Analysis: Montana Should Delay Medicaid Expansion, Aim for Real Reform

Published May 15, 2013

Montana Gov. Steve Bullock waited until nearly 60 of the 2013 legislative session’s 90 days had passed before making a Medicaid expansion proposal that essentially said, “Do what the feds want.”

That’s a wasted opportunity. Since Medicaid rules are made in Washington, DC, our state frittered away a chance to negotiate reforms that could better meet the needs of Montana’s most at-risk population while being fair to taxpayers.

So now in the session’s waning days we’re stuck with a take it or leave it choice for creating an entirely new dependency class without addressing any of Medicaid’s widely acknowledged shortcomings.

This is simply irresponsible. Providing better healthcare access at lower cost to those most at risk should come first. Then we can debate the pros and cons of putting tens of thousands of young, healthy, childless adults into the program, and of taxpayers footing the bill.

Fix, Don’t Expand

There are two major arguments for fixing Medicaid before expanding it, one of them financial and the other one moral.

The financial argument is that this expansion isn’t “free money” for Montana. It will actually come at a net cost to Montana’s taxpayers, a cost that will only grow if and when the federal government decides it is unable to fulfill its end of the deal.

And the moral argument is that it will result in tens of thousands of Montanans being dumped into a system that results in inferior access to care, with many of them forced out of much better private insurance plans.

Forty-four percent of the newly eligible would be healthy adults under the age of 34, and 75 percent would be childless. In addition, a fourth of all new enrollees would be crowded out of their much better private insurance plans, creating a new dependency class that taxpayers can ill afford as state and federal budgets are increasingly consumed by expanding entitlement programs.

Trapped in a Failing System

Expansion will trap young, healthy, able, and mostly childless adults in a failing system and reduce their incentives to work and succeed. Medicaid recipients encounter barriers to primary care at nearly twice the rate as those with private insurance. They use emergency rooms at rates nearly twice those of the privately insured.

And although Obamacare initially raises premium reimbursements for providers via Medicaid, cuts to provider payments are almost certain to come. In a recent brief filed in California, federal officials defended the right to cut Medicaid payments to providers by 10 percent, by insisting “There is no general mandate under Medicaid to reimburse providers for all or substantially all of their costs.”

In a poll conducted in 2012 by the Physicians Foundation, one out of four doctors surveyed said they had stopped accepting Medicaid patients because of the below-market payments they receive and the headache of red tape and compliance costs. A study published in Health Affairs last year reported a third of physicians said they would accept no new Medicaid patients.

Shoveling more than 70,000 new Montanans into the Medicaid system while decreasing provider reimbursements won’t make access to quality care any easier for these people or anyone else in the state.

High Costs for Taxpayers

Even with all these faults, expansion would come at a high cost for Montana’s taxpayers. The net costs to Montana taxpayers through 2021, with all new taxes and jobs included, range from $50 million to well over $100 million. That’s enough to hire 230 to 460 new teachers for the same period.

Montana should resist any Medicaid expansion until the federal government gives states more control over how the money is spent, to ensure the best care at the lowest cost for their own citizens. At a minimum, deferring the decision will give Montana’s leaders and citizens ample opportunity to evaluate the results of expansion in other states and make a more informed decision during the 2015 legislative session.