Montana can expect continued economic benefits from Medicaid expansion

Mar 25, 2016

By MBPC Staff

States across the country that have expanded Medicaid are experiencing significant savings as well as increased revenue, and as we heard from the Montana health agency this week, we can expect similar experiences here in Montana after the passage of the HELP Act. In case you missed it, MBPC released a new report this week, highlighting the successful enrollment levels in Medicaid – already, over 38,000 Montanans have enrolled– and detailing some effective strategies the state should consider in continuing its outreach to eligible Montanans.

The Department of Public Health and Human Services also announced this week that the State of Montana has already experienced $3 million in savings to the state general fund, and over $37 million in NEW federal dollars invested in communities across the state.

Based on other states' experiences, Montana can expect continued good news as enrollment grows. A new study out this month shows that all expansion states should expect to see state budgetary savings and additional revenue.

As we’ve talked about before, the federal government pays 100% of the cost of expansion. That match will gradually scale down, but will never drop below 90%. This compares to a federal match of about 70% for the previously eligible Medicaid population. States have been able to “transfer” a portion of that previously eligible population into the new adult group covered at the higher federal match. For the individual, insurance won’t look any different (or in some cases, may be better!), but the state will see savings on what it has to spend on Medicaid. We’ve already seen this in Montana – with the state receiving the higher match for over 8,000 individuals previously covered by Medicaid. This translates to over $3 million in savings to the state general fund.

The report also details additional savings, through lower uncompensated care costs and less pressure on state resources for mental and behavioral health programs, public health programs, and health care services for prisoners. Because many of those who access these programs are now eligible for Medicaid, they can get preventative care and other services they need at lower cost to the state. We don’t yet have data for Montana, but the research shows that savings in other states have exceeded expectations.

Additionally, those new federal dollars into Montana communities have rippling effects all over the state. Even when the federal share scales down to a 90% matching rate, this is still a good deal for states, because these federal funds generate new economic activity that wouldn’t have happened otherwise. A simple comparison is when someone living outside of Montana visits and spends money in the state. Unlike a state resident choosing to spend a dollar in one area of the state economy versus another, our state economy reaps the benefits of that new out-of-state dollar. As the article points out, for every 90 cents in federal funds to pay for one dollar of new Medicaid spending, the state should expect $1.35 to $1.80 in state economic activity, supporting jobs and increasing tax revenues for state and local governments.

Over 38,000 Montanans are getting the health care coverage they need to stay healthy and to be active members of their communities. We’ve heard from many of these folks, who have told their stories about how getting the health services they need has made a real difference. And the fact that the state will see even greater economic benefits than anticipated is “icing on the cake”.