Montana Underestimated Medicaid Expansion ‘Woodwork Effect’

Published March 10, 2016

The State of Montana underestimated the number of newly and previously eligible individuals who would sign up for its expanded Medicaid program under the Health and Economic Livelihood Partnership Act (HELP), which will now cost much more than predicted.

Blue Cross Blue Shield, the program’s administrator, predicted 18,600 residents would enroll in Medicaid by January 1, 2016, the day the program’s expansion under the Affordable Care Act (ACA) took effect. Gov. Steve Bullock’s (D) administration estimated 23,000 would enroll by June 2016, according to a report by KRTV in Montana.

On February 8, Bullock said more than 27,000 Montanans had enrolled, reports the Great Falls Tribune. As of March 1, 36,320 newly eligible Medicaid recipients had enrolled, according to a state Legislative Finance Committee report published March 10.

Under the Medicaid expansion provisions contained in the ACA, the federal government will pay for 100 percent of the costs of newly eligible enrollees through 2016, then gradually taper its share to 90 percent by 2020, with states paying the difference.

Out of the Woodwork

Brent Mead, the executive director of the Montana Policy Institute, says the greater-than-expected enrollment numbers will significantly increase the cost of the state’s Medicaid expansion.

“The total number of projected enrollees [was] around 22,700 for expansion and 800 ‘woodwork’ enrollees,” Mead said.

The “woodwork effect” refers to the enrollment of individuals who were previously eligible for Medicaid but signed up after the program’s expansion. Montana must pay for woodwork enrollees at the pre-Medicaid expansion rate, which the Kaiser Family Foundation in 2014 listed as 32 percent for Montana.

“The state badly missed the ball on the woodwork clients,” Mead said. “The latest numbers we have are for December 2015, but early indications show that both applications and enrollment for those previously eligible for Medicaid spiked when compared to 2014.”

Mead says the inaccurate estimate of the woodwork effect will soon force Montana to choose between spending more tax dollars on Medicaid or funding non-entitlement programs at the desired levels.

“The state will face a choice in 2017,” Mead said. “This is going to ramp up mandatory spending at the same time that commodity prices like oil, coal, and cattle are low. Something will have to give, but if I were to wager, it would be other state programs like higher education or infrastructure spending that suffer, rather than restraining a new entitlement program.”

No Magic Money Pot

Nicholas Horton, a senior research fellow at the Foundation for Government Accountability, says states that expand Medicaid because they are enticed by the federal government’s 90–100 percent share are banking on an empty promise.

“The money for expansion isn’t there, but that’s one of the biggest fallacies expansion supporters have propagated,” Horton said. “They say there’s all this money in Washington[, DC] and if states don’t expand Obamacare, that money will go to another state. It’s simply not true. The Congressional Research Service has definitively said there’s no magic pot of Obamacare money.”

Horton says those who are concerned about the national debt cannot justify expanding Medicaid.

“All of the money the federal government is spending on Obamacare’s Medicaid expansion is being added to the national debt,” Horton said. “So, if you’re concerned about the national debt, which is rapidly approaching $20 trillion, I don’t see how you can justify supporting new deficit spending.”

Awaiting Elections

Horton says the November elections may hold the key to curbing Montana’s Medicaid expansion costs.

“Based on conversations we’ve had with folks on the ground in Montana, there’s a significant appetite for repeal,” Horton said. “And obviously, if the state gets a new conservative governor next year, the likelihood of repeal goes way up.”

Bullock filed for reelection on February 29. Contenders include Republicans Mark Perea and Greg Gianforte, Libertarian Ron Vandevender, and independent Christopher Zarcone, reports.

Putting Hope in Term Limits

Mead says the cure for Montana’s unpredictably expensive Medicaid expansion may lie in an election further down the road.

“Conservatives will have an opportunity as the program sunsets in 2019,” Mead said. “Many legislators cycle in and out of office, and conservatives can make their voices heard on the issue.”

The next class of legislators should be more amenable to reform than the current batch, Mead says.

“By the time the 90 percent rate kicks in, many of the proponents of expansion will be term-limited out of office, including Bullock,” Mead said. “They will never have to deal with the consequences of a ballooning program that has less financial support from the federal government.”

Mead says however the composition of the legislature may change, he has “no doubt that any attempt to roll back expansion will be a massive undertaking.

“Just because it is difficult does not mean conservatives in Montana should stop pressing for a sustainable health care system,” said Mead.

Dustin Siggins ([email protected]) writes from Washington, DC.

Internet Info:

Quinn Holzer, The Montana Help Act, Medicaid Expansion Update, Legislative Finance Committee, Montana Legislative Fiscal Division, March 10, 2016:

An Estimate of the Economic Ramifications Attributable to the Potential Medicaid Expansion on the Montana Economy, The Bureau of Business and Economic Research, The University of Montana, January 8, 2013:

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This article has been updated.