bber 2018 the economic impact of medicaid expansion in ... · medicaid expansion?” our analysis...

FY2012-2015Prepared by:

Bureau of Business and Economic Research

University of Montana

Missoula, Montana 59812

Prepared for:

The Montana Healthcare Foundation and

Headwaters Foundation

The Economic Impact of Medicaid Expansion in Montana

BUREAU OF BUSINESS AND

ECONOMIC RESEARCH

U N I V E R S I T Y O F M O N TA N A

April 2018

Acknowledgements

ThisreportwasproducedandauthoredbyBryceWardandBrandonBridgeofthe

UniversityofMontana’sBureauofBusinessandEconomicResearch.Allstatementsand

conclusionsincludedinthisreportbelongtotheauthorsanddonotrepresenttheposition

oftheUniversityofMontana.

Wewouldliketothankthefollowingpartnersforsupportingthisresearch:

Formoreinformation,contact:

BureauofBusinessandEconomicResearch

GallagherBusinessBuilding,Suite231

Missoula,MT59812

(406)243-5113

www.bber.umt.edu

TableofContents

Abstract.....................................................................................................................................................0

I.Summary................................................................................................................................................1

II.Background..........................................................................................................................................3

III.ModelInputsandAssumptions.......................................................................................................5

A.NewSpending.................................................................................................................................................6

B.Pre-existingSpending.................................................................................................................................................8

D.Trends............................................................................................................................................................12

1.Enrollment...................................................................................................................................................................12

2.Spending.......................................................................................................................................................................13

IV.REMIModelResults........................................................................................................................13

A.Statewide......................................................................................................................................................14

B.ByRegion.......................................................................................................................................................16

V.OtherEconomicEffectsofMedicaidExpansion..........................................................................16

VI.FiscalEffects......................................................................................................................................19

VII.Conclusion........................................................................................................................................22

Appendix.................................................................................................................................................24

A.ChangeinUtilizationAssociatedWithMedicaidExpansion................................................................24

B.ChangeinHealthCareSpendingAssociatedWithMedicaidExpansion.............................................25

C.StateSpending..............................................................................................................................................26

D.ShiftinPayers...............................................................................................................................................28

D.FederalGovernment...................................................................................................................................31

E.Employers......................................................................................................................................................33

F.Individuals.....................................................................................................................................................33

G.EnrollmentForecast....................................................................................................................................34

H.SpendingForecast.......................................................................................................................................34

Abstract

MedicaidexpansionhasasubstantialeffectonMontana’seconomy.Assumingthat

enrollmentplateausnearcurrentlevels,Medicaidexpansionwillintroduceapproximately

$350millionto$400millionofnewspendingtoMontana’seconomyeachyear.This

spendingripplesthroughMontana’seconomy,generatingapproximately5,000jobsand

$270millioninpersonalincomeineachyearbetween2018and2020.Inadditionto

generatingeconomicactivity,Medicaidexpansionappearstoimproveoutcomesfor

Montanans—reducingcrime,improvinghealth,andloweringdebt.Whilethestatepaysa

nominalamountforthesebenefits,thecoststothestatebudgetaremorethanoffsetbythe

savingscreatedbyMedicaidexpansionandbytherevenuesassociatedwithincreased

economicactivity.

TheEconomicImpactofMedicaidExpansioninMontana

1

I.Summary

Inthisstudy,wedescribetheeconomicimpactsofMedicaidexpansiononMontana’s

economy.Thatis,weinvestigate“Howmanyjobsandhowmuchincomestemsfrom

Medicaidexpansion?”Ouranalysiscoverstheperiod2016-2020.Assuch,italsoimplicitly

answersthequestion,“HowwouldfailingtorenewMedicaidexpansionin2019impact

Montana’seconomy?”

MedicaidexpansioninMontana,createdbytheHELPACTof2015,infusesasignificant

amountofmoneyintothestate’seconomy.Duringitsfirsttwoyears,Medicaidexpansion

providedbeneficiariesmorethan$800millionofhealthcare.Thefederalgovernmentpaid

formostofthis,andmostofthesefederaldollarswouldnothavebeenspentinMontana

withoutMedicaidexpansion.Approximately75to80percentofMedicaidspendingisnew

moneyinMontana.ThismeansthatnewspendingonMedicaidexpansionisapproximately

33percentlargerthanMontana’sbeveragemanufacturingindustry(e.g.,craftbrewing,

distilling,wineries,etc.)andonly10percentsmallerthanthetotalbudgetforUniversityof

Montanasystem.

MedicaidexpansionspendingentersMontana’seconomyintwoways.First,itsupports

newhealthcarespending.Nearlyonein10MontananswasenrolledinMedicaidexpansion

asofMarch2018.Mostexpansionenrolleeswouldhavebeenuninsuredintheabsenceof

theexpansion.Assuch,Medicaidexpansionprovidestensofthousandsofuninsured,

underinsured,andlow-incomeMontananswithhealthcaretheywouldnototherwise

receive.Second,Medicaidexpansionspendingreplacesexistingspending.Evenwithout

Medicaidexpansion,beneficiarieswouldhavereceivedsomehealthcare.Medicaid

expansionchangeswhopaysforthiscare.Withoutexpansion,thestate,thefederal

government,employers,hospitalsandproviders,andthebeneficiariesthemselvesall

contributedtopayingforcareforpeoplewhosecareisnowpaidforviaMedicaid.With

expansion,thefederalgovernmentpaysfornearlyallofhealthcareprovidedto

beneficiaries.

Asaresult,Medicaidexpansionstimulateseconomicactivity.Weestimatethat,

between2018and2020,itwillgenerateapproximately5,000jobsand$270millionin

personalincomeannually(seeTable1).1Thisrepresentsslightlylessthan1percentof

1Itisusefultonotethatouranalysisdoesnotsaythattheexpansioncreates5,000inoneyearandthenadifferentadditional5,000newjobsthenextyear.Manyofthejobsarecreatedinoneyearandthenpersist.Forinstance,anursingpositioncreatedasaresultofexpansionin2017thatpersiststhrough2020wouldbepartofthe(approximately)5,000in2020.


2

Montana’semploymentandincome.Duringitsfirstfiveyears,Medicaidexpansionis

expectedtogenerateatotalofabout$1.2billioninpersonalincomeand$2.6billionin

outputornewsales.Consistentwithourmodel,betweenJune2015(whentheHELPAct

wassignedintolaw)andSeptember2017,Montanaaddedmorethan6,200healthcare

jobs.

Table1:SummaryofEconomicImpactsofMedicaidExpansioninMontana/Yearand

Cumulative(incomeandsalesinmillionsof2016dollars)

2016 2017 2018 2019 2020 Cumulative

Jobs 3,161 5,071 5,326 5,165 4,975 PersonalIncome $147 $241 $265 $272 $279 $1,204NewSales(i.e.,output) $336 $551 $587 $576 $566 $2,616Population 968 2,229 3,263 4,036 4,672

TheeconomicimpactsofMedicaidexpansionarenotlimitedtothejobsandincomeit

directlyorindirectlysupports.Medicaidexpansionalsorepresentsasignificantinvestment

inMontanans’healthandwell-being,andtheseinvestmentspayoff.Asubstantialbodyof

researchfromaroundtheU.S.hasevaluatedtheeffectsofMedicaidexpansionandfound

thatit:

• Improveshealth.OnestudyfoundthatMedicaidexpansionwasassociated

witha5.1percentagepointincreaseintheshareoflow-incomeadultsin

excellenthealth.2Thisisconsistentwithalargerbodyofliteraturethatfinds

thatinsuranceexpansionsimprovementalhealthandreducemortality.3

• Improvesfinancialhealth.Forinstance,onerecentstudyfoundthatMedicaid

expansionreducedmedicaldebtby$900pertreatedperson,prevented50,000

bankruptcies,andledtobettercredittermsforborrowers.4

• Reducescrime.Medicaidexpansionreducedcrimebymorethan3percent,

generatingsocialbenefitsofmorethan$10billion-$13billionannually.5

2Sommers,B.D.,Maylone,B.,Blendon,R.J.,Orav,E.J.,andEpstein,A.M.,“Three-YearImpactsoftheAffordableCareAct:ImprovedMedicalCareandHealthAmongLow-IncomeAdults,”HealthAffairs36,no.6(June1,2017):1119-1128.3Sommers,B.D.,Gawande,A.A.,andBaicker,K.,“HealthInsuranceCoverageandHealth—WhattheRecentEvidenceTellsUs,”NewEnglandJournalofMedicine377,no.6(August10,2017).4Brevoort,K.,Grodzicki,D.,andHackmann,M.B.,MedicaidandFinancialHealth(No.w24002),NationalBureauofEconomicResearch(2017);Hu,L.,Kaestner,R.,Mazumder,B.,Miller,S.,andWong,A.TheEffectofthePatientProtectionandAffordableCareActMedicaidExpansionsonFinancialWellbeing(No.w22170),NationalBureauofEconomicResearch(2016).5Vogler,J.,“AccesstoHealthCareandCriminalBehavior:Short-RunEvidenceFromtheACAMedicaidExpansions,”(November14,2017);He,Q.,“TheEffectofHealthInsuranceonCrime:EvidenceFromtheAffordableCareActMedicaidExpansion,”(2017).Foranexpansiverecentbibliographysee:Antonisse,L.,


3

Furthermore,Medicaidexpansion,alongwiththeassociatedHELP-Linkworkforce

developmentprogram,mayhaveimprovedlabormarketoutcomesforlow-income

Montanans.Followingexpansion,participationinthelaborforceamonglow-income

Montanansages18-64increasedby6to9percentagepoints.Similargainsinlaborforce

participationdidnotoccuramonglow-incomepopulationsinotherstatesoramong

higher-incomeMontanans.ThissuggeststhatMedicaidexpansionandHELP-Link

improvedlabormarketoutcomesforlow-incomeMontanans.

WhileMontanapayspartofthecostofMedicaidexpansion,thesecostsaremorethan

offsetbycostsavingsandincreasedrevenues.Medicaidexpansionhasallowedsome

peopletoswitchfromtraditionalMedicaidtotheexpansion.BecauseMontanapays35

percentofthecostfortraditionalMedicaidbutlessthan10percentintheexpansion,this

savedthestatemorethan$40millionduringthefirsttwoyears.Medicaidexpansionalso

saved$7.7millioninFY2017byreducingthecostofinmatecare,andthroughincreased

economicactivityandstaterevenues.AsshowninTable2,costsavingsandincreased

revenuemorethanoffsetsexpansioncosts.Thiswillremaintrueevenafterthestate's

shareofMedicaidexpansioncostsrisesto10percentin2020.

Table2:FiscalEffectsofMedicaidExpansioninMontana/Year(inmillionsof2016

dollars)

2016 2017 2018 2019 2020TotalSavings $18 $38.9 $40.1 $41.1 $42.1TotalCosts $5.3 $33.0 $39.6 $43.0 $60.9NetFiscalImpact(revenuegrowthminusexpendituregrowth)

$32.7 $48.7 $46.0 $40.2 $35.3

Net(savings+fiscalimpact-costs) $45.4 $54.6 $46.5 $38.4 $16.5

II.Background

In2015,MontanapassedtheHELPAct,whichexpandedMedicaidundertheAffordable

CareAct(ACA).Startingin2016,Montananswithincomesbelow138percentofthe

FederalPovertyLevel(FPL)couldenrollinMedicaid,andthefederalgovernmentwould

paymostofthecosts.Specifically,thefederalgovernmentpaid100percentofcostsfor

Garfield,R.,Rudowitz,R.,andArtiga,S.,“TheEffectsofMedicaidExpansionUndertheACA:UpdatedFindingsfromaLiteratureReview,”(2017).


4

eligibleenrolleesin2016and95percentin2017.Itwillpay94percentin2018,95percent

in2019,and90percentin2020andbeyond.6

TheHELPActaddedsomeprovisionstothetypicalMedicaidexpansion.Forinstance,it

requiredenrolleestopaypremiumsandmakeco-paymentsforsomeservices,and

enrolleesmaybedisenrollediftheyfailtopaytheirpremiums.Italsoincluded12-month

continuouseligibility,whichallowsenrolleestomaintainMedicaidcoverageforuptoone

year,regardlessofchangestoincomeorfamilystatus.Additionally,theHELPAct

authorizedaworkforcedevelopmentprogram(HELP-Link)toimproveemployment

outcomesforMedicaidexpansionbeneficiaries.

Morethan40,000MontananshadenrolledinMedicaidthroughtheexpansionby

January2016,andenrollmenthasclimbedto93,950byMarch2018.Medicaidexpansion

spendinginMontanawas$145millionduringFY2016(whichcoveredJanuary-June2016),

$442millioninFY2017,and$215millionduringthefirsthalfofFY2018(July-December

2017).Thus,duringitsfirsttwoyears,Medicaidexpansionspendingtotaled$802million.

ThisreportcomputestheeconomicimpactsgeneratedbyMedicaidexpansion.An

economicimpactanalysisisappropriatetostudyMedicaidexpansionbecause,from

Montana’sperspective,thedecisiontoexpandMedicaidbringsfederaldollarsintothestate

thatarenotoffsetbyincreasedpaymentstothefederalgovernment.7Thatis,when

MontanaagreedtoexpandMedicaid,thefederalgovernmentdidnotimposeaspecialtax

onMontananstopayforthecostsoftheexpansioninMontana.

Therearetwowaystothinkaboutthemarginalcosttothefederalgovernment

associatedwithMontana’sdecisiontoexpandMedicaid.First,theACAwaswritteninsuch

awaythatitraisedsufficientrevenuetopaytheexpectedcostsofexpandingMedicaidin

all50states.Assuch,onecouldarguethatthemarginalcostsassociatedwithMontana

expandingMedicaidiszero.Thefederalgovernmentdoesnotneedtoraiseanyadditional

fundsfromMontanansorotherstopayforthecostofMontana’sexpansion.Alternatively,if

6 ThesharepaidbythefederalgovernmentinMontanadiffersslightlyfromtheseamounts.Inexchangefor

allowingMontanatooffer12-monthcontinuouseligibility,thefederalgovernmentloweredtheshareitpaysbylessthanonepercentagepoint.However,someofthisisoffsetbythefactthatthefederalgovernmentpaysfor100percentofcertaincosts(e.g.,IndianHealthServices).7AlargeamountofliteratureestablishesthatMontana’sMedicaidexpansionspendinggeneratesamarginalincreaseineconomicactivitythatcanbeevaluatedusinganeconomicimpactanalysis.See,forinstance,Ayanian,J.Z.,Ehrlich,G.M.,Grimes,D.R.,andLevy,H.,“EconomicEffectsofMedicaidExpansioninMichigan,”NewEnglandJournalofMedicine376,no.5(2017):407-410;DeloitteDevelopmentLLC.MedicaidExpansionReport:2014.CommonwealthofKentucky(2015);Chernow,M.,“TheEconomicsofMedicaidExpansion,”(2016)https://www.healthaffairs.org/do/10.1377/hblog20160321.054035/full/;Brown,etal.,“AssessingtheEconomicandBudgetaryImpactofMedicaidExpansioninColorado,”(2016).


5

oneviewsMontana’sMedicaidexpansionasamarginalfederalexpenditurethatmustbe

offsetwithhigherfederalrevenuesatsomepoint,theincreasedrevenuerequiredtopay

forMontana’sexpansionwillbepassedontoallAmericans.GiventhatMontanansprovide

lessthan1percentoffederalrevenues,morethan99percentofthefederalmarginalcosts

associatedwithMontana’sMedicaidexpansionarepassedontotaxpayersinotherstates.

Thus,thetotalmarginalcosttoMontanansassociatedwiththedecisiontoexpandMedicaid

islimitedtothesharepaiddirectlybythestateplus,atmost,Montana’sshareofallfederal

revenues.

MedicaidexpansionimpactsMontana’seconomyinthesamewaythataMontana

companywinningagovernmentcontract.ItbringsmoneyintoMontana’seconomythat

wouldnototherwisebethere,andthismoneyripplesthroughthestate’seconomycreating

jobsandincome.

III.ModelInputsandAssumptions

WecalculatetheimpactofMedicaidexpansiononMontana’seconomyusingtheREMI

model,aneconomicmodelcalibratedtorepresenttheinteractionsinMontana'seconomy,

leasedfromRegionalEconomicModels,Inc.Usingthemodelwecomputeabaselinemodel

ofMontana’seconomywithoutMedicaidexpansion.Then,wecomputethesamemodel

addingMedicaidexpansion.TheeconomicimpactofMedicaidexpansionisthedifference

betweenthesetwoscenarios.

TherearethreeessentialcomponentstoestimatingtheeconomicimpactofMedicaid

spending:

● Directimpacts–Thespending(e.g.,benefitsandclaims)andactivitydirectlytied

toexpansion

● Indirectimpacts–Thespendingofotherentitiesthatarecarriedoutbecauseof

Medicaidspending

● Inducedimpacts–Therippleeffectsthatoccurasthedirectandindirectspending

impactspropagatethroughtheeconomy

Inthissection,webrieflyoutlinetheassumptionsusedtoquantifythedirectimpacts

thatentertheREMImodel.Amorecompletedescriptionofourassumptionsandtheir

justificationareincludedintheAppendix.

WedividethedirecteffectsofMedicaidexpansionspendingintotwocategories.First,

thereisnewspending,whichincludesspendingonhealthcareservicesthatwouldnot

haveoccurredwithoutMedicaidexpansion.Second,thereispre-existingspending,which


6

includesspendingforhealthcarethatwouldhaveoccurredregardlessofMedicaid

expansion.

A.NewSpending

ExpandingMedicaidincreaseshealthcareuseandhealthcarespending.8Forinstance,

afterMedicaidexpansion,theshareoflow-incomeMontananswhoskippedcaredueto

costfellby16percent.Similarly,thesharewhohadnothadacheck-upwithinthepasttwo

yearsfellby20percent(seeFigure1).ThesedatacoveronlythefirstyearofMedicaid

expansioninMontana.AsimilaranalysisofstatesthatexpandedMedicaidin2014shows

thattheseeffectsgrowovertime.

Figure1–ChangeinHealthCareAccessAmongLow-IncomeMontanansBeforeand

AfterMedicaidExpansion

Source:BBERanalysisof2015an2016BehavioralRiskFactorSurveillanceSystemdata.

ThesedatasuggestthatMedicaidexpansionincreaseshealthcareuse,buttheydonot

speaktothetotalincreaseinhealthcareuseorspending.Toestimatethenetincreasein

healthcarespending,weanalyzedtherelationshipbetweenhealthcarespendingper

8Sommers,B.D.,Maylone,B.,Blendon,R.J.,Orav,E.J.,andEpstein,A.M.,“Three-YearImpactsoftheAffordableCareAct:ImprovedMedicalCareandHealthAmongLow-IncomeAdults,”HealthAffairs36,no.6(2017):1119-1128;Mahendraratnam,N.,Dusetzina,S.B.,andFarley,J.F.,“PrescriptionDrugUtilizationandReimbursementIncreasedFollowingStateMedicaidExpansionin2014,”JournalofManagedCare&SpecialtyPharmacy23,no.3(2017):355-363;Antonisse,L.,Garfield,R.,Rudowitz,R.,andArtiga,S.,“TheEffectsofMedicaidExpansionUndertheACA:UpdatedFindingsFromaLiteratureReview,”HealthAffairs35,no.10(2016):1810-1815.

36%

29%29%

25%

Nocheck-upinlast2years Skippedcareduetocost

2015

2016


7

capitaandhealthinsurancecoveragebetween2008-2014.AsdetailedintheAppendix,we

findaclearrelationshipbetweenchangesinhealthinsurancecoverageandtotalhealth

carespending.Weestimatethatapproximately50percent($132million)ofMedicaid

expansionspendingin2016representedanetincreaseinspending.9Thisamountstoanet

increaseinhealthcarespendingofapproximately$2,500foreachexpansionenrolleeor

$5,000foreachenrolleewholikelywouldnothavehadinsurancein2016without

Medicaidexpansion.

Thenetincreaseinspendingcanbedividedintotwoparts.10Partofitreflectsspending

onmorehealthcare.Thatis,itreflectscarethatwouldnothaveoccurredbutfor

expansion.Partofitreflectsareductioninuncompensatedcare.Thespendingdatainthe

aboveanalysisisbased,inpart,onnetpatientrevenue.11Sincesomeuncompensatedcare

absorbedbyprovidersisnotcounted,partoftheincreaseinspendingreflectsreduced

uncompensatedcare.

Medicaidexpansionreduceduncompensatedcare.AforthcomingreportbyManatt

reportsthathospitaluncompensatedcareinMontanadeclinedbyover45%between2015

and2016.Similarly,onenationalstudyfoundthat“Medicaidexpansioncuteverydollar

thatahospitalspentonuncompensatedcareby41centsbetween2013and2015.”12

Formally,wemodelbothnewspendingandthereductioninuncompensatedcare

absorbedbyprovidersasincreasedhealthcareoutput.Economicaccountsdonotinclude

theproviderportionofuncompensatedcareaseconomicoutput.13Thus,tomaintain

9Weestimatethata1ppdeclineintheshareofpeoplewithoutinsuranceincreasestotalhealthcarespendingpercapitaby$46.Montana’suninsuredratefellby3.5percentagepointsin2016.Non-expansionstatessawa0.7ppdeclinein2016.Assuch,weassumethatintheabsenceofexpansion,Montana’suninsuredratewouldhavefallenby0.7pp.Thus,weattribute2.8ppofthedeclinetotheexpansionin2016.Then,$46*2.8*1.028million(Montana’s2016population)=$132million.10Technically,thereisathirdpartthatincludesreductionsinhealthcarespendingrelatedtoshiftingpeoplefromhigher-pricedprivateinsurancetolower-pricedMedicaid.Throughoutthisreport,wefocusonthenetincrease,newspendinglessreducedprices.11Determiningwhopaysforuncompensatedcareiscomplicated.Someiscoveredbyfederal,state,orlocalprograms.Somemaybepassedontootherconsumersthroughhigherrates.However,evidencesuggeststhatasubstantialproportionis“paid”byproviders.Forinstance,onerecentstudyestimatedthatlocalhospitalsincurredcostsequalto$800peruninsuredpersonintheirarea.(See:Garthwaite,C.,Gross,T.,andNotowidigdo,M.J.,“HospitalsasInsurersofLastResort,”AmericanEconomicJournal:AppliedEconomics10,no.1(2018):1-39.)12Dranove,D.,Gartwaite,C.,andOdy,C.,“TheImpactoftheACA'sMedicaidExpansiononHospitals'UncompensatedCareBurdenandthePotentialEffectsofRepeal,”Issuebrief(CommonwealthFund)12(2017):1-9.13Seehttps://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/DSM-16.pdf.


8

consistencywiththedefinitionsusedinourmodel,wetreatreductionsintheprovider

portionofuncompensatedcareasincreasedhealthcareoutputorincreasedsales.

ConsistentwiththeevidencethatMedicaidexpansionspendingspikesinthesecond

yeardueto“pent-updemand”effects,weassumenewMedicaidspendingroseto57

percentin2017andwillthenfallbackdownto50percentby2019.Onaverage,weassume

that52percentofMedicaidspendingrepresentsnewspending.

B.Pre-existingSpending

Asdiscussedinthepriorsection,about50percentofMedicaidexpansionspending

wouldhaveexistedwithoutMedicaidexpansion.Werefertothecarethatbeneficiaries

wouldhaveconsumedregardlessofexpansionaspre-existingspending.

Intheabsenceofexpansion,avarietyofsourceswouldhavepaidforpre-existing

spending.Intheabsenceofexpansion,someexpansionbeneficiarieswouldhaveenrolled

intraditionalMedicaid.Thestateandfederalgovernmentswouldhavepaidforthiscare.

Somewouldhaveenrolledinanindividualinsuranceplan(e.g.,anexchangeplan).The

federalgovernment(viaexchangesubsidies,forthosewhoqualify14)andtheindividuals

(viapremiumsandout-of-pocketpayments)wouldhavepaidforthiscare.Somewould

haveobtainedinsuranceviatheiremployer.Theemployer(viatheemployer’sshareof

premiumcosts)andtheemployee(viatheemployee’sshareofpremiumsandout-of-

pocketpayments)wouldhavepaidforthiscare.

WithMedicaidexpansion,thefederalgovernment,stategovernment,andindividual

beneficiariespayforthecarethatbeneficiarieswouldhaveconsumedregardlessof

expansion.Asaresult,themoneythatthefederalgovernment,stategovernment,

employers,andindividualswouldhavespentonpre-existingspendingcanbespenton

otherthings.SomeofthisrepurposedspendingisnewspendinginMontanaandgenerates

economicimpacts

Forinstance,consideranindividualwho,intheabsenceofexpansion,wouldhave

obtainedinsuranceviathehealthinsuranceexchanges.Withexpansion,thefederal

governmentnolongerspendsmoneyonpremiumsubsidiesforthisindividual,andthe

individualspendslessonpremiumsandout-of-pocketpayments.Thefederalgovernemnt

canredirectthespendingforpremiumsubisieselesewhere(e.g.,Medicaidexpansion).The

individualcanspendthemoneytheywouldhaveotherwisespentonpremiumsandout-of-

14Individualswithincomesbetween100percentand138percentoftheFPLareeligibleforexchangesubsidiesandCSRsinstatesthathavenotexpandedMedicaid.


9

pocketexpensesonfood,rent,etc.Therepurposedindividualspendingconstitutesnew

spendinginMontana’seconomyandgenerateseconomicimpacts.

Toestimatetheeconomicimpactsoftheshiftinspendingonpre-existingcare,weneed

tounderstandwhobenefitsfromit.Unfortunately,itisdifficulttoestimatetheshiftin

healthcarespendingduetoMedicaidexpansion.Theavailabledatadoesnotdescribewho

wouldhavepaidforexistingcarehadMontananotexpandedMedicaid.Thedatathatexist

areincompleteandsometimescontradictory.

Figure2presentsourestimatefortheshiftsinexistingspending.Thebarontheleft

representsspendingwithMedicaidexpansion.ThemoneyspentonMedicaidexpansionin

Montanacomesfromthreesources—thefederalgovernment,stategovernment,and

beneficiaries(intheformofpremiums).Whilethesharepaidbyfederalandstate

governmentsvarieseachyear,in2020,thefederalgovernmentwillpayapproximately89

percentofthecost,thestatewillpay10percent,andbeneficiarypremiumsprovidethe

remaining1percent.15

ThebarontherightrepresentsspendingwithoutMedicaidexpansion.Twothings

standoutwhencomparingthebars.First,thecoloredportionofthebarontheright(i.e.,

thenon-whitepart)ismuchsmaller.Thegapbetweenthebarscapturesthenetincreasein

healthcarespendingassociatedwithMedicaidexpansiondiscussedinsectionIII.A..

Second,whopaysforpre-existingspendingdiffersfromexpansionspending.

Forinstance,regardlessofexpansion,thefederalgovernmentpaysforsomeofthe

healthcareconsumedbysomeexpansionbeneficiaries.Mostofthesefundscomefromtwo

sources—traditionalMedicaidandhealthinsuranceexchangesubsidiesandcostsharing

reductions.16Moneythatthefederalgovernmentwouldhavespentonhealthcare

regardlessofexpansionisnotnewspendinginMontana,butratheritissimplyatransfer

fromonefederalprogramtoanother.Weestimatethatapproximately19percentof

15During2016and2017,beneficiariespaid$6.7millioninpremiums.Thisrepresents0.84percentofthe$802millionintotalbenefits.ConsistentwithBachrachetal.,(2016),weassumethatpremiumspaidbybeneficiariesoffsetpartofthestate’sshareandpartofthefederalshare.https://www.statenetwork.org/wp-content/uploads/2016/12/State-Network-Manatt-Assessment-Tool-State-Budget-Impact-of-Medicaid-Expansion-December-2016.pdf16TherearesomeadditionalsourcesoffederalspendingthatmaydirectlyrespondtoMedicaidexpansion,particularlyfederalpaymentsforuncompensatedcare(e.g.,DisproportionateShareHospital(DSH)payments).Theserespondincomplicatedwaystochangesinuninsuredrates,federalpolicy,etc.Forinstance,DSHpaymentswerescheduledtobecutbyspecificamountsaspartoftheACA.However,Congresshascontinuedtodelayimplementationofthecuts.(See:https://www.macpac.gov/subtopic/disproportionate-share-hospital-payments/;https://www.macpac.gov/wp-content/uploads/2017/03/Analyzing-Disproportionate-Share-Hospital-Allotments-to-States.pdf.)


10

Medicaidexpansionspendingrepresentsatransferfromonefederalprogramtoanother.

Weexcludethesetransfersfromourcalculation.

Figure2:SpendingonMedicaidExpansionBeneficiaries’HealthCare“Withand

Without”ExpansionbySource

Thesituationforstategovernmentissimilar,albeitsmaller.Intheabsenceof

expansion,thestatewouldhavepaidforsomehealthcarethatisnowpaidforbythe

expansion.Forinstance,intheabsenceofexpansion,traditionalMedicaidwouldhavepaid

forsomecareforsomebeneficiaries.DPHHSreportsthatmovingpeoplefromtraditional

Medicaidsavedthestate$40millionduringthefirsttwoyearsofexpansion.17Inaddition,

theMontanaDepartmentofCorrectionsreportsthatMedicaidexpansionreducedits

spendingonhealthcareby$7.66millioninFY2017.18Thestatemayalsorealizesavings

fromreducedpaymentsformentalhealthservicesorsubstanceabuseservicesforlow-

incomeindividuals.19ArecentreportfromManattthatlookedatsubstanceusedisorder

spendinginMontanaarguesthatthestatemayrealize$3millionofannualsavingsasa

17Thesesavingsstemfromthefactthatthestatepays35percentofthecostsfortraditionalMedicaid,but0percent(in2016)or5percent(in2017)orlessfortheexpansion.18MedicaidexpansionallowedtheDepartmentofCorrections(DOC)toshiftmoreofitshospitalizationstoMedicaid.Priortoexpansion,DOCwaspayingratesdeterminedbyBlueCross/BlueShield.Withoutexpansion,DOCestimatesitwouldhavespent$12.3million.WithMedicaidexpansion,DOCpaysMedicaidrates.ItreportsMedicaidexpansionreducedpaymentsby$7.66millionduringFY2017.19Bachrach,etal.,RepealingtheMedicaidExpansion:ImplicationsforMontana,(2017):8-9.

0.89

0.19

0.10

0.08

0.01

0.12

0.09

0.52

With Without

Employers

Individuals

State

FederalGovernment


11

resultofMedicaidexpansion.20Thestatemayalsoseereductionsinpaymentsfor

uncompensatedcare.Onestudyestimatedthatstates’savingsfromreducing

uncompensatedcarecouldequal13percentto25percentoftheirMedicaidexpansion

costs.21

WeestimatethatMedicaidexpansionreducesstatespendingforhealthcarebyan

averageof8percentoftotalMedicaidexpansionspending.Thisincludesthedemonstrated

savingsfromtraditionalMedicaid,theDepartmentofCorrections,andtheexpected

reductioninspendingonsubstanceusedisorders.Wesubtractthisamountfromthe

amountthatthestatepaysforMedicaidexpansion.

IntheabsenceofMedicaidexpansion,beneficiarieswouldhavepaidformuchofthe

caretheyreceived.Roughly15percentofMedicaidbeneficiarieswouldlikelyhavehad

someformofprivateinsuranceintheabsenceofexpansion.Theseindividualswouldhave

paidpremiumsandmadeout-of-pocketpayments.Inaddition,thoseremaininguninsured

intheabsenceofexpansionwouldhavepaidforsomeoftheircareoutofpocket.For

instance,onerecentstudyfoundthattheuninsuredpaid$500peryearoutofpocketfor

theirhealthcare.22AdifferentstudyshowedthatMedicaidexpansionreducedout-of-

pocketspendingfortheaveragenewlyenrolledMedicaidexpansionfamilyby$3,000per

year.23

Weassumethat12percentoftotalMedicaidspendingcoverswhatindividualswould

havepaidthemselves.Beneficiariescannowspendthismoneyonotherthings,andthey

mayalsobenefitfromlowerinterestpaymentsondebtincurredtopayformedicalcare

andlowerinterestratesforotherborrowing.Thesepathwaysmaygenerateadditional

economicimpacts,butwedidnotincludethesepotentialeffectsinouranalysis.

EmployersmayalsobenefitfromMedicaidexpansionbecausesomeofthosewhoenroll

mayhaveobtainedemployer-providedinsuranceintheabsenceofexpansion.24Assuch,

20Grady,Bachrach,andBoozang,Medicaid’sRoleintheDeliveryandPaymentofSubstanceUseDisorderServicesinMontana(2017).21Buettgens,M.,Holahan,J.,andRecht,H.,“MedicaidExpansion,HealthCoverage,andSpending:AnUpdateforthe21StatesThatHaveNotExpandedEligibility,”(2016).22Coughlin,T.,Holahan,J.,andCaswell,K.,“UncompensatedCarefortheUninsuredin2013:ADetailedExamination.2014,”TheHenryJ.KaiserFamilyFoundation:TheKaiserCommissiononMedicaidandtheUninsured(2017).23Glied,S.,Chakraborty,O.,andRusso,T.,“HowMedicaidExpansionAffectedOut-of-PocketHealthCareSpendingforLow-IncomeFamilies,”Issuebrief(CommonwealthFund),(2017):1-9.24SeveralrecentstudiesdonotfindthatMedicaidexpansionleadstolargereductionsinemployer-sponsoredinsurance.Thissuggeststhatcrowd-outeffectsarelikelysmall.SeeDuggan,M.,Goda,G.S.,andJackson,E.,TheEffectsoftheAffordableCareActonHealthInsuranceCoverageandLaborMarketOutcomes(No.w23607),NationalBureauofEconomicResearch(2017);Frisvold,D.E.,andJung,Y.,“TheImpactofExpanding


12

theseemployerssavewhattheywouldhavecontributedtowardtheemployee’shealthcare

costs.Forpurposesofthisanalysis,weassumethatthesesavingsequal9percentoftotal

Medicaidspending.Dependingonmarketconditions,employersmaypasssomeofthese

savingstoemployeesashighercompensation.Weassumethattheydo,butthattheyalso

keepsome.

D.Trends

1.Enrollment

Medicaidenrollmentgrewfrom40,000inthefirstmonthofMedicaidexpansionto

nearly94,000byMarch2018.BasedonevidencefromotherMedicaidexpansionstates,

enrollmenttendstoplateauby24monthsafterexpansion(seeFigure4).Forpurposesof

ouranalysis,weassumethatenrollmentgrowsslightlyto94,000andremainsconstantat

thatlevelforthenextseveralyears.Giventhatonecrudeestimateplacesthesizeofthe

potentialexpansionpopulationatapproximately100,000,itseemsunlikelythatMontana

canenrollsubstantiallymorepeopleintheexpansion.25IntheAppendixsectionL,we

presentresultsthatassumethatenrollmentcontinuestogrowto105,000.

Figure4:AverageMonthlyPercentChangeinExpansionEnrollment

Source:BBERanalysisofMBESEnrollmentReportdata.

MedicaidonHealthInsuranceCoverageandLaborMarketOutcomes,”InternationalJournalofHealthEconomicsandManagement,(2016):1-23.25SeeAppendixsectionGforadditionaldetails.

-5%

0%

5%

10%

15%

20%

25%

30%

35%

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35

%changeinmonthlyenrollment

Monthssinceexpansion


13

2.Spending

MedicaidspendingpernewlyeligibleindividualinMontanawasroughly$5,315during

2016androseto$6,387in2017.Theselevelsareroughlyinlinewithspendingobserved

inotherMedicaidexpansionstatesintheirfirsttwoyears:nationally,expansionspending

perbeneficiarywas$5,511in2014and$6,395in2015.Thisinitialincreaseinspending

perbeneficiaryisexpectedtosubsideasindividuals’pent-updemandissatisfied.26A

recentreportbytheMedicaidactuarysuggeststhatspendingpermemberforthosenewly

eligibleforMedicaidexpansionwasexpectedtofallto$5,370in2018beforerisingto

$5,981by2020.27Forpurposesofthisanalysis,weassumethatMedicaidexpansion

spendingperbeneficiaryinMontanacatchesupwithandthenfollowsthefederalforecast.

IV.REMIModelResults

ThediscussioninthepriorsectionoutlinesthenetdirectimpactofMedicaidexpansion.

Combined,approximately75percentto80percentoftotalspendingonMedicaid

expansionbenefitsandclaimsrepresentsnewspendinginMontana.Weallocatethese

directimpactsacrossproviders,government,business,andindividualsasdescribedabove.

Newspendingonhealthcareisallocatedacrosshealthcaresectorsinproportionto

reportedMedicaidexpansionspending.28WefurtherallocatespendingacrossMontana

regionsinproportiontoMedicaidenrollment.29

Tocomputetheindirectandinducedimpacts,weusetheREMImodel,aneconomic

model,calibratedtorepresenttheinteractionsintheMontanaeconomy,leasedfrom

RegionalEconomicModels,Inc.TheREMImodelisoneofthebestknownandmost

respectedanalyticaltoolsinthepolicyanalysisarenathathasbeenusedinmorethan100

previousstudiesaswellasdozensofpeer-reviewedarticlesinscholarlyjournals.Itisa

state-of-the-arteconometricforecastingmodelthatincorporatesdynamicfeedbacks

betweeneconomicanddemographicvariables.TheREMImodelforecastsemployment,

income,expenditures,andpopulationsforcountiesandregionsbasedonamodel

containingmorethan100stochasticanddynamicrelationshipsaswellasanumberof

identities.30

26CentersforMedicareandMedicaidServices.2016ActuarialReportontheFinancialOutlookforMedicaid,(2016).27Ibid.28http://dphhs.mt.gov/Portals/85/Documents/healthcare/MedicaidExpansionHealthCareServicesProfile.pdf29WeallocateMedicaidenrollmentbycountyintothefiveregionsavailableintheREMImodel.http://dphhs.mt.gov/Portals/85/Documents/healthcare/MedicaidExpansionMemberProfile.pdf30Afullexplanationofthedesignandoperationofthemodelcanbefoundin:Treyz,G.I.,Rickman,D.S.,&Shao,G.(1991).TheREMIeconomic-demographicforecastingandsimulationmodel.InternationalRegionalScienceReview,14(3),221-253.


14

Weestimateimpactsusingthefollowingprocess.First,abaselineprojectionofthe

economyisproducedusingthemodel,utilizinginputsandassumptionsthatextrapolate

growthandconditionsofrecenthistoryintheabsenceofMedicaidexpansion.Themodelis

thenusedasecondtimewithidenticalinputs,exceptthatMedicaidexpansionisadded.

Thus,Medicaidexpansionproducesadifferenteconomy,reflectingnotonlytheexpansion,

butalsohowtherestoftheeconomyreactstoit.Thedifferencebetweenthebaselineand

alternativescenariosoftheeconomyrepresentstheeconomicimpactofMedicaid

expansion.

A.Statewide

Table3presentsthestatewideeffectsofMedicaidexpansion.Undertheconditionsand

assumptionsoutlined,weestimatethatMedicaidexpansionadded3,161jobs,$147million

inpersonalincome,and$336millioninnewsales(oroutput)toMontana’seconomyin

2016.Weprojectthattheseeffectswillpeakin2018andwillremainlargelyconstant

through2020.In2020,Medicaidexpansionisexpectedtosupport4,975jobs,$279million

inpersonalincome,and$566millioninnewsales(oroutput).

Bytheendofitsfirstfiveyears,Medicaidexpansionisexpectedtocreateatotalof

about$1.2billioninpersonalincomeandmorethan$2.6billioninoutput.Weexcludejobs

andpopulationfromthecumulativetotalbecausetheyarenotadditiveacrossyears.They

representthedifferenceinemployment(orpopulation)relativetonoexpansionineach

year.Thatis,weestimatethatMontanawillhaveroughly5,000morejobseachyearthanit

wouldintheabsenceoftheexpansion.31

Table3:SummaryofEconomicImpactsofMedicaidExpansioninMontana(income

andsalesinmillionsof$2016)

2016 2017 2018 2019 2020 Cumulative

Jobs 3,161 5,071 5,326 5,165 4,975 PersonalIncome $147 $241 $265 $272 $279 $1,204NewSales(i.e.,output) $336 $551 $587 $576 $566 $2,616Population 968 2,229 3,263 4,036 4,672

Table4showsthebreakdownofemploymentbyindustry.Asonemightexpect,the

largestimpactsareinhealthcare.OuranalysissuggeststhatMedicaidexpansionwill

31Ouranalysisdoesnotsaythattheexpansioncreates5,000inoneyearandthenadifferentadditional5,000newjobsthenextyear.Manyofthejobsarecreatedinoneyearandthenpersist.Forinstance,anursingpositioncreatedasaresultofexpansionin2017thatpersiststhrough2020wouldbepartofthe(approximately)5,000in2020.


15

createapproximately2,000additionalhealthcarejobs.However,therearealsofairly

significanteffectsonretailtrade(morethan800jobs)andconstruction(morethan600

jobs).

Table4:IndustryBreakdownofEmploymentImpacts

2016 2017 2018 2019 2020

HealthCareandSocialAssistance

1,183 2,033 2,085 2,030 2,142

RetailTrade 469 788 828 814 825Construction 320 568 652 628 549AccommodationandFood 160 266 289 294 303OtherServices,ExceptPublicAdministration

152 266 289 294 303

Professional,Scientific,andTechnicalServices

95 159 172 171 168

RealEstateandRental 75 126 137 137 136AdministrativeandWasteManagementService

84 137 141 136 134

Other 261 418 405 364 337

Consistentwiththemodel,healthcareemploymentgrowthinMontanaaccelerated

followingMedicaidexpansion(seeFigure5).Betweensecondquarter2015(whenthe

HELPActwaspassed)andthirdquarter2017,Montana’shealthcaresectoraddedmore

than6,200jobs.Furthermore,since2014,statesthatsawlargerincreasesininsurance

coveragesawlargerincreasesinhealthcareemployment(seeAppendixsectionI).

Figure5:HealthCareEmploymentinMontana,Q12013–Q32017

Source:BBERanalysisofQCEWdataforNAICS62.

61,846 61,835

68,052

58,000

60,000

62,000

64,000

66,000

68,000

70,000


16

B.ByRegion

Table5summarizestheeconomicimpactsofMedicaidexpansionacrossfiveMontana

regions:Northest,Southwest,Central,NorthCentral,andEast.32Medicaidenrollmentdoes

notdeviatethatmuchfrompopulation.Assuch,economicimpactsacrossregionsare

somewhatproportionaltopopulation.

Table5:EconomicImpactsbyRegion,2018andCumulative(incomeandsalesin

millionsof$2016)

NW SW Central

2018 Cumul. 2018 Cumul. 2018 Cumul.

Jobs 1,920 1,190 1,091 PersonalIncome $89 $403 $61 $277 $59 $269NewSales/Output $202 $902 $123 $584 $130 $581Population 1,132 766 682

N.Central East

2018 Cumul. 2018 Cumul.

Jobs 877 247 PersonalIncome $43 $194 $13 $59NewSales/Output $96 $427 $27 $120Population 547 138

V.OtherEconomicEffectsofMedicaidExpansion

Theresultsabovefocusoneconomicimpactsanddonotaccountformanyother

expansionbenefits.Forinstance,Medicaidexpansionmayimprovehealthoutcomes.One

studyfoundthatMedicaidexpansionwasassociatedwitha5.1percentagepoint(23%)

32TheNorthwestregionincludesFlathead,Granite,Lake,Lincoln,Mineral,Missoula,Powell,Ravalli,andSanderscounties.TheSouthwestregionincludesBeaverhead,Broadwater,DeerLodge,Gallatin,Jefferson,Madison,Meagher,Park,andSilverBowcounties.TheNorthCentralregionincludesBlaine,Cascade,Chouteau,Glacier,Hill,LewisandClark,Liberty,Pondera,Teton,andToolecounties.TheCentralregionincludesBigHorn,Carbon,Fergus,GoldenValley,JudithBasin,Musselshell,Petroleum,Stillwater,SweetGrass,Treasure,Wheatland,andYellowstonecounties.TheEastregionincludesCarter,Custer,Daniels,Dawson,Fallon,Garfield,McCone,Phillips,PowderRiver,Prairie,Richland,Rosebud,Sheridan,Valley,andWibauxcounties.


17

increaseintheshareoflow-incomeadultsinexcellenthealth.33Analysesofotherinsurance

expansionshavefoundthatprovidinghealthinsuranceimprovesdepressionoutcomesand

reducesmortality.34

Medicaidexpansionalsogeneratesmajorimprovementsinfinancialsecurity.Itreduces

debtcollections,reducesbankruptcies,andimprovescreditscores.35Forinstance,one

recentstudyfoundthatMedicaidexpansionreducedmedicaldebtby$900pertreated

person,prevented50,000bankruptcies,andledtobettercredittermsforborrowers.36

Theinterestsavingsfromtheseimprovementswereworth$280pertreatedpersonor

$520millionoverall.Thesefinancialbenefitsdoublethevalueofexpansiontouninsured

individualsrelativetoasimplecalculationbasedonthechangeinout-of-pocketcosts.

MultiplerecentstudiesfindthatMedicaidexpansionreducedbothviolentandproperty

crime.37Onestudyarguesthesebenefitsmaystemfromincreasedmentalhealthand

substanceabusetreatment.Nationally,thebenefitsofexpansion-inducedcrimereduction

mayexceed$10billionannually.

SomeworrythatexpandingMedicaidwillreduceworkincentives.However,several

studiesfindnoevidencethatMedicaidexpansiondepressesemployment.38Onestudyeven

foundthatMedicaidexpansionincreasedemploymentamongpeoplewithdisabilities.39

33Sommers,B.D.,Maylone,B.,Blendon,R.J.,Orav,E.J.,andEpstein,A.M.,“Three-YearImpactsoftheAffordableCareAct:ImprovedMedicalCareandHealthAmongLow-IncomeAdults,”HealthAffairs36,no.6(2017):1119-1128.34Sommers,B.D.,Gawande,A.A.,andBaicker,K.,“HealthInsuranceCoverageandHealth—WhattheRecentEvidenceTellsUs,”(2017).35Brevoort,K.,Grodzicki,D.,andHackmann,M.B.,MedicaidandFinancialHealth(No.w24002).NationalBureauofEconomicResearch(2017);Hu,L.,Kaestner,R.,Mazumder,B.,Miller,S.,andWong,A.,TheEffectofthePatientProtectionandAffordableCareActMedicaidExpansionsonFinancialWellbeing(No.w22170),NationalBureauofEconomicResearch(2016).36Brevoort,etal.,(2017).37Vogler,J.,“AccesstoHealthCareandCriminalBehavior:Short-RunEvidenceFromtheACAMedicaidExpansions(2017);He,Q.,“TheEffectofHealthInsuranceonCrimeEvidenceFromtheAffordableCareActMedicaidExpansion(2017).Thesestudiesareconsistentwithresearchthatexaminedtheeffectsofpriorinsuranceexpansionsoncrime,e.g,.Wen,H.,Hockenberry,J.M.,andCummings,J.R.,“TheEffectofMedicaidExpansiononCrimeReduction:EvidenceFromHIFA-WaiverExpansions,”JournalofPublicEconomics154(2017):67-94.38Leung,P.,andMas,A.EmploymentEffectsoftheACAMedicaidExpansions(No.w22540).NationalBureauofEconomicResearch(2016);Kaestner,R.,Garrett,B.,Chen,J.,Gangopadhyaya,A.,andFleming,C.,“EffectsofACAMedicaidExpansionsonHealthInsuranceCoverageandLaborSupply,”JournalofPolicyAnalysisandManagement36,no.3(2017):608-642;Duggan,M.,Goda,G.S.,andJackson,E.,TheEffectsoftheAffordableCareActonHealthInsuranceCoverageandLaborMarketOutcomes(No.w23607),NationalBureauofEconomicResearch(2017);Frisvold,D.E.,andJung,Y.,“TheImpactofExpandingMedicaidonHealthInsuranceCoverageandLaborMarketOutcomes,”InternationalJournalofHealthEconomicsandManagement(2016):1-23.


18

DatafromMontanaalsoshownoadverseeffectofMedicaidexpansiononthe

employmentoflow-incomeMontanans.Infact,Montanasawasubstantialincreaseinlow-

incomelaborforceparticipationfollowingMedicaidexpansion.Laborforceparticipation

amongnon-disabledMontanansages18-64withincomesbelow138percentFPLrosefrom

58percentto64percent.AsshowninTable6,similarincreasesinlaborforceparticipation

werenotobservedamonghigher-incomeMontanansorlow-incomeresidentsinother

states.Infact,laborforceparticipationfellintheseothergroups.Ifweassumethatlow-

incomelaborforceparticipationinMontanawasexpectedtofollowthetrendsinother

statesoramonghigh-incomeMontanans,thentheincreaseinlaborforceparticipation

amonglow-incomeMontanansisevenlarger(8.5percentagepoints).

Table6–LaborForceParticipationAmongPeopleAges18-64,BeforeandAfter

Expansion

Before(2013-2015)

After(2016-2017)

Difference(afterminusbefore)

DifferenceinDifference

(MTdifferenceminusrestdifference)

0-138%FPL Montana 58.2% 64.2% 6%

RestofU.S. 57.1% 54.6% -2.5%*** 8.5%*>138%FPL

Montana 86.2% 84.1% -2.0% RestofU.S. 83.4% 83.5% 0.1% -2.1%

Source:BBERanalysisofCurrentPopulationSurveyASEC,dataobtainedfromIPUMS-CPS.

***=p<0.01,*=p<0.05.SeeAppendixforadditionaldetails.

WhiletheseresultsdonotprovethatMedicaidexpansionincreasedemployment,they

suggestitmighthave.Thispatternofresultsisconsistentwiththehypothesisthat

MedicaidexpansionandMontana’sHELP-Linkprogramimprovedemploymentoutcomes

forMontana’sMedicaidexpansionbeneficiaries.Theseeffectscouldreflecttheimpactof

obtaininghealthinsuranceandanyassociatedimprovementsinhealth,theimpactof

HELP-Link,acombinationofthetwo,orsomeothernotyetaccountedforfactor.However,

wenotethatarecentanalysisofaprograminNevada,similartoHELP-Link,thatprovided

39Hall,J.P.,Shartzer,A.,Kurth,N.K.,andThomas,K.C.,“EffectofMedicaidExpansiononWorkforceParticipationforPeopleWithDisabilities,”AmericanJournalofPublicHealth107,no.2(2017):262-264.


19

eligibilityreviewandjobcounselingservicestorandomlyselectedunemployment

insurancerecipientsledtopersistentincreasesinlong-termemploymentandearnings.40

MedicaidexpansionrepresentsasignificantinvestmentinMontana’shealthcare

system,particularlyitscriticalaccesshospitalsandruralproviders.Italsosignificantly

improvesthefinancialhealthofsafety-nethospitals.41WedescribetheeffectsofMedicaid

expansiononhealthcareprovidersinaforthcomingreport.

VI.FiscalEffects

Medicaidexpansionalsoaffectsthestate’sbudget.Whileitreducessomestatecosts,it

imposesothers.Asnotedpreviously,thestatecovereda0percentshareoftotalbenefits

andclaimsin2016,butthatsharewillriseto10percentin2020andbeyond.Technically,

thecosttothestateismorecomplicatedthanthis.BecauseMontanaoffers12-month

continuouseligibility,itmustpayaslightlyhighershareofcosts.However,thefederal

governmentpaysfor100percentofcertainexpansioncosts(e.g.,costsofservicesprovided

bytheIndianHealthService).Todate,thesecostscomprisenearly5percentoftotal

expansionspending.Premiumschargedtoexpansionbeneficiariesalsooffsetstatecosts

veryslightly.Onnet,weestimatethatthestateofMontanawillpay10.24percentof

Medicaidexpansioncostsin2020.

Thestatealsomustpaytoadministertheprogram.In2017,theLegislativeFiscalOffice

estimatedthattotaladministrativecostsassociatedwithMedicaidexpansionwouldequal

approximately1percentoftotalbenefitsandclaims.42Assuch,by2020,thestate’s

Medicaidexpansioncostswillequalapproximately11percentoftotalMedicaidexpenses.

Thesecostsaremorethanoffsetbythecostsavingsandincreasedrevenues.As

discussedabove,MedicaidexpansionreducesthecostoftraditionalMedicaid,healthcare

spendingbytheDepartmentofCorrections,andspendingonsubstanceusedisorders.We

estimatethatthesesavingsaverageapproximately8percentoftotalMedicaidexpansion

40Manoli,D.S.,Michaelides,M.,andPatel,A.,Long-TermEffectsofJob-SearchAssistance:ExperimentalEvidenceUsingAdministrativeTaxData(No.w24422),NationalBureauofEconomicResearch(2018).41Dobson,A.,DaVanzo,J.E.,Haught,R.,andPhap-Hoa,L.,“ComparingtheAffordableCareAct'sFinancialImpactonSafety-NetHospitalsinStatesThatExpandedMedicaidandThoseThatDidNot,”IssueBrief(CommonwealthFund),(2017):1-10.42Theseprojectionsincludepaymentsforthethird-partyadministrator(TPA).In2017,SB261canceledthird-partyadministrationinanefforttosavemoney.Whilethischangewasintendedtoreducecosts,itremainstobeseenhowmuchthisshiftwillsave.Forpurposesofthisanalysis,wecontinuetoassumethatadministrativecostswillequal1percentoftotalbenefitsandclaims.


20

spending,andcouldenduphigherdependingontheextenttowhichthestateisableto

reducespendingforotherhealthservicesoruncompensatedcare.

AsshowninTable7,comparingcoststosavings,weestimatethatMedicaidexpansion

hadorwillhaveapositiveorclosetoneutralimpactonthestate’sbudgetin2016,2017,

2018,and2019.Forinstance,in2017,Medicaidexpansionreducedthestate’sspendingon

traditionalMedicaid,inmatecare,andsubstanceusedisordersbyapproximately$39

million($2016),anditcostapproximately$33million.Thus,onnet,notcountingfor

revenueorotherimpacts,Medicaidexpansionsavedthestate$6millionin2017.

By2020,however,savingsmaynolongeroffsetcosts.Onnet,thestatewillhavetopay

approximately2.8percentoftotalMedicaidexpansionspendingin2020.Thus,the

questioniswhethertheincreasedeconomicactivityassociatedwithMedicaidexpansion

willgeneratenetpositivebudgeteffectssufficienttocovertheseremainingcosts.We

estimatethattheywill.

UsingtheFiscalImpactAssessmentTool(FIAT),amodulethatestimatesstaterevenue

andexpenditureimpactsbasedontheoutputfromtheREMImodel,wefindthattaxesand

otherstaterevenuesrisebyanamountsufficienttopayfortheremainingMedicaid

expansioncostsin2020.43

AsshowninTable7,totalstaterevenuesfromallsources(includingintergovernmental

transfers)areexpectedtoincreaseby$40millionto$50millionperyear.Ifwerestrictthe

calculationtoincludeonlytaxes,statetaxrevenuesrisebyapproximately$21millionper

year.Thesetaxrevenuesaresufficienttopayforthe$16millioninMedicaidexpansion

costsnotcoveredbybudgetsavingsin2020.

However,itisimportanttolookbeyondtheimpactofMedicaidexpansiononrevenues.

OurmodelsuggeststhatMedicaidexpansionwillincreaseeconomicactivityandincrease

population.Theseincreasesmayalsoimpactstateexpenditures.Combiningbothrevenue

andexpenditureeffectsstillyieldsalargepositiveneteffectonthestatebudget.44Thenet

fiscalimpactin2020isestimatedtobe$35million.Again,thisismorethanenoughto

coverthe$16millioninremainingMedicaidexpansioncostsin2020.

43TheFIATmodeluseshistoricalaveragerelationshipsbetweeneconomicactivity(particularlypopulation,personalincome,andemployment)andstaterevenuesandexpenditurestoprojecthowrevenuesandexpenditureschangeinresponsetochangingpopulation,personalincome,andemployment.44Thenetfiscalimpactislargerthanrevenuesinthefirstfewyearsbecausethemodelassumesthatthegainsinemploymentfromincreasedactivitywillreducespendingonvariouspublicwelfareandinsuranceprograms.


21

Table7:FiscalEffectsofMedicaidExpansioninMontana(allvaluesinmillionsof

$2016)

2016 2017 2018 2019 2020

Savings TraditionalMedicaid 15.2 28.4 29.3 30.1 30.9Corrections 1.3 7.6 7.8 8.0 8.2SubstanceUseDisorders 1.5 3 3 3 3TotalSavings 18 38.9 40.1 41.1 42.1

Costs BenefitsandClaims 2.4 28.0 32.9 36.3 53.1Administration 2.9 5.1 5.1 4.9 5.2TotalCosts 5.3 33.0 38.0 41.2 58.3

SavingsMinusCosts 12.7 5.9 2.1 -0.1 -16.2

Revenues(allsources) 22.2 38.4 44.1 46.8 49.1

Revenues,TaxesOnly 11.5 19.3 21.1 21.4 21.8Expenditures -10.5 -10.3 -1.9 6.6 13.9

NetFiscalImpact(revenuesminusexpenditures)

32.7 48.7 46.0 40.2 35.3

TotalSavings+NetFiscalImpact

50.7 87.6 86.1 81.4 77.4

Net(savings+revenues-costs)

45.4 54.6 48.1 40.2 19.1

Theseresultscomewithanimportantcaveat.Theyarebasedonthehistoricalaverage

relationshipsbetweeneconomicactivityandstaterevenuesandspending.However,given

federaltaxreform,statebudgetshortfalls,etc.,thesehistoricalrelationshipsmaynot

accuratelydescribehowfutureeconomicactivitywillaffectMontana’sstatebudget.

Ultimately,theFIATtoolprovidesasimpleintuitiveanswertothequestion,“Howdoes

Medicaidexpansionaffectthestate’sbudget?”However,wenotethatstatebudgetsare

veryflexibleandrespondtoshockslikeMedicaidexpansionincomplicatedways.45As

such,itisdifficulttoisolatetheeffectsofMedicaidexpansionthroughoutthewholebudget

(bothrevenuesandexpenses).

OurfindingthatMedicaidexpansionpaysforitselfisconsistentwithseveralother

studiesthathaveexaminedtheimpactofMedicaidexpansiononstatebudgets.For

45AlongerdiscussionofthechallengesofestimatingbudgetimpactsofMedicaidexpansioncanbefoundin

Dorn,S.,“TheEffectsoftheMedicaidExpansiononStateBudgets:AnEarlyLookinSelectStates,”(2015).


22

instance,arecentstudyofMedicaidexpansioninMichiganfound"state-budgetgains

outweightheaddedcost.”46Similarly,ananalysisofbudgetsavingsandrevenuegains

across11expansionstatesarguedthat“projectedexpansionrelatedsavingsandrevenue

gainsareexpectedtooffsetcostsofexpansioninmanystatesforseveralyears.”47This

studynotesthatcomprehensiveanalysesofspendinginArkansasandKentuckyshow

savingsandrevenuegainssufficienttooffsetcostsatleastthrough2021.

ANoteonWoodworkEffects

SomearguethatthecostsofMedicaidexpansionshouldinclude“woodwork”effects,

whichmeansthattheavailabilityofMedicaidexpansionincreasesenrollmentintraditional

Medicaid.Ifso,thecostofMedicaidexpansioncouldincludethecostsassociatedwiththese

enrollees.

Wedonotincludewoodworkeffectsinthisanalysis,primarilybecausetheliterature

findsthattheAffordableCareActincreasedenrollmentintraditionalMedicaid,butthese

increaseswerenotrelatedtoMedicaidexpansion.Forinstance,onerecentstudyfound

“similarly-sizedwoodworkeffectsinallgroupsofstates,regardlessofMedicaidexpansion

status.”48Similarly,ourownanalysisofwoodworkeffectsinlate-expansionstates(see

AppendixsectionK)doesnotfindevidencethatMedicaidexpansionincreasestraditional

Medicaidenrollment.

Ifoneweretoincludewoodworkeffects,itwouldbeimportanttoincludebothbenefits

andcosts,suchastheeffectsofincreasedactivityassociatedwiththisspending.

Furthermore,evenifoneassumesthatthereissomelevelofwoodworkeffectsassociated

withtheimplementationofMedicaidexpansion,oneshouldnotassumethatending

Medicaidexpansionwilleliminatethesecosts.Itisnotclearwhetherthoseeligiblefor

traditionalMedicaidwillreturntobeinguninsuredifMedicaidexpansionweretocease.It

seemslikelythatmanywouldremain.

VII.Conclusion

MedicaidexpansionhashadasubstantialpositiveeffectonMontana’seconomy.While

effectsvaryfromyear-to-year,itbringsapproximately$350millionto$400millionofnew

spendingtoMontana’seconomyeachyear.ThisspendingripplesthroughMontana’s

46Ayanian,J.Z.,Ehrlich,G.M.,Grimes,D.R.,andLevy,H.,“EconomicEffectsofMedicaidExpansionin

Michigan,”NewEnglandJournalofMedicine376,no.5(2017):407-410.47Bachrach,D.,Boozang,P.,Herring,A.,andReyneri,D.G.,“StatesExpandingMedicaidSeeSignificantBudget

SavingsandRevenueGains,”Princeton:RobertWoodJohnsonFoundation(2016).48Frean,M.,Gruber,J.,andSommers,B.D.,“PremiumSubsidies,theMandate,andMedicaidExpansion:CoverageEffectsoftheAffordableCareAct.”JournalofHealthEconomics53(2017):72-86.


23

economy,generatingapproximately5,000jobsand$270millioninpersonalincomein

eachyearbetween2018-2020.Inadditiontogeneratingeconomicactivity,Medicaid

expansionappearstoimproveoutcomes—reducingcrime,improvinghealth,andshrinking

debt.Whilethestatepaysforthesebenefits,thecoststothestatebudgetaremorethan

offsetbythesavingscreatedbyMedicaidexpansionandbytherevenuesassociatedwith

increasedeconomicactivity.

Likeanystudy,thisstudyhaslimitations.Theassumptionsusedtoestimatethedirect

impactsofMedicaidexpansionmaybeunderminedbyreal-worldevents.Similarlythe

assumptionsthatunderlietheREMImodelmayalsofailtoaccuratelycapturetheeconomic

relationshipsatissue.Inordertoaccountfortheseweaknesses,weconductedseveral

sensitivityanalyses.Thatis,weestimatedseveraladditionalmodelsusingalternative

assumptions.WepresenttheresultsfromtwooftheseanalysesinAppendixsectionL.

Ingeneral,theseadditionalanalysesyieldresultssimilartothosedescribedhere.

Medicaidexpansiongeneratesseveralthousandadditionaljobsandseveralhundred

millioninadditionalincome.Italsopaysforitself,sincethesavingsgeneratedplus

additionalrevenues(orotherreducedexpenditures)exceedthecoststothestate.While

theremaybeconditionsunderwhichMedicaidexpansionimposesnetcostsonthestate,

weexpectsuchinstancestooccurrarely,assumingMedicaidexpansionretainsitscurrent

structure.


24

Appendix

A.ChangeinUtilizationAssociatedWithMedicaidExpansion

ToillustratetheimpactofMedicaidexpansiononhealthcareutilizationinMontana,we

obtainedBehavioralRiskFactorSurveillanceSystem(BRFSS)microdatafromtheCenters

forDiseaseControlandPreventionfortheyears2013-2016.49Weimportedthesedatainto

STATA13.1andcompletedallanalysesusingSTATA’ssurvey(svy)commandstoaccount

forBRFSSsurveydesignandsampleweights.

TheBRFSSincludesahandfulofquestionsthatmeasurehealthcareaccess.Specifically,

weexaminedtwoquestions:

● Wasthereatimeinthepast12monthswhenyouneededtoseeadoctorbut

couldnotbecauseofcost?

● Abouthowlonghasitbeensinceyoulastvisitedadoctorforaroutine

checkup?50

Thesequestionsprovideaverycrudeindicationofhealthcareuse.

ToidentifytheeffectsofMedicaidexpansion,werestrictedouranalysistolow-income

residentswhomaybeMedicaidexpansioneligible.TheBRFSSdoesnotreportMedicaid

eligibilityorincomerelativetopoverty.ToidentifypeoplewhomaybeMedicaideligible,

weimputedincomeequaltothemidpointofthereportedincomecategories(fromvariable

_income2).Wethencomputedhouseholdsizebysummingthenumberofchildrenand

adultsinthehome(fromthevariableschildren,numadult,andhhadult).Weobtainedthe

povertylevelbyhouseholdsizeforeachyearfromtheDepartmentofHealthandHuman

Services.51Then,wecomputedimputedincomeasapercentofFPLforeachindividualand

examinedresultsforallindividualswithincomeslessthan150percentFPL.52

TheresultsforMontanaandforstatesthatsawlargeMedicaidexpansionimpactsare

asfollows.MedicaidexpansioninMontanaledtoalargeincreaseinMedicaidenrollment

49https://www.cdc.gov/brfss/annual_data/annual_data.htm.50Werecodetheresponsestobothquestionstoexcludedon’tknow,refused,ormissing.Wealsorecodethetimesincelastcheck-uptoequal1iftherespondenthadacheck-upwithinthelasttwoyears,and0otherwise.51https://aspe.hhs.gov/poverty-guidelines.52Giventheimprecisionofourpovertymeasure,weexpandtheboundsofouranalysisto150percentFPL.


25

andacorrespondinglargedecreaseintheshareofpeoplewithoutinsurance.Notevery

stateexperiencedeffectssimilartothoseinMontana.TheimpactsofMedicaidexpansion

acrossstatesvary.SomestatesalreadyofferedMedicaidtoalargershareofpeoplepriorto

theACA.Inthesestates,theimpactoftheexpansiononhealthinsurancecoverageand

healthcareaccessissmaller.Thus,tobetterillustratetheeffectsofexpandingMedicaidin

anenvironmentmoresimilartoMontana,weexaminedeffectsinstatesthatexpanded

Medicaidin2014andsawlargeincreasesinMedicaid(>5percentagepointincreasein

shareofpopulationwithMedicaidbetween2013and2016)andlargeincreasesinthe

shareofpeoplewithhealthinsurance(>8percentagepoints).Thestatesmeetingthese

criteriainclude:Washington,Oregon,California,Nevada,NewMexico,Kentucky,Arkansas,

andWestVirginia.

TableA1:ShareofAdultPopulationReportingHealthCareAccessinSelected

MedicaidExpansionStatesBeforeandAfterExpansion

Montana OtherExpansion 2015 2016 2013 2016

SkippedCareDuetoCost

0.29[0.25-0.34]

0.25[0.21-0.29]

0.33[0.31-0.35]

0.21[0.20-0.23]

NoCheck-upinLast2Years

0.36[0.32-0.41]

0.29[0.25-0.33]

0.28[0.26-0.30]

0.23[0.22-0.25]

Source:BBERanalysisofBRFSSdata,95%CIin[].

B.ChangeinHealthCareSpendingAssociatedWithMedicaid

Expansion

ToestimatetheimpactofMedicaidexpansion(ormorepreciselytheimpactof

providinghealthinsurance)onhealthcarespending,weobtaineddataonhealthcare

spendingbystatefromtheCentersforMedicareandMedicaidServices(CMS).53We

mergedthesedatawithdataonhealthinsurancecoveragebystatefromtheAmerican

CommunitySurvey.54Toidentifytheeffectsofinsurancecoverageonhealthcarespending,

weregressedtotalpercapitahealthcarespendingontheshareofpeoplewithanyhealth

insurance,statepersonalincomepercapita,andstate(andsometimesyear)fixedeffects.

Thisspecificationidentifiestheaveragechangeinhealthcarespendingassociatedwitha

changeintheshareofpeoplewithinsuranceacrossallstates.Weestimatedtwodifferent

versionsofthisregression.First,welimitedthesampletoincludeonly2013and2014. 53https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsStateHealthAccountsResidence.html.54https://www.census.gov/library/publications/2017/demo/p60-260.html(datafromspreadsheetHIC-4).


26

ThisspecificationcapturestheeffectsassociatedwiththefirstyearoftheAffordableCare

Act.Second,welimitedthesampletoinclude2008-2013(yearspriortomostACAeffects).

WepresenttheresultsoftheseregressionsinTableA2.Bothspecificationsyieldsimilar

effects.Aonepercentagepointincreaseinhealthinsurancecoverageisassociatedwithan

approximately$46increaseintotalperpersonhealthcarespending.

Montana’suninsuredratefellby3.5percentagepointsin2016.Thissuggeststhat

healthcarespendingincreasedby$166millionduetothereductioninuninsured.The

questioniswhatshareofthedecreaseinuninsuredcanbeattributedtoMedicaid

expansion.Giventhatnon-expansionstatessawa0.7ppdeclinein2016,weassumethatin

theabsenceofexpansion,Montana’suninsuredratewouldhavefallenby0.7pp.Thus,we

attribute2.8ppofthedeclinetotheexpansionin2016.Assuch,$46*2.8%*1.028million

people=$132million.Giventhemarginoferrorforalloftheseestimates,thisnumberis

crude.However,itprovidesausefulbenchmarkforouranalysis.

TableA2:RelationshipBetweenChangeinHealthCareSpendingPerCapitaand

ChangeinInsuranceCoverage

Pre-toPost-ACAExpansionandExchanges

Pre-ACA

2013-2014 2008-2013

PercentAnyCoverage 45.7***(10.8)

46.4(26.0)

PersonalIncomeperCapita

0.11***(0.02)

0.05***(0.01)

Constant -1006(548)

811(2448)

N 102 306

StateFixedEffects Yes YesYearFixedEffects No Yes

Note:standarderrorsin(),***p<0.01

C.StateSpending

DPHHSreportsthatmovingpeoplefromtraditionalMedicaidtotheexpansionsaved

$8.1millioninFY2016,$22.3millioninFY2017,andatotalof$40millionduringthefirst

twoyearsofexpansion.SplittingFY2017betweenCY2016andCY2017inproportionto

totalMedicaidspendingyieldssavingsof$15.2millionin2016and$24.8millionin2017.

Montanatypicallypays35percentofthecostsfortraditionalMedicaid.Ifthatrateapplies

tothosewhoshifted,andMontanapaid0percentforthoseintheexpansionin2016and5

percentin2017,wecancomputetotalspendingforthosewhowouldhaveremainedin


27

traditionalMedicaidintheabsenceoftheexpansion.Wepresenttheresultsofthisanalysis

inTableA3.

Tounderstandhowthisspendingwouldevolveovertime,weassumethattotal

spendingforthisgroupwouldgrowat5percentperyear,roughlyinlinewiththeratesthe

MedicaidactuaryforecastsMedicaidexpansionspendingperbeneficiarytogrow.

TraditionalMedicaidbeneficiariescompriseapproximately16percentoftotalspendingon

Medicaidexpansioneachyear(e.g.,the$82.6millionspentin2017is16percentofthe

$516millionintotalexpansionspending).Thefederalgovernmentwouldhavepaid

approximately10percentofthisandthestatetheremaining6percent.

TableA3:WithinMedicaidTransfersAssociatedWithExpansion

ReportedSavingstoMT($millions)

ImpliedTotalSpending($millions)

State$ifTraditional($millions)

State$ifExpansion($millions)

StateSavings($millions)

SavingstoMT(2years)

40

2016 15.2 43.5 15.2 0.0 15.22017 24.8 82.6 28.9 4.1 24.82018 86.7 30.4 5.2 25.22019 91.1 31.9 6.4 25.52020 95.6 33.5 9.6 23.9

Asdescribedabove,MedicaidexpansionalsoaffectsspendingbytheDepartmentof

Corrections.DOCreportsthattheexpansionsavedthem$7.66millioninFY2017.Wealso

assumethatthesesavingscontinueandthattheygrowat5percentperyear.

TworecentreportssponsoredbytheMontanaHealthcareFoundationandpreparedby

ManattsuggestedthatMedicaidexpansionalsoreducesspendingonsubstanceuse

disordersandmentalhealth.55Thesereportsdocumenta$1.5millionreductionin

spendingonsubstanceusedisordersinhalfofFY2016andapotential$1.3million

reductioninspendingintheMentalHealthServicesProgram.Theyfurtherarguethatthe

statemayrealize$3millionperyearinsubstanceusedisordersavings.Giventhe

difficultiesinherentinattributingshiftsinstatespendingtoparticularprograms,we

assumethatthestaterealizes$3millionperyearinsavingsintheseareasfrom2017-2020.

Giventhatthisrepresentslessthan0.6percentoftotalMedicaidexpansionspending,our

resultsarelargelyunaffectedbytheinclusionofthesesavings.

55Bachrach,etal.,(2017)andGrady,Bachrach,andBoozang(2017).


28

D.ShiftinPayers

Tocompleteouranalysis,itisimportanttounderstandwhattypesofinsurance,ifany,

Medicaidexpansionbeneficiarieswouldhaveintheabsenceofexpansion.Howmanyof

thosewhoenrollthroughtheexpansionwouldhaveinsurancewithoutit?Ofthosewho

wouldhaveinsurance,whatkindofinsurancewouldtheyhave(e.g.,traditionalMedicaid,

employersponsored,directpurchase)?

Thepriorsectionsuggeststhatapproximately16percentofMedicaidexpansion

spendingisatransferfromtraditionalMedicaid.Thus,weassumethat16percentof

MedicaidexpansionenrolleesarelikelytransferswithinMedicaid.

Amongtheremainder,thevastmajoritycomefromthepoolofuninsured.FigureA1

providesasimplewaytoillustratethis.Thisfigureshowstheaveragechangeofinsurance

coverageamongtheMedicaidexpansioneligiblebetween2013and2016.Amongstates

thatexpandedMedicaidinJanuary2014(initialexpansionstates),16percentofthe

Medicaideligiblegainedinsurancecoverageintheaverageexpansionstate.Whilethere

wassomeincreaseindirectpurchaseinsuranceandMedicare,thevastmajorityofthis

increasecamefromgrowthintheshareofpeoplewithMedicaid.56Theshareofthis

populationwithMedicaidgrewbyanaverage16percent.

Thisisconsistentwiththeliteraturethatfindsthatenrollmentindirectpurchase

insurancegrewrelativelylittleinMedicaidexpansionstates(averagegrowthof2

percentagepoints)andthatMedicaidexpansiondidnotcrowdoutemployersponsored

insurance(averagedeclineoflessthan1percentagepoint).57

56Thechangeinsharecansumtomorethanthechangeincoveragebecausesomepeoplereportmorethanonetypeofinsurance.57E.g.,Duggan,etal.,(2017)


29

FigureA1:AveragePercentChangeinInsuranceCoverage2013-2016AmongPeople

0%-138%FPLAges18-64,byTypeofInsuranceCoverageandExpansionStatus

Source:BBERanalysisofAmericanCommunitySurveydata.

Weassumethat68percentofMedicaidexpansionbeneficiarieswouldbeuninsuredin

theabsenceofMedicaidexpansion.Wecomputethisusingthefollowing:

ChangeinMedicare+ChangeinDirect+ChangeEmployer=0.007+0.023-0.001=0.029

ChangeinAny–ChangeinMedicaid=.165-.155=0.01

! assume0.01ofthe0.029ledtoincreasedcoverageand0.019switchedto

Medicaid

! 1-(0.019/0.155)=0.88ofMedicaidcoverageininitialexpansionstatescomes

fromtheuninsured

However,MontanawaslatetoexpandMedicaid.Assuch,moreMedicaideligiblesgained

directpurchasecoveragefromtheexchangesbetween2013and2015.Weexpectmoreof

thosewhogainMedicaidviatheexpansioninMontanatocomefromthedirectpurchase

pool.Giventhattheaveragenon-expansionstatesawa3percentagepointgreaterincrease

intheshareofMedicaideligiblewhogaineddirectpurchaseinsurance(seeFigureA1),we

10%

3%

5%

3%

1%

16%

0%

2%

16%

1%

Any Employer Direct Medicaid Medicare

Non-Expansion

InitialExpansion


30

assumeanadditional3percentagepointsofMontana’sMedicaidexpansioneligibleswitch

fromotherformsofinsurance:

! 1-((0.019+0.03)/0.155)=0.68.

Combined,theseanalysessuggestthat68percentoftheincreaseinMedicaidcoveragein

Montanamaycomefromtheuninsured.

Thisimpliesthat16percentofMedicaidexpansionenrolleescomefromeither

employer-sponsoredinsuranceordirectpurchaseinsurance.Weassumethat,inthe

absenceofMedicaidexpansion,40percentofthesepeoplewouldhavedirectpurchase

insuranceand60percentwouldhaveemployer-sponsoredinsurance.PriortoMedicaid

expansioninMontana(2015),amonglow-incomepeoplewhohadeitherdirectpurchase

insuranceoremployersponsoredinsurance,40percenthaddirectpurchaseinsuranceand

60percenthademployer-sponsoredinsurance.

Thissuggeststhatapproximately5,800peopleswitchedfromdirectpurchase

insurance.Giventhatfollowingtheimplementationoftheexchanges,Montanasawa2

percentagepointincreaseintheshareoflow-incomepeoplewithdirectpurchase

insurance,thisassumptionimpliesthatallofthenetincreaseindirectpurchaseinsurance

(plussome)switchestoMedicaidexpansion.58Asaresult,theshareoflow-incomepeople

withdirectpurchaseinsurancereturnstoslightlybelowwhereitwaspriortoACA

implementation.Thisisaconservativeassumption.Onaverage,initialMedicaidexpansion

statessawa1.5percentagepointincreaseintheshareoflow-incomepeoplewithdirect

purchaseinsurancetwoyearsafterACAimplementation.Byassumingalargershiftfrom

directpurchase(i.e.,theexchanges)wereducethemagnitudeoftheeconomicimpact.59

Theremainingapproximately8,700Medicaidenrolleesareassumedtohaveswitched

fromemployer-sponsoredinsurance.Thissmallnumberisconsistentwiththebroader

58ThislevelofswitchingisalsoroughlyconsistentwithadifferentapproachtoestimatedlikelyswitchingbetweenMedicaidanddirectpurchase.Onaverage,accordingtoACSdata,statesthatexpandedMedicaidin2014sawlittleincreaseintheshareofpeopleages18-64withincomesbetween100percentand138percentFPLwithdirectpurchaseinsurance.Incontrast,statesthatdidnotinitiallyexpandMedicaid,likeMontana,sawlargeincreases.In2016,nearly17percentofMontanansinthisgroupstillhaddirectpurchaseinsurance,whileonly9percentofpeopleininitialexpansionstatesdid.IfweassumethatMedicaidexpansionbringstheshareoflow-incomeMontanansages18-64withdirectpurchaseinsurancetoalevelinlinewiththeaverageininitialexpansionstatesortothelevelinlinewithwhereMontanawaspriortoexpansion(10%),thenwewouldexpecttoobserveapproximately3,400fewerMontananswithdirectpurchaseinsurance.59Thisisbecauseweassume100percentofthesepeoplewouldenrollintheexchangesandreceivefederalsubsidies.Assuch,MedicaidspendingonpeoplewhowouldotherwiseenrollintheexchangesdoesnotgeneratenewfederalspendinginMontana.


31

literature,whichfindstheMedicaidexpansiondidnotsubstantiallyreduceemployer-

providedinsurance.

D.FederalGovernment

BasedonthecalculationshowninTableA3,thefederalgovernmentwouldhavepaidan

amountequalto11percentofMedicaidexpansionspendingviatraditionalMedicaid

regardlessofthedecisiontoexpand.

Inaddition,asdiscussedinAppendixsectionC,intheabsenceofexpansion,someof

thoseeligibleforMedicaidexpansionwouldhavehaddirectpurchaseinsurance.Ifthey

purchasedfromtheexchanges,thosewithincomesbetween100percentand138percent

FPLwouldhavebeeneligibleforpremiumsubsidiesandcostsharingreductions.

Determiningthemagnitudeoffederalspendingontheseindividualsisdifficult.Weneedto

knowbothhowmanypeoplewhoenrollinMedicaidexpansionwouldhaveobtained

coveragefromtheexchange,andhowmuchthegovernmentprovidedtoeachofthese

individualsviasubsidiesandcostsharing.

AsdescribedinAppendixsectionC,weassumethatasof2018,approximately5,800

Medicaidexpansionenrolleeswouldotherwisehavedirectpurchaseinsurance.Weassume

that100percentofthesepeoplewouldhaveenrolledviatheexchangesandwouldhave

receivedfederalsubsidies.Assuch,weassumethatallofthesepeoplehaveincomes

between100percentand138percentFPL.

GiventhatDPHHSdatashowthat10,994Medicaidexpansionbeneficiarieshadincomes

between100percentand138percentFPLasofMarch2018,weassumethat53percentof

thoseeligibleforsubsidieswouldhavereceivedthemintheabsenceofMedicaid

expansion.

Forthosewhowouldhaveenrolledintheexchangeandreceivedsomeamountof

subsidy/CSR,itisdifficulttoestimatethemagnitudeofthesesubsidies.ForallMontanans,

theaveragesubsidy(premiumtaxcredit)was$3,600in2016and$5,700in2017.60In

addition,theaverageCSRforindividualswitha94percentactuarialvalueCSR(thosewith

incomesbetween100percentand150percentFPL)wasapproximately$1,500.61

However,theaverageexchangeconsumerandtheaverageMedicaidbeneficiarywith

60CMS2017EffectuatedEnrollmentSnapshot(June12,2017).61“HealthInsuranceMarketplaceCostSharingReductionSubsidiesbyZipcodeandCounty2016,ASPE,U.S.DepartmentofHealth&HumanServices.


32

incomesbetween100percentand138percentFPLlikelydiffer.Therefore,itisnotclear

thattheaveragesubsidyandCSRapplytotheMedicaideligiblepopulation.

Toestimatethesizeofthesubsidy,weusedtheKaiserFamilyFoundation’sHealth

InsuranceMarketplaceCalculatortoobtainsubsidyestimatesforsomeonewithanincome

equalto125percentFPLatfive-yearageintervalsfor2015,2016,2017,and2018.We

averagetheseamountsweightingbytheshareofMedicaidexpansionbeneficiariesineach

agegroup.62Tothisamount,weadd$1,500,theaverageapproximateannualCSRin

Montanain2016.63Forfutureyears,weincreasethisamountby5percent.

TableA4presentsourestimatesforfederalspendingonsubsidiesbyyear.This

spendingrepresentsbetween4.4percentand8.3percentoftotalspendingonMedicaid

expansion.Combinedwithwhatthefederalgovernmentwouldhavespentontraditional

Medicaid,approximately19percentoftotalMedicaidexpansionspendingissimply

transferredwithinthefederalgovernment.Wedonotincludeanyofthistransferred

moneyinoureconomicimpactanalysis.

TableA4:ChangeinFederalSpendingonExchangeSubsidiesinMontanaWithout

Expansion

Year AssumedFederalSpendingperEnrollee(subsidy+CSR)

AssumedPeopleWithSubsidiesw/oExpansion

TotalFederalSpending

FederalSpendingasShareofMedicaidExpansionSpending

2016 5,018 3,339 16,758,341 0.0592017 6,240 5,009 31,257,552 0.0612018 7,057 5,828 41,128,196 0.0782019 7,410 5,828 43,184,606 0.0832020 7,780 5,828 45,343,836 0.081

62http://dphhs.mt.gov/Portals/85/Documents/healthcare/MedicaidExpansionMemberProfile.pdf.63TheTrumpadministrationcanceledfederalCSRpaymentsfor2018.However,insuranceprovidersarestillobligatedtoprovidethem.Assuch,theyhaveraisedpremiums.Giventhestructureoffederalsubsidies,whichlimitpremiumstoapercentageofincomeforpeoplewithincomeslessthan400percentFPL,thefederalgovernmentstilleffectivelyfundsmostoftheCSRpaymentsbecausethegovernmentabsorbsmostoftheincreaseinpremiums.However,someoftheburdenforthehigherCSRpaymentswillfallonindividualswithincomesgreaterthan400percentFPLwhodonotqualifyforsubsidies.GiventhatMedicaidexpansionreducestheneedforCSRs,expansionmaylowerpremiumsforhigher-incomeMontanans.Wedonotincludethesesavingsinourmodel.


33

E.Employers

SomeshareofMedicaidexpansionbeneficiariesmayhavebeencoveredbytheir

employerintheabsenceofMedicaidexpansion.AsdiscussedinAppendixsectionC,we

assumethatby2018,approximately8,700Medicaidexpansionbeneficiarieswouldhave

hademployer-sponsoredinsurance.

Weassumethattheemployershareofpremiumsequaled$5,075in2016.64Weassume

employerpremiumsgrowby4percentperyear.65Combined,weassumethatemployers

captureapproximately9percentoftotalMedicaidexpansionspending.

It’shardtosaywhatemployerswilldowiththesesavings.Somearguethatthemarket

willforceemployerstomaintaintotalcompensation.66Assuch,reducedspendingonone

typeofbenefitshouldincreasewagesorotherbenefits.However,itisalsopossiblethat

employerswillkeepsomeofthesesavings,particularlyinascenariowhereonlysomeof

theiremployeesareoptingoutofcoverage.Weassumea50-50split.

F.Individuals

Individualsbenefitfromreducedout-of-pocketcostsandreducedpremiums.We

assumethatindividualscapture12percentoftotalMedicaidexpansionspending.We

derivethisnumberbyapplyingestimatesforpremiumsandout-of-pocketspendingfor

differentgroupstotheirestimatedpopulationsize.67

64ThisisbasedonMedicalExpenditurePanelSurvey(MEPS)data.Averageannualsinglepremiumperenrolledemployeeforemployer-basedhealthinsurance.(https://www.kff.org/other/state-indicator/single-coverage/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D)65Thisisinlinewithrecentgrowth.Collins,S.R.,Radley,D.C.,Gunja,M.Z.,andBeutel,S.,“TheSlowdowninEmployerInsuranceCostGrowth:WhyManyWorkersStillFeelthePinch,”IssueBrief(CommonwealthFund)36(2016):1-22.66Blumberg,L.J.,“Perspective:WhoPaysforEmployer-SponsoredHealthInsurance?”HealthAffairs18,no.6(1999):58-61.67Informationonpremiumsandout-of-pocketcostsobtainedfromCollins,S.R.,Radley,D.C.,Gunja,M.Z.,andBeutel,S.,“TheSlowdowninEmployerInsuranceCostGrowth:WhyManyWorkersStillFeelthePinch,”IssueBrief(CommonwealthFund)36(2016):1-22;Coughlin,T.A.,“UncompensatedCarefortheUninsuredin2013:ADetailedExamination(2014);andAverageAnnualSinglePremiumperEnrolledEmployeeforEmployer-BasedHealthInsurance(https://www.kff.org/other/state-indicator/single-coverage/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D).


34

G.EnrollmentForecast

OurenrollmentforecastisbasedontheexperienceofinitialMedicaidexpansionstates.

Onaverage,Medicaidenrollmentplateausapproximatelytwoyearsafterexpansion.As

such,weassumethatenrollmentwillresemblecurrentenrollment.Seediscussionin

III.D.1.

Wealsonotethatundercurrenteconomicconditions,Montanamayhavelimitedroom

toexpandenrollmentfurther.TableA5presentstheestimatedsizeofMontana’s

populationages18-64withincomebetween0percentand138percentFPL.AsofMarch

2017,theCurrentPopulationSurveysuggestedthatroughly95,000Montanansmetthe

basiceligibilitycriteria.Thesesurveyestimatesdonotgathersufficientinformationto

preciselyestimatethesizeoftheeligiblepopulation.Furthermore,with12-month

eligibility,someshareofexpansionenrolleesmayfalloutsideofthisrangeduringthe

monthofthesurvey.However,thesedatasuggestlimitedroomforcontinuedgrowthin

expansionenrollment.

TableA5:MontanaPopulationAges18-64WithIncomeBetween0%and138%FPL

Year MontanansAges18-64WithIncomeBetween0%and

138%FPL[95%CI]

2015 116,331[102,865-129,672]

2016 109,617[98,656-120,579]

2017 95,334[84,782-105,521]

Source:BBERanalysisofCPSASECdata.

H.SpendingForecast

WebaseourforecastforMedicaidexpansionspendingperbeneficiaryontheforecast

fromthe2016ActuarialReportontheFinancialOutlookforMedicaid.68However,we

condensethetimelinebyaveragingtwoyearsofMedicaidforecastfor2015-16and2016-

17.

I.EmploymentEffectsofMedicaidExpansion 68https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/Downloads/MedicaidReport2016.pdf.


35

FigureA2presentsanalternativeviewoftherelationshipbetweenMedicaidexpansion

(orincreasesininsurancecoverage)andhealthcareemployment.Itshowsthepercent

changeinhealthcareemployment(obtainedfromtheQuarterlyCensusofEmployment

andWages)betweenJanuary2013andJune2017plottedagainstthepercentchangein

insurancecoverage(obtainedfromtheAmericanCommunitySurvey)between2013and

2016.Thefigureshowsthatstatesthatincreasedinsurancecoveragetendedtoseelarger

increasesinhealthcareemployment.Whilethisanalysisissomewhatcrude,itisconsistent

withtheresultsreportedbyourREMIanalysis.

FigureA2:CorrelationBetweenGrowthinHealthCareEmploymentandGrowthin

InsuranceCoverage

Notes:Blue=initialexpansionstates,Red=lateexpansionstates,Green=non-expansion

states

Arizona

Arkansas

CalifoColorado

Connecticut

Delaware

District of Columbia

Hawaii

IllinoisIowa

KentuckyMaryland

Massachusetts

Minnesota

Nevada

New Jersey New MexicoNew York

North Dakota

Ohio

Oregon

Rhode Island

Vermont

Washington

West Virginia

Alaska

Indiana

LouisianaMichigan

Montana

New Hampshire

PennsylvaniaAlabama

FloridaGeorgiaIdaho

KansasMaine Mississippi

Missouri

Nebraska

North Carolina

Oklahoma

South Carolina

South DakotaTennessee

Texas

Utah

VirginiaWisconsin

Wyoming

05

10

15

pct ch

g in

he

alth

ca

re e

mp

loym

en

t 2

01

3-2

01

7

2 4 6 8 10pct change in covered 2013-2016


36

J.ImpactofMedicaidExpansion/HELP-LinkonLaborForce

Participation

AsdiscussedinsectionV,laborforceparticipationamonglow-incomeMontanans

increasedafterMontanaexpandedMedicaid.Thesefindingsarebasedonananalysisof

datafromtheCurrentPopulationSurveyAnnualSocialandEconomicSupplementobtained

fromIPUMS-CPS.69TheASECisadministeredinMarcheachyear.

Inthemaintext,wefocusonindividualsages18-64withincomesbelow138percent

FPLwhodonotreportadisability.70Wereportthepercentageofpeopleinthisgroupwho

reportparticipatinginthelaborforcebeforeMontanaexpandedMedicaid(2013-2015)

andafterMontanaexpandedMedicaid(2016-2017).

IntableA5,wereportresultsfromasimilardifferences-in-differencesanalysisthat

usesregressionanalysistoaddcontrolsforage,age2,sex,race(whitenon-Hispanic),region

(censusdivisions),andyearfixedeffects.Theeffectsaresimilartothosereportedinthe

maintext.Relativetolow-incomepeopleinotherstates,laborforceparticipation(LFP)

increasedbynearly8percentagepointsmoreinMontanathaninotherareas.Thiseffectis

notobservedamonghigher-incomeMontanans,suggestingthatthechangeinLFPisnota

Montanaeffect,anditonlyappliestolow-incomeMontanans.Thefinalcolumnfurther

establishesthis.Theresultsinthiscolumnarebasedonasimilaranalysis,butinsteadof

comparingthechangeinLFPamonglow-incomeMontananstolow-incomeresidentsin

otherstates,wecomparelow-incomeMontananstohigh-incomeMontanans.Theresults

aresimilar.TheysuggestthatsomethingincreasedLFPamonglow-incomeMontanansin

2016thatdidnotsimilarlyaffectotherlow-incomeAmericans(orlow-incomeresidentsof

Mountainstates)orhigher-incomeMontanans.MedicaidexpansionandHELP-Linkprovide

aplausibleexplanationfortheseobservedeffects.

InTableA6,weshowthatAmericanCommunitySurveydatadepictasimilarpattern.

Weobservelargeincreasesinlaborforceparticipationamonglow-income(belowFPL)

Montanansages20-64after2016.Weobservelargeincreasesamongpeoplewithand

withoutdisabilities.WedonotobservesimilarincreasesinLFPamonghigher-income

MontanansoramongpeopleacrosstheUnitedStates.

69Flood,S.King,M.,Ruggles,S.,andWarren,J.R,“IntegratedPublicUseMicrodataSeries,CurrentPopulationSurvey:Version5.0,”[dataset]Minneapolis:UniversityofMinnesota(2017).https://doi.org/10.18128/D030.V5.0.70WecomputeincomeasapercentofpovertyusingIPUMS-CPSvariablesofftotvalandoffcutoff.


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TableA5:Differences-in-DifferencesRegressionAnalysisofImpactofMedicaid

ExpansiononLaborForceParticipation

LowIncome(0-138%FPL)

HigherIncome(>138%FPL)

MontanaOnly

Montana 0.006(0.027)

0.028***(0.009)

LowIncome -0.255***(0.027)

After -0.034***(0.006)

0.004*(0.002)

After 0.007(0.016)

Montana*After

0.078*(0.034)

-0.024*(0.011)

Low*After 0.076*(0.035)

Controls Age,age2,sex,whitenon-Hispanic Controls Age,age2,sex,whitenon-Hispanic

RegionFE Yes Yes RegionFE N/A

YearFE Yes Yes YearFE Yes

N 93,988 442,652 N 6,969Note:Standarderrorsin(),***p<0.01,*p<0.05.

TableA6:LaborForceParticipationbyPovertyandDisability

WithDisabilities

WithoutDisabilities

Montana 2015 2016 Change 2015 2016 ChangeBelowPoverty 24% 29% 6% 56% 64% 9%AbovePoverty 56% 56% 0% 86% 87% 1%

U.S. BelowPoverty 23% 22% -1% 57% 56% -1%AbovePoverty 47% 48% 1% 86% 86% 0%

Source:BBERanalysisofAmericanCommunitySurveydataobtainedfromAmericanFactFinderTable

B23024.

K.WoodworkEffects

Whiletheexistingliteraturegenerallyfindslimitedwoodworkeffects,mostofthis

researchexaminedinitialexpansionstates.Here,weexaminedchangesintraditional

MedicaidenrollmentamonglateexpansionstatesusingMBESdata,whichincludes

monthlyenrollmentbystatefor2014,2015,and2016.Specifically,weperformeda

differences-in-differencesanalysis.Thatis,weregressedthenaturallogoftraditional

Medicaidenrollment(computedastotalMedicaidenrollmentminusthenumberofnewly

eligible)onanindicatorequaltooneformonthsafterthestateexpandedMedicaidand

zerootherwise,andstate,year,andmonthfixedeffects.Theeffectsinthisanalysisare

identifiedbycomparingthechangeintraditionalMedicaidenrollmentinlateexpansion

statestothechangeinnon-expansionstates.Wedidnotfindevidenceconsistentwiththe


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hypothesisthatMedicaidexpansionincreasestraditionalMedicaidenrollment.Wefound

thatenrollmentinexpansionstatesincreasedby0.3percentrelativetonon-expansion

states.Thisresultisnotstatisticallysignificant(p-value=0.91notclosetostandard

significancethresholdof0.05).

L.AlternativeREMISpecifications

TableA7presentsstatewideresultsfortwoalternativeREMIspecifications.Thefirst

specificationshowsamuchmoreconservativeestimate,whereweassumethatthefederal

transferis25percenttototalspendingor32percenthigherthaninthebaseline

specification.Wealsoreduceenrollmentto92,000,whichfurthershrinkstheeconomic

impacts.Thesecondspecificationpresentsanestimatewithmuchhigherenrollmentof

97,000in2018and105,000in2019-2020.Theconclusionsfromthesealternative

specificationsareconsistentwiththoseinthemainbodyofthereport.Medicaidexpansion

generatesthousandsofadditionaljobsandhundredsofmillionsofadditionalincome,and

combinedsavingsplusincreasedrevenuesaresufficienttopayforthestate’sshareofthe

costs.Therearemanyotherpossiblemodelspecifications,however,selectingmodelsfrom

withinaplausiblerangeofassumptionsisverylikelytoyieldsimilarconclusions.

TableA7:SummaryofEconomicImpactsofMedicaidExpansioninMontana/Year

andCumulative(income,sales,andnetsavingsinmillionsof$2016)

A.25%FederalTransfer/92,000EnrollmentPlateau

2016 2017 2018 2019 2020 Cumulative

Jobs 3,035 4,837 4,972 4,766 4,565 PersonalIncome $137 $223 $240 $245 $249 $1,094NewSales(i.e.,output) $324 $528 $550 $534 $522 $2,458Population 932 2,137 3,093 3,792 4,363 FiscalEffect:Savings+Revenue-Costs $43.6 $51.3 $44.6 $36.6 $15.9

B.105,000EnrollmentPlateau

2016 2017 2018 2019 2020 Cumulative

Jobs 3,161 5,071 5,533 5,668 5,492 PersonalIncome $147 $241 $275 $297 $306 $1,266NewSales(i.e.,output) $336 $551 $609 $633 $625 $2,754Population 968 2,229 3,330 4,247 4,999 FiscalEffect:Savings+Revenue-Costs $45.4 $54.6 $48.7 $40.4 $16.8