Medicaid Expansion
6:47 pm
Wed March 26, 2014

Legislative Fiscal Division refutes Gov.’s cost estimate for Medicaid Expansion

Governor Steve Bullock announced his support Wednesday for a voter initiative to expand Medicaid, called the Healthy Montana Initiative.

Medicaid expansion is an optional piece of the Federal Affordable Care Act, and Republican majorities in the Montana Legislature decided not to approve it in 2013.

The Healthy Montana Initiative would put that option before voters this fall, if it gets enough signatures. Supporters of the initiative say the plan would help prevent cost hikes the insured population sees when those without health insurance show up in the emergency room and can’t pay their bills. They say Medicaid expansion will create 12,000 good paying jobs and boost the economy by $5.4 billion.

But, the nonpartisan office responsible for analyzing the state budget disagrees with the Bullock Administration as to how much Medicaid expansion would cost the state budget.

The Governor’s office is counting about $115 million in new federal dollars for the Children’s Health Insurance Program (CHIP) as cost savings of expansion. This means the net cost to the state budget over the first four years would only be about $2 million.

The summary included with the fiscal note on Medicaid expansion submitted by the Governor's Office of Budget and Program Planning.
The summary included with the fiscal note on Medicaid expansion submitted by the Governor's Office of Budget and Program Planning.
Credit OBPP

"A lot of people say that's pretty fuzzy math to come up with that,” said Sen. Fred Tomas (R-Stevensville) regarding the Governor’s analysis including the new CHIP funds. “(That’s) money that we will get anyway, and they’re counting as revenue to reduce this cost.”

Sen. Thomas asked the non-partisan Legislative Fiscal Division (LFD) to look into the Governor’s analysis. Representatives from the LFD would not agree to an interview, but LFD Director Amy Carlson said in an email response to Thomas that the CHIP funds should not be included when looking at the financial impact of Medicaid expansion. She said that’s because the CHIP increase happens due to a change that’s not related to expanding Medicaid.

So, whether or not you include this federal increase to CHIP makes the difference between saying Medicaid expansion costs the state $2 million in its first four years or $117 million.

And that’s just in the first four years, which is how far out the Governor’s fiscal note estimates the cost of expansion.  Sen. Thomas believes this analysis strategically only looks at the best financial years “and then cut(s) it off in 2019 before the costs really start to ratchet up.”

In 2019, federal law states Montana would only have to pay 6.5 percent of the cost of expansion. By 2020, that’s 8 and a half percent, and from 2021 forward it’s 10 percent. The Legislative Fiscal Division predicts by 2022 forward, Medicaid expansion would cost Montana’s state budget $90 million dollars every year.

Analysis provided to Sen. Thomas by LFD Director Amy Carlson
Analysis provided to Sen. Thomas by LFD Director Amy Carlson
Credit MT Legislative Fiscal Division

“That’s a real chunk of revenue to just come up with in a legislative session,” Thomas said.

OK, now for the Bullock Administration’s take.

“I think what we’re seeing here is more procedural games,” said the Governor’s Budget Director, Dan Villa, “just like we saw during the regular (2013) session, which denied 50-thousand working Montanans from receiving low-cost health insurance.”

He’s the one who prepared this fiscal note on Medicaid expansion. Specifically, he prepared it to go along with the Healthy Montana Initiative. Villa said the language of that initiative requires he take into account all changes in federal funds for state-provided health insurance.

“It doesn’t say only certain portions,” he said, “it doesn’t say only the portions that pertain to Medicaid Expansion, it says all.”

President of the Healthy Montana Initiative effort Kim Abbott declined an interview. But when asked if the initiative was drafted in a way to make the finances of Medicaid expansion seem as palatable as possible, she emailed back that the initiative has been deemed legally sufficient by the Attorney General’s office. She said organizers are excited to be out in communities around the state talking to voters about getting low-income Montanans the healthcare they need and deserve.

To the other problem Senator Thomas has with the Governor’s fiscal note, that it only estimates out to 2019--Budget Director Villa said measuring four years out is the standard.

“It’s the way it’s been done since I believe 2007, we’re continuing to follow practice,” he said.

And as far as the Legislative Fiscal Division’s $90 million a year cost estimates for 2021 and beyond, he has no comment on those.

“I don’t want to extrapolate what 8 years in the future might hold for Medicaid costs,” he said.

What he does say is for the tens of thousands who would be covered by Medicaid expansion, the state would only have to pay a maximum of 10 percent of their insurance costs. The state pays 25-33 percent of the cost for the current Medicaid population.

“So bringing these people in is actually far less expensive than the current program we have today,” he said.

But the Governor’s office will have to convince lawmakers of that in order to make it happen. Because even if voters choose to expand Medicaid this fall, it will still be up to the Legislature to fund it.