies have been asked to slash budgets by 3% this year, and the incoming Democrats haven't laid out how they'd fund expansion.

"Opting in is a gamechanger for people to have access to a healthcare system that their tax dollars pay for," said Lynn Cowles, health and food justice policy director at Every Texan. "We owe it to people in Texas to do something with this moment."

The likely sequence: a legislative fight in the Senate, a possible trigger bill tied to Congress, and a state agency waiting on legal clarity over whether Hinojosa can act alone. For the 5 million uninsured Texans, the $10 billion question now moves from whether to how — and when.