MTPR

Medicaid Expansion Stimulates Montana Economy, Report Shows

Apr 11, 2018

Medicaid expansion in Montana is expected to cost the state more than $58 million annually in a couple of years. But, a new economic analysis says the healthcare program in on track to pay for itself by then through savings in other parts of the state budget and increased economic activity.

That analysis was commissioned by the Headwaters Foundation and the Montana Healthcare Foundation. Joining us now to talk about it is Healthcare Foundation CEO Aaron Wernham, and Bryce Ward, associate director of the University of Montana’s Bureau of Business and Economic Research, who performed the analysis.

Eric Whitney: Economist Bryce Ward, let's start with you. Can you briefly tell us what the question you were asking in this analysis was and what was the answer or the conclusion that you reached?

Bryce Ward: The broad question is, well what's Medicaid expansion doing, particularly to the economy. And real briefly, we find that it brings in a lot of money from outside the state and that stimulates economic activity in Montana to the tune of roughly 5,000 jobs and $270 million of personal income. Medicaid expansion also saves the state money in a variety of ways. You take the savings plus the additional revenue and the benefits from the additional economic activity. We think it will pay for itself, even after you reach the full state share of 10 percent in 2020 and beyond.

Summary of Economic Impacts of Medicaid Expansion in Montana/Year and Cumulative (income, sales, and net savings in millions of 2016 dollars)
Credit UM Bureau of Business and Economic Research

EW: I'm going to want to circle back to some of those economic conclusions that you've drawn and how you got there, but I want to bring in Aaron Wernham now. And as the head of the Montana Healthcare Foundation, your focus is on improving the health of Montanans in general, and that includes helping more Montanans get access to healthcare. What kind of effect do you think that Medicaid expansion has had on those two goals?

Aaron Wernham: The first and most important finding is just that it has really increased access to healthcare. So we know that insurance coverage is important to health and the program is covering more than 94,000 Montanans now. So it's become a very important source of coverage, which allows people to get in for screenings and indeed within the very first year of the program, this report shows that the number of people who had been skipping checkups had fallen more than 20 percent. So I think it's benefiting health tremendously and I think the new finding from this report is that it's not only covering so many of our neighbors and colleagues, it is also paying for itself.

EW: Bryce Ward, you mention that the federal government is paying most of the cost of Medicaid expansion in Montana. It's been ratcheting down from the federal government paying 100 percent of the cost of Medicaid expansion and by 2020, the federal government will be paying 90 percent of the cost and Montana will be responsible for 10 percent of the cost. Critics of Medicaid expansion in the Montana Legislature say the state just plain can't afford that 10 percent. Your estimate in this analysis is that in 2020, Montana's 10 percent share is going to be more than $58 million a year. Am I right that your analysis also says that the Legislature isn't going to have trouble finding that money because of the effects of expansion?

BW: Yeah. There's a couple pieces. First, when we expand Medicaid, there's direct savings in other parts of state programs. In particular, in traditional Medicaid. Because there was a certain set of people that you're allowed to take from traditional Medicaid and move them into the expansion population. And in traditional Medicaid, the state pays 35 percent, so when you're only paying 10 percent there's a 25 percent savings, right. So that savings alone, if those trends continue into the future, over half of that 10 percent cost to the state of Medicaid expansion is covered just from the savings in traditional Medicaid. And then you add in savings to the corrections department, and other health programs, and you can cover almost all of that 10 percent just with savings. There will be a little bit of cost left over. Like about $16 million is what the new report. The state has to come up with $16 million, but when you think okay there's 5,000 jobs and $280 million of income in 2020, that, you know, we estimate wouldn't be here otherwise, because that's money that's coming in to be stimulating, you know that should be enough to expand the state coffers by enough to cover that cost.

EW: The latest Medicaid enrollment figure that I've seen from March of this year says that there are now nearly 94,000 Montanans who are covered by Medicaid expansion. Both supporters and critics of expansion say that number is higher than was anticipated. I have questions for both of you on that and I'd like to start with Aaron. What's your take on Medicaid enrollment exceeding expectations, what do you think that means?

AW: I think it means that the program is valuable and that there was a tremendous pent up need for this. When you look across rural Montana, it's an unfortunate but true finding that there are a tremendous number of people who are subsisting on relatively low income and weren't able to afford health coverage or weren't getting coverage through their employment and are now able to get coverage for the first time. And they're now already beginning to access preventative services, lower cost out-patient services, and we hope, get healthier.

EW: Bryce Ward, Medicaid expansion critics point to that higher than expected enrollment number and say it's proof that the state is costing the state more than proponents said it would when they passed the legislation. Do they have a point?

BW: It does cost more than you quote unquote expected. Whether that's a problem or not I think you have to put in the context because more people getting care does mean more money from outside coming into the state, generating those jobs, generating income. So I think that's what's new. There has been debate on whether we can afford the cost of care for a higher than expected number of enrollees, but I think this study answers that question.

EW: Before Medicaid expansion, people couldn't enroll in Medicaid simply because they had very low incomes. And I've heard this referred to as, you can't get Medicaid if you're just poor. You have to be ... poor and disabled, or poor and pregnant, or poor and a child. But if you were a so-called able-bodied person, you couldn't be eligible for Medicaid even if you had no income. Medicaid expansion changed that, so now nearly anyone with an income of a little under $16,000 a year can get Medicaid coverage. Critics say that discourages people from working. Why would people go out and look for a job that provides insurance or pays enough for them to afford health insurance if they can just get it for free? And, Bryce Ward, is there any evidence that expanding Medicaid to able-bodied adults reduces participation in Montana's workforce?

BW: No, in fact the opposite. So let me just start with the national findings. Several papers have examined how Medicaid expansion affects labor force participation among the eligible and the general finding there is that it doesn't really do much, but in Montana, we actually see the opposite. We see a substantial increase in employment and labor force participation in the 6 to 9 percent range amongst these kind of lower-income, Medicaid eligible Montanans. Which doesn't surprise me that we would see something that big given what the literature was saying, but it certainly suggests that there is something else going on with these low-income people in Montana that might be attributable to Medicaid expansion and the associated HELP-link program.

EW: A lot of people are going to find that counter-intuitive, that if they can get this really expensive thing — if they can get healthcare at little or no cost through Medicaid expansion — why would that motivate people to go out and get jobs?

BW: First, there is this additional optional program called HELP-link, which basically said, look, if you're enrolling in Medicaid expansion let's see if we can offer you employment assistance through the office of labor and industry to get a better job or to get a job. And that might be helping. One of the most robust findings about providing health insurance to low-income people is that their mental health gets better. Better mental health might lead to better employment outcomes in Montana. It also could just be that a lot of the people who were Medicaid expansion eligible, they were working to begin with and having a job is something that they want.

EW: I expect some people to attack this economic analysis as being somehow partisan or being put out to further a political agenda. Is there any truth to that?

BW: No. I take great pride in trying to tear my answers down, so if anything I'm going to try to take the easy answer and say 'why is this wrong?' I mean the reality of Medicaid expansion is that it brings a lot of money in from outside the state that if you don't choose to pull the trigger, you don't get. You know, it's just like if a Montana company won a big federal contract. Well if a Montana company wins a big federal contract, those are jobs and income that come along with it. And in this case, that federal contract is on the order of $350-$400 million a year, and if you bring $350-$400 million a year into the state, you're gonna get economic impact. And the stuff that we talked about in terms of the savings, those are reported by the state. So, you know, there's not much partisanship here. This is just us describing what we think happens, and I'll leave it at that.

AW: The Montana Healthcare Foundation exists purely to improve the health and health care of all Montanans. That is our agenda. We don't see it as a political agenda. When we see a program that offers health benefits, we're interested in understanding it, understanding the full scope and scale of those benefits, understanding if there are any problems and looking at ways that they can be made better. So our goal with this report was just to make sure that Montanans have the information they need to make good decisions about the Medicaid expansion program and we do a great deal of work beyond this sort of report, looking at ways to strengthen the healthcare delivery system and to improve the effectiveness of the services that are delivered now that people have coverage.

EW: Bryce Ward and Aaron Warnem, thanks for joining us on Montana Public Radio.

Aaron Wernham is CEO of the Montana Healthcare Foundation, and Bryce Ward is associate director of the Bureau of Business and Economic Research at the University of Montana.

Read the full report on The Economic Impact of Medicaid Expansion in Montana.

Editor’s note: Montana Public Radio has received funding for health care coverage from the Montana Healthcare Foundation, and is a broadcast service of the University of Montana.