BBER 2018 The economic impact of Medicaid expansion in ... · $442 million in FY2017, and $215...

FY2012-2015Prepared by:Bureau of Business and Economic ResearchUniversity of MontanaMissoula, Montana 59812

Prepared for:The Montana Healthcare Foundation and Headwaters Foundation

The Economic Impact of Medicaid Expansion in Montana

BUREAU OF BUSINESS AND ECONOMIC RESEARCHU N I V E R S I T Y O F M O N TA N A

April 2018

AcknowledgementsThisreportwasproducedandauthoredbyBryceWardandBrandonBridgeoftheUniversityofMontana’sBureauofBusinessandEconomicResearch.AllstatementsandconclusionsincludedinthisreportbelongtotheauthorsanddonotrepresentthepositionoftheUniversityofMontana.Wewouldliketothankthefollowingpartnersforsupportingthisresearch:

Formoreinformation,contact:BureauofBusinessandEconomicResearchGallagherBusinessBuilding,Suite231Missoula,MT59812(406)243-5113www.bber.umt.edu

TableofContentsAbstract.....................................................................................................................................................0

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

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

III.ModelInputsandAssumptions.......................................................................................................5A.NewSpending.................................................................................................................................................6

B.Pre-existingSpending.................................................................................................................................................8D.Trends............................................................................................................................................................12

1.Enrollment...................................................................................................................................................................122.Spending.......................................................................................................................................................................13

IV.REMIModelResults........................................................................................................................13A.Statewide......................................................................................................................................................14B.ByRegion.......................................................................................................................................................16

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

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

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

Appendix.................................................................................................................................................24A.ChangeinUtilizationAssociatedWithMedicaidExpansion................................................................24B.ChangeinHealthCareSpendingAssociatedWithMedicaidExpansion.............................................25C.StateSpending..............................................................................................................................................26D.ShiftinPayers...............................................................................................................................................28D.FederalGovernment...................................................................................................................................31E.Employers......................................................................................................................................................33F.Individuals.....................................................................................................................................................33G.EnrollmentForecast....................................................................................................................................34H.SpendingForecast.......................................................................................................................................34

AbstractMedicaidexpansionhasasubstantialeffectonMontana’seconomy.Assumingthat

enrollmentplateausnearcurrentlevels,Medicaidexpansionwillintroduceapproximately$350millionto$400millionofnewspendingtoMontana’seconomyeachyear.ThisspendingripplesthroughMontana’seconomy,generatingapproximately5,000jobsand$270millioninpersonalincomeineachyearbetween2018and2020.Inadditiontogeneratingeconomicactivity,MedicaidexpansionappearstoimproveoutcomesforMontanans—reducingcrime,improvinghealth,andloweringdebt.Whilethestatepaysanominalamountforthesebenefits,thecoststothestatebudgetaremorethanoffsetbythesavingscreatedbyMedicaidexpansionandbytherevenuesassociatedwithincreasedeconomicactivity.

TheEconomicImpactofMedicaidExpansioninMontana

1

I.Summary

Inthisstudy,wedescribetheeconomicimpactsofMedicaidexpansiononMontana’seconomy.Thatis,weinvestigate“HowmanyjobsandhowmuchincomestemsfromMedicaidexpansion?”Ouranalysiscoverstheperiod2016-2020.Assuch,italsoimplicitlyanswersthequestion,“HowwouldfailingtorenewMedicaidexpansionin2019impactMontana’seconomy?”

MedicaidexpansioninMontana,createdbytheHELPACTof2015,infusesasignificant

amountofmoneyintothestate’seconomy.Duringitsfirsttwoyears,Medicaidexpansionprovidedbeneficiariesmorethan$800millionofhealthcare.Thefederalgovernmentpaidformostofthis,andmostofthesefederaldollarswouldnothavebeenspentinMontanawithoutMedicaidexpansion.Approximately75to80percentofMedicaidspendingisnewmoneyinMontana.ThismeansthatnewspendingonMedicaidexpansionisapproximately33percentlargerthanMontana’sbeveragemanufacturingindustry(e.g.,craftbrewing,distilling,wineries,etc.)andonly10percentsmallerthanthetotalbudgetforUniversityofMontanasystem.

MedicaidexpansionspendingentersMontana’seconomyintwoways.First,itsupportsnewhealthcarespending.Nearlyonein10MontananswasenrolledinMedicaidexpansionasofMarch2018.Mostexpansionenrolleeswouldhavebeenuninsuredintheabsenceoftheexpansion.Assuch,Medicaidexpansionprovidestensofthousandsofuninsured,underinsured,andlow-incomeMontananswithhealthcaretheywouldnototherwisereceive.Second,Medicaidexpansionspendingreplacesexistingspending.EvenwithoutMedicaidexpansion,beneficiarieswouldhavereceivedsomehealthcare.Medicaidexpansionchangeswhopaysforthiscare.Withoutexpansion,thestate,thefederalgovernment,employers,hospitalsandproviders,andthebeneficiariesthemselvesallcontributedtopayingforcareforpeoplewhosecareisnowpaidforviaMedicaid.Withexpansion,thefederalgovernmentpaysfornearlyallofhealthcareprovidedtobeneficiaries.

Asaresult,Medicaidexpansionstimulateseconomicactivity.Weestimatethat,

between2018and2020,itwillgenerateapproximately5,000jobsand$270millioninpersonalincomeannually(seeTable1).1Thisrepresentsslightlylessthan1percentof

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


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Montana’semploymentandincome.Duringitsfirstfiveyears,Medicaidexpansionisexpectedtogenerateatotalofabout$1.2billioninpersonalincomeand$2.6billioninoutputornewsales.Consistentwithourmodel,betweenJune2015(whentheHELPActwassignedintolaw)andSeptember2017,Montanaaddedmorethan6,200healthcarejobs.Table1:SummaryofEconomicImpactsofMedicaidExpansioninMontana/YearandCumulative(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

TheeconomicimpactsofMedicaidexpansionarenotlimitedtothejobsandincomeitdirectlyorindirectlysupports.MedicaidexpansionalsorepresentsasignificantinvestmentinMontanans’healthandwell-being,andtheseinvestmentspayoff.AsubstantialbodyofresearchfromaroundtheU.S.hasevaluatedtheeffectsofMedicaidexpansionandfoundthatit:

• Improveshealth.OnestudyfoundthatMedicaidexpansionwasassociatedwitha5.1percentagepointincreaseintheshareoflow-incomeadultsinexcellenthealth.2Thisisconsistentwithalargerbodyofliteraturethatfindsthatinsuranceexpansionsimprovementalhealthandreducemortality.3

• Improvesfinancialhealth.Forinstance,onerecentstudyfoundthatMedicaidexpansionreducedmedicaldebtby$900pertreatedperson,prevented50,000bankruptcies,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-incomeMontanans.Followingexpansion,participationinthelaborforceamonglow-incomeMontanansages18-64increasedby6to9percentagepoints.Similargainsinlaborforceparticipationdidnotoccuramonglow-incomepopulationsinotherstatesoramonghigher-incomeMontanans.ThissuggeststhatMedicaidexpansionandHELP-Linkimprovedlabormarketoutcomesforlow-incomeMontanans.

WhileMontanapayspartofthecostofMedicaidexpansion,thesecostsaremorethanoffsetbycostsavingsandincreasedrevenues.MedicaidexpansionhasallowedsomepeopletoswitchfromtraditionalMedicaidtotheexpansion.BecauseMontanapays35percentofthecostfortraditionalMedicaidbutlessthan10percentintheexpansion,thissavedthestatemorethan$40millionduringthefirsttwoyears.Medicaidexpansionalsosaved$7.7millioninFY2017byreducingthecostofinmatecare,andthroughincreasedeconomicactivityandstaterevenues.AsshowninTable2,costsavingsandincreasedrevenuemorethanoffsetsexpansioncosts.Thiswillremaintrueevenafterthestate'sshareofMedicaidexpansioncostsrisesto10percentin2020. Table2:FiscalEffectsofMedicaidExpansioninMontana/Year(inmillionsof2016dollars) 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.BackgroundIn2015,MontanapassedtheHELPAct,whichexpandedMedicaidundertheAffordable

CareAct(ACA).Startingin2016,Montananswithincomesbelow138percentoftheFederalPovertyLevel(FPL)couldenrollinMedicaid,andthefederalgovernmentwouldpaymostofthecosts.Specifically,thefederalgovernmentpaid100percentofcostsfor

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


4

eligibleenrolleesin2016and95percentin2017.Itwillpay94percentin2018,95percentin2019,and90percentin2020andbeyond.6

TheHELPActaddedsomeprovisionstothetypicalMedicaidexpansion.Forinstance,it

requiredenrolleestopaypremiumsandmakeco-paymentsforsomeservices,andenrolleesmaybedisenrollediftheyfailtopaytheirpremiums.Italsoincluded12-monthcontinuouseligibility,whichallowsenrolleestomaintainMedicaidcoverageforuptooneyear,regardlessofchangestoincomeorfamilystatus.Additionally,theHELPActauthorizedaworkforcedevelopmentprogram(HELP-Link)toimproveemploymentoutcomesforMedicaidexpansionbeneficiaries.

Morethan40,000MontananshadenrolledinMedicaidthroughtheexpansionby

January2016,andenrollmenthasclimbedto93,950byMarch2018.MedicaidexpansionspendinginMontanawas$145millionduringFY2016(whichcoveredJanuary-June2016),$442millioninFY2017,and$215millionduringthefirsthalfofFY2018(July-December2017).Thus,duringitsfirsttwoyears,Medicaidexpansionspendingtotaled$802million.

ThisreportcomputestheeconomicimpactsgeneratedbyMedicaidexpansion.An

economicimpactanalysisisappropriatetostudyMedicaidexpansionbecause,fromMontana’sperspective,thedecisiontoexpandMedicaidbringsfederaldollarsintothestatethatarenotoffsetbyincreasedpaymentstothefederalgovernment.7Thatis,whenMontanaagreedtoexpandMedicaid,thefederalgovernmentdidnotimposeaspecialtaxonMontananstopayforthecostsoftheexpansioninMontana.

Therearetwowaystothinkaboutthemarginalcosttothefederalgovernment

associatedwithMontana’sdecisiontoexpandMedicaid.First,theACAwaswritteninsuchawaythatitraisedsufficientrevenuetopaytheexpectedcostsofexpandingMedicaidinall50states.Assuch,onecouldarguethatthemarginalcostsassociatedwithMontanaexpandingMedicaidiszero.ThefederalgovernmentdoesnotneedtoraiseanyadditionalfundsfromMontanansorotherstopayforthecostofMontana’sexpansion.Alternatively,if

6 ThesharepaidbythefederalgovernmentinMontanadiffersslightlyfromtheseamounts.InexchangeforallowingMontanatooffer12-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).


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oneviewsMontana’sMedicaidexpansionasamarginalfederalexpenditurethatmustbeoffsetwithhigherfederalrevenuesatsomepoint,theincreasedrevenuerequiredtopayforMontana’sexpansionwillbepassedontoallAmericans.GiventhatMontanansprovidelessthan1percentoffederalrevenues,morethan99percentofthefederalmarginalcostsassociatedwithMontana’sMedicaidexpansionarepassedontotaxpayersinotherstates.Thus,thetotalmarginalcosttoMontanansassociatedwiththedecisiontoexpandMedicaidislimitedtothesharepaiddirectlybythestateplus,atmost,Montana’sshareofallfederalrevenues.

MedicaidexpansionimpactsMontana’seconomyinthesamewaythataMontana

companywinningagovernmentcontract.ItbringsmoneyintoMontana’seconomythatwouldnototherwisebethere,andthismoneyripplesthroughthestate’seconomycreatingjobsandincome.

III.ModelInputsandAssumptionsWecalculatetheimpactofMedicaidexpansiononMontana’seconomyusingtheREMI

model,aneconomicmodelcalibratedtorepresenttheinteractionsinMontana'seconomy,leasedfromRegionalEconomicModels,Inc.UsingthemodelwecomputeabaselinemodelofMontana’seconomywithoutMedicaidexpansion.Then,wecomputethesamemodeladdingMedicaidexpansion.TheeconomicimpactofMedicaidexpansionisthedifferencebetweenthesetwoscenarios.

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

toexpansion● Indirectimpacts–Thespendingofotherentitiesthatarecarriedoutbecauseof

Medicaidspending● Inducedimpacts–Therippleeffectsthatoccurasthedirectandindirectspending

impactspropagatethroughtheeconomy

Inthissection,webrieflyoutlinetheassumptionsusedtoquantifythedirectimpactsthatentertheREMImodel.AmorecompletedescriptionofourassumptionsandtheirjustificationareincludedintheAppendix.

WedividethedirecteffectsofMedicaidexpansionspendingintotwocategories.First,

thereisnewspending,whichincludesspendingonhealthcareservicesthatwouldnothaveoccurredwithoutMedicaidexpansion.Second,thereispre-existingspending,which


6

includesspendingforhealthcarethatwouldhaveoccurredregardlessofMedicaidexpansion.

A.NewSpendingExpandingMedicaidincreaseshealthcareuseandhealthcarespending.8Forinstance,

afterMedicaidexpansion,theshareoflow-incomeMontananswhoskippedcareduetocostfellby16percent.Similarly,thesharewhohadnothadacheck-upwithinthepasttwoyearsfellby20percent(seeFigure1).ThesedatacoveronlythefirstyearofMedicaidexpansioninMontana.AsimilaranalysisofstatesthatexpandedMedicaidin2014showsthattheseeffectsgrowovertime.

Figure1–ChangeinHealthCareAccessAmongLow-IncomeMontanansBeforeandAfterMedicaidExpansion

Source:BBERanalysisof2015an2016BehavioralRiskFactorSurveillanceSystemdata.

ThesedatasuggestthatMedicaidexpansionincreaseshealthcareuse,buttheydonot

speaktothetotalincreaseinhealthcareuseorspending.Toestimatethenetincreaseinhealthcarespending,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,wefindaclearrelationshipbetweenchangesinhealthinsurancecoverageandtotalhealthcarespending.Weestimatethatapproximately50percent($132million)ofMedicaidexpansionspendingin2016representedanetincreaseinspending.9Thisamountstoanetincreaseinhealthcarespendingofapproximately$2,500foreachexpansionenrolleeor$5,000foreachenrolleewholikelywouldnothavehadinsurancein2016withoutMedicaidexpansion.

Thenetincreaseinspendingcanbedividedintotwoparts.10Partofitreflectsspending

onmorehealthcare.Thatis,itreflectscarethatwouldnothaveoccurredbutforexpansion.Partofitreflectsareductioninuncompensatedcare.Thespendingdataintheaboveanalysisisbased,inpart,onnetpatientrevenue.11Sincesomeuncompensatedcareabsorbedbyprovidersisnotcounted,partoftheincreaseinspendingreflectsreduceduncompensatedcare.

Medicaidexpansionreduceduncompensatedcare.AforthcomingreportbyManattreportsthathospitaluncompensatedcareinMontanadeclinedbyover45%between2015and2016.Similarly,onenationalstudyfoundthat“Medicaidexpansioncuteverydollarthatahospitalspentonuncompensatedcareby41centsbetween2013and2015.”12

Formally,wemodelbothnewspendingandthereductioninuncompensatedcare

absorbedbyprovidersasincreasedhealthcareoutput.Economicaccountsdonotincludetheproviderportionofuncompensatedcareaseconomicoutput.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.


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consistencywiththedefinitionsusedinourmodel,wetreatreductionsintheproviderportionofuncompensatedcareasincreasedhealthcareoutputorincreasedsales.

ConsistentwiththeevidencethatMedicaidexpansionspendingspikesinthesecond

yeardueto“pent-updemand”effects,weassumenewMedicaidspendingroseto57percentin2017andwillthenfallbackdownto50percentby2019.Onaverage,weassumethat52percentofMedicaidspendingrepresentsnewspending.

B.Pre-existingSpending Asdiscussedinthepriorsection,about50percentofMedicaidexpansionspending

wouldhaveexistedwithoutMedicaidexpansion.Werefertothecarethatbeneficiarieswouldhaveconsumedregardlessofexpansionaspre-existingspending.

Intheabsenceofexpansion,avarietyofsourceswouldhavepaidforpre-existing

spending.Intheabsenceofexpansion,someexpansionbeneficiarieswouldhaveenrolledintraditionalMedicaid.Thestateandfederalgovernmentswouldhavepaidforthiscare.Somewouldhaveenrolledinanindividualinsuranceplan(e.g.,anexchangeplan).Thefederalgovernment(viaexchangesubsidies,forthosewhoqualify14)andtheindividuals(viapremiumsandout-of-pocketpayments)wouldhavepaidforthiscare.Somewouldhaveobtainedinsuranceviatheiremployer.Theemployer(viatheemployer’sshareofpremiumcosts)andtheemployee(viatheemployee’sshareofpremiumsandout-of-pocketpayments)wouldhavepaidforthiscare.

WithMedicaidexpansion,thefederalgovernment,stategovernment,andindividualbeneficiariespayforthecarethatbeneficiarieswouldhaveconsumedregardlessofexpansion.Asaresult,themoneythatthefederalgovernment,stategovernment,employers,andindividualswouldhavespentonpre-existingspendingcanbespentonotherthings.SomeofthisrepurposedspendingisnewspendinginMontanaandgenerateseconomicimpacts

Forinstance,consideranindividualwho,intheabsenceofexpansion,wouldhave

obtainedinsuranceviathehealthinsuranceexchanges.Withexpansion,thefederalgovernmentnolongerspendsmoneyonpremiumsubsidiesforthisindividual,andtheindividualspendslessonpremiumsandout-of-pocketpayments.Thefederalgovernemntcanredirectthespendingforpremiumsubisieselesewhere(e.g.,Medicaidexpansion).Theindividualcanspendthemoneytheywouldhaveotherwisespentonpremiumsandout-of-

14Individualswithincomesbetween100percentand138percentoftheFPLareeligibleforexchangesubsidiesandCSRsinstatesthathavenotexpandedMedicaid.


9

pocketexpensesonfood,rent,etc.TherepurposedindividualspendingconstitutesnewspendinginMontana’seconomyandgenerateseconomicimpacts.

Toestimatetheeconomicimpactsoftheshiftinspendingonpre-existingcare,weneed

tounderstandwhobenefitsfromit.Unfortunately,itisdifficulttoestimatetheshiftinhealthcarespendingduetoMedicaidexpansion.TheavailabledatadoesnotdescribewhowouldhavepaidforexistingcarehadMontananotexpandedMedicaid.Thedatathatexistareincompleteandsometimescontradictory.

Figure2presentsourestimatefortheshiftsinexistingspending.ThebarontheleftrepresentsspendingwithMedicaidexpansion.ThemoneyspentonMedicaidexpansioninMontanacomesfromthreesources—thefederalgovernment,stategovernment,andbeneficiaries(intheformofpremiums).Whilethesharepaidbyfederalandstategovernmentsvarieseachyear,in2020,thefederalgovernmentwillpayapproximately89percentofthecost,thestatewillpay10percent,andbeneficiarypremiumsprovidetheremaining1percent.15

ThebarontherightrepresentsspendingwithoutMedicaidexpansion.Twothings

standoutwhencomparingthebars.First,thecoloredportionofthebarontheright(i.e.,thenon-whitepart)ismuchsmaller.ThegapbetweenthebarscapturesthenetincreaseinhealthcarespendingassociatedwithMedicaidexpansiondiscussedinsectionIII.A..Second,whopaysforpre-existingspendingdiffersfromexpansionspending.

Forinstance,regardlessofexpansion,thefederalgovernmentpaysforsomeofthe

healthcareconsumedbysomeexpansionbeneficiaries.Mostofthesefundscomefromtwosources—traditionalMedicaidandhealthinsuranceexchangesubsidiesandcostsharingreductions.16MoneythatthefederalgovernmentwouldhavespentonhealthcareregardlessofexpansionisnotnewspendinginMontana,butratheritissimplyatransferfromonefederalprogramtoanother.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.)


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Medicaidexpansionspendingrepresentsatransferfromonefederalprogramtoanother.Weexcludethesetransfersfromourcalculation.

Figure2:SpendingonMedicaidExpansionBeneficiaries’HealthCare“WithandWithout”ExpansionbySource

Thesituationforstategovernmentissimilar,albeitsmaller.Intheabsenceofexpansion,thestatewouldhavepaidforsomehealthcarethatisnowpaidforbytheexpansion.Forinstance,intheabsenceofexpansion,traditionalMedicaidwouldhavepaidforsomecareforsomebeneficiaries.DPHHSreportsthatmovingpeoplefromtraditionalMedicaidsavedthestate$40millionduringthefirsttwoyearsofexpansion.17Inaddition,theMontanaDepartmentofCorrectionsreportsthatMedicaidexpansionreduceditsspendingonhealthcareby$7.66millioninFY2017.18Thestatemayalsorealizesavingsfromreducedpaymentsformentalhealthservicesorsubstanceabuseservicesforlow-incomeindividuals.19ArecentreportfromManattthatlookedatsubstanceusedisorderspendinginMontanaarguesthatthestatemayrealize$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.20Thestatemayalsoseereductionsinpaymentsforuncompensatedcare.Onestudyestimatedthatstates’savingsfromreducinguncompensatedcarecouldequal13percentto25percentoftheirMedicaidexpansioncosts.21

WeestimatethatMedicaidexpansionreducesstatespendingforhealthcarebyan

averageof8percentoftotalMedicaidexpansionspending.ThisincludesthedemonstratedsavingsfromtraditionalMedicaid,theDepartmentofCorrections,andtheexpectedreductioninspendingonsubstanceusedisorders.WesubtractthisamountfromtheamountthatthestatepaysforMedicaidexpansion.

IntheabsenceofMedicaidexpansion,beneficiarieswouldhavepaidformuchofthe

caretheyreceived.Roughly15percentofMedicaidbeneficiarieswouldlikelyhavehadsomeformofprivateinsuranceintheabsenceofexpansion.Theseindividualswouldhavepaidpremiumsandmadeout-of-pocketpayments.Inaddition,thoseremaininguninsuredintheabsenceofexpansionwouldhavepaidforsomeoftheircareoutofpocket.Forinstance,onerecentstudyfoundthattheuninsuredpaid$500peryearoutofpocketfortheirhealthcare.22AdifferentstudyshowedthatMedicaidexpansionreducedout-of-pocketspendingfortheaveragenewlyenrolledMedicaidexpansionfamilyby$3,000peryear.23

Weassumethat12percentoftotalMedicaidspendingcoverswhatindividualswould

havepaidthemselves.Beneficiariescannowspendthismoneyonotherthings,andtheymayalsobenefitfromlowerinterestpaymentsondebtincurredtopayformedicalcareandlowerinterestratesforotherborrowing.Thesepathwaysmaygenerateadditionaleconomicimpacts,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’shealthcarecosts.Forpurposesofthisanalysis,weassumethatthesesavingsequal9percentoftotalMedicaidspending.Dependingonmarketconditions,employersmaypasssomeofthesesavingstoemployeesashighercompensation.Weassumethattheydo,butthattheyalsokeepsome.

D.Trends

1.EnrollmentMedicaidenrollmentgrewfrom40,000inthefirstmonthofMedicaidexpansionto

nearly94,000byMarch2018.BasedonevidencefromotherMedicaidexpansionstates,enrollmenttendstoplateauby24monthsafterexpansion(seeFigure4).Forpurposesofouranalysis,weassumethatenrollmentgrowsslightlyto94,000andremainsconstantatthatlevelforthenextseveralyears.Giventhatonecrudeestimateplacesthesizeofthepotentialexpansionpopulationatapproximately100,000,itseemsunlikelythatMontanacanenrollsubstantiallymorepeopleintheexpansion.25IntheAppendixsectionL,wepresentresultsthatassumethatenrollmentcontinuestogrowto105,000.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.SpendingMedicaidspendingpernewlyeligibleindividualinMontanawasroughly$5,315during

2016androseto$6,387in2017.TheselevelsareroughlyinlinewithspendingobservedinotherMedicaidexpansionstatesintheirfirsttwoyears:nationally,expansionspendingperbeneficiarywas$5,511in2014and$6,395in2015.Thisinitialincreaseinspendingperbeneficiaryisexpectedtosubsideasindividuals’pent-updemandissatisfied.26ArecentreportbytheMedicaidactuarysuggeststhatspendingpermemberforthosenewlyeligibleforMedicaidexpansionwasexpectedtofallto$5,370in2018beforerisingto$5,981by2020.27Forpurposesofthisanalysis,weassumethatMedicaidexpansionspendingperbeneficiaryinMontanacatchesupwithandthenfollowsthefederalforecast.

IV.REMIModelResultsThediscussioninthepriorsectionoutlinesthenetdirectimpactofMedicaidexpansion.

Combined,approximately75percentto80percentoftotalspendingonMedicaidexpansionbenefitsandclaimsrepresentsnewspendinginMontana.Weallocatethesedirectimpactsacrossproviders,government,business,andindividualsasdescribedabove.NewspendingonhealthcareisallocatedacrosshealthcaresectorsinproportiontoreportedMedicaidexpansionspending.28WefurtherallocatespendingacrossMontanaregionsinproportiontoMedicaidenrollment.29

Tocomputetheindirectandinducedimpacts,weusetheREMImodel,aneconomic

model,calibratedtorepresenttheinteractionsintheMontanaeconomy,leasedfromRegionalEconomicModels,Inc.TheREMImodelisoneofthebestknownandmostrespectedanalyticaltoolsinthepolicyanalysisarenathathasbeenusedinmorethan100previousstudiesaswellasdozensofpeer-reviewedarticlesinscholarlyjournals.Itisastate-of-the-arteconometricforecastingmodelthatincorporatesdynamicfeedbacksbetweeneconomicanddemographicvariables.TheREMImodelforecastsemployment,income,expenditures,andpopulationsforcountiesandregionsbasedonamodelcontainingmorethan100stochasticanddynamicrelationshipsaswellasanumberofidentities.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,utilizinginputsandassumptionsthatextrapolategrowthandconditionsofrecenthistoryintheabsenceofMedicaidexpansion.Themodelisthenusedasecondtimewithidenticalinputs,exceptthatMedicaidexpansionisadded.Thus,Medicaidexpansionproducesadifferenteconomy,reflectingnotonlytheexpansion,butalsohowtherestoftheeconomyreactstoit.ThedifferencebetweenthebaselineandalternativescenariosoftheeconomyrepresentstheeconomicimpactofMedicaidexpansion.

A.StatewideTable3presentsthestatewideeffectsofMedicaidexpansion.Undertheconditionsand

assumptionsoutlined,weestimatethatMedicaidexpansionadded3,161jobs,$147millioninpersonalincome,and$336millioninnewsales(oroutput)toMontana’seconomyin2016.Weprojectthattheseeffectswillpeakin2018andwillremainlargelyconstantthrough2020.In2020,Medicaidexpansionisexpectedtosupport4,975jobs,$279millioninpersonalincome,and$566millioninnewsales(oroutput).

Bytheendofitsfirstfiveyears,Medicaidexpansionisexpectedtocreateatotalof

about$1.2billioninpersonalincomeandmorethan$2.6billioninoutput.Weexcludejobsandpopulationfromthecumulativetotalbecausetheyarenotadditiveacrossyears.Theyrepresentthedifferenceinemployment(orpopulation)relativetonoexpansionineachyear.Thatis,weestimatethatMontanawillhaveroughly5,000morejobseachyearthanitwouldintheabsenceoftheexpansion.31

Table3:SummaryofEconomicImpactsofMedicaidExpansioninMontana(incomeandsalesinmillionsof$2016) 2016 2017 2018 2019 2020 CumulativeJobs 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,thelargestimpactsareinhealthcare.OuranalysissuggeststhatMedicaidexpansionwill 31Ouranalysisdoesnotsaythattheexpansioncreates5,000inoneyearandthenadifferentadditional5,000newjobsthenextyear.Manyofthejobsarecreatedinoneyearandthenpersist.Forinstance,anursingpositioncreatedasaresultofexpansionin2017thatpersiststhrough2020wouldbepartofthe(approximately)5,000in2020.


15

createapproximately2,000additionalhealthcarejobs.However,therearealsofairlysignificanteffectsonretailtrade(morethan800jobs)andconstruction(morethan600jobs).Table4:IndustryBreakdownofEmploymentImpacts 2016 2017 2018 2019 2020HealthCareandSocialAssistance

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,healthcareemploymentgrowthinMontanaacceleratedfollowingMedicaidexpansion(seeFigure5).Betweensecondquarter2015(whentheHELPActwaspassed)andthirdquarter2017,Montana’shealthcaresectoraddedmorethan6,200jobs.Furthermore,since2014,statesthatsawlargerincreasesininsurancecoveragesawlargerincreasesinhealthcareemployment(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.ByRegionTable5summarizestheeconomicimpactsofMedicaidexpansionacrossfiveMontana

regions:Northest,Southwest,Central,NorthCentral,andEast.32Medicaidenrollmentdoesnotdeviatethatmuchfrompopulation.Assuch,economicimpactsacrossregionsaresomewhatproportionaltopopulation.Table5:EconomicImpactsbyRegion,2018andCumulative(incomeandsalesinmillionsof$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.OtherEconomicEffectsofMedicaidExpansionTheresultsabovefocusoneconomicimpactsanddonotaccountformanyother

expansionbenefits.Forinstance,Medicaidexpansionmayimprovehealthoutcomes.OnestudyfoundthatMedicaidexpansionwasassociatedwitha5.1percentagepoint(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.33Analysesofotherinsuranceexpansionshavefoundthatprovidinghealthinsuranceimprovesdepressionoutcomesandreducesmortality.34

Medicaidexpansionalsogeneratesmajorimprovementsinfinancialsecurity.Itreduces

debtcollections,reducesbankruptcies,andimprovescreditscores.35Forinstance,onerecentstudyfoundthatMedicaidexpansionreducedmedicaldebtby$900pertreatedperson,prevented50,000bankruptcies,andledtobettercredittermsforborrowers.36Theinterestsavingsfromtheseimprovementswereworth$280pertreatedpersonor$520millionoverall.Thesefinancialbenefitsdoublethevalueofexpansiontouninsuredindividualsrelativetoasimplecalculationbasedonthechangeinout-of-pocketcosts.

MultiplerecentstudiesfindthatMedicaidexpansionreducedbothviolentandproperty

crime.37Onestudyarguesthesebenefitsmaystemfromincreasedmentalhealthandsubstanceabusetreatment.Nationally,thebenefitsofexpansion-inducedcrimereductionmayexceed$10billionannually.

SomeworrythatexpandingMedicaidwillreduceworkincentives.However,several

studiesfindnoevidencethatMedicaidexpansiondepressesemployment.38OnestudyevenfoundthatMedicaidexpansionincreasedemploymentamongpeoplewithdisabilities.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.


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DatafromMontanaalsoshownoadverseeffectofMedicaidexpansiononthe

employmentoflow-incomeMontanans.Infact,Montanasawasubstantialincreaseinlow-incomelaborforceparticipationfollowingMedicaidexpansion.Laborforceparticipationamongnon-disabledMontanansages18-64withincomesbelow138percentFPLrosefrom58percentto64percent.AsshowninTable6,similarincreasesinlaborforceparticipationwerenotobservedamonghigher-incomeMontanansorlow-incomeresidentsinotherstates.Infact,laborforceparticipationfellintheseothergroups.Ifweassumethatlow-incomelaborforceparticipationinMontanawasexpectedtofollowthetrendsinotherstatesoramonghigh-incomeMontanans,thentheincreaseinlaborforceparticipationamonglow-incomeMontanansisevenlarger(8.5percentagepoints).

Table6–LaborForceParticipationAmongPeopleAges18-64,BeforeandAfterExpansion

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,theysuggestitmighthave.ThispatternofresultsisconsistentwiththehypothesisthatMedicaidexpansionandMontana’sHELP-LinkprogramimprovedemploymentoutcomesforMontana’sMedicaidexpansionbeneficiaries.Theseeffectscouldreflecttheimpactofobtaininghealthinsuranceandanyassociatedimprovementsinhealth,theimpactofHELP-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.


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eligibilityreviewandjobcounselingservicestorandomlyselectedunemploymentinsurancerecipientsledtopersistentincreasesinlong-termemploymentandearnings.40

MedicaidexpansionrepresentsasignificantinvestmentinMontana’shealthcare

system,particularlyitscriticalaccesshospitalsandruralproviders.Italsosignificantlyimprovesthefinancialhealthofsafety-nethospitals.41WedescribetheeffectsofMedicaidexpansiononhealthcareprovidersinaforthcomingreport.

VI.FiscalEffectsMedicaidexpansionalsoaffectsthestate’sbudget.Whileitreducessomestatecosts,it

imposesothers.Asnotedpreviously,thestatecovereda0percentshareoftotalbenefitsandclaimsin2016,butthatsharewillriseto10percentin2020andbeyond.Technically,thecosttothestateismorecomplicatedthanthis.BecauseMontanaoffers12-monthcontinuouseligibility,itmustpayaslightlyhighershareofcosts.However,thefederalgovernmentpaysfor100percentofcertainexpansioncosts(e.g.,costsofservicesprovidedbytheIndianHealthService).Todate,thesecostscomprisenearly5percentoftotalexpansionspending.Premiumschargedtoexpansionbeneficiariesalsooffsetstatecostsveryslightly.Onnet,weestimatethatthestateofMontanawillpay10.24percentofMedicaidexpansioncostsin2020.

Thestatealsomustpaytoadministertheprogram.In2017,theLegislativeFiscalOffice

estimatedthattotaladministrativecostsassociatedwithMedicaidexpansionwouldequalapproximately1percentoftotalbenefitsandclaims.42Assuch,by2020,thestate’sMedicaidexpansioncostswillequalapproximately11percentoftotalMedicaidexpenses.

Thesecostsaremorethanoffsetbythecostsavingsandincreasedrevenues.As

discussedabove,MedicaidexpansionreducesthecostoftraditionalMedicaid,healthcarespendingbytheDepartmentofCorrections,andspendingonsubstanceusedisorders.Weestimatethatthesesavingsaverageapproximately8percentoftotalMedicaidexpansion

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,andcouldenduphigherdependingontheextenttowhichthestateisabletoreducespendingforotherhealthservicesoruncompensatedcare.

AsshowninTable7,comparingcoststosavings,weestimatethatMedicaidexpansion

hadorwillhaveapositiveorclosetoneutralimpactonthestate’sbudgetin2016,2017,2018,and2019.Forinstance,in2017,Medicaidexpansionreducedthestate’sspendingontraditionalMedicaid,inmatecare,andsubstanceusedisordersbyapproximately$39million($2016),anditcostapproximately$33million.Thus,onnet,notcountingforrevenueorotherimpacts,Medicaidexpansionsavedthestate$6millionin2017.

By2020,however,savingsmaynolongeroffsetcosts.Onnet,thestatewillhavetopay

approximately2.8percentoftotalMedicaidexpansionspendingin2020.Thus,thequestioniswhethertheincreasedeconomicactivityassociatedwithMedicaidexpansionwillgeneratenetpositivebudgeteffectssufficienttocovertheseremainingcosts.Weestimatethattheywill.

UsingtheFiscalImpactAssessmentTool(FIAT),amodulethatestimatesstaterevenue

andexpenditureimpactsbasedontheoutputfromtheREMImodel,wefindthattaxesandotherstaterevenuesrisebyanamountsufficienttopayfortheremainingMedicaidexpansioncostsin2020.43

AsshowninTable7,totalstaterevenuesfromallsources(includingintergovernmentaltransfers)areexpectedtoincreaseby$40millionto$50millionperyear.Ifwerestrictthecalculationtoincludeonlytaxes,statetaxrevenuesrisebyapproximately$21millionperyear.Thesetaxrevenuesaresufficienttopayforthe$16millioninMedicaidexpansioncostsnotcoveredbybudgetsavingsin2020.

However,itisimportanttolookbeyondtheimpactofMedicaidexpansiononrevenues.OurmodelsuggeststhatMedicaidexpansionwillincreaseeconomicactivityandincreasepopulation.Theseincreasesmayalsoimpactstateexpenditures.Combiningbothrevenueandexpenditureeffectsstillyieldsalargepositiveneteffectonthestatebudget.44Thenetfiscalimpactin2020isestimatedtobe$35million.Again,thisismorethanenoughtocoverthe$16millioninremainingMedicaidexpansioncostsin2020. 43TheFIATmodeluseshistoricalaveragerelationshipsbetweeneconomicactivity(particularlypopulation,personalincome,andemployment)andstaterevenuesandexpenditurestoprojecthowrevenuesandexpenditureschangeinresponsetochangingpopulation,personalincome,andemployment.44Thenetfiscalimpactislargerthanrevenuesinthefirstfewyearsbecausethemodelassumesthatthegainsinemploymentfromincreasedactivitywillreducespendingonvariouspublicwelfareandinsuranceprograms.


21

Table7:FiscalEffectsofMedicaidExpansioninMontana(allvaluesinmillionsof$2016) 2016 2017 2018 2019 2020Savings 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 58.3SavingsMinusCosts 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 13.9NetFiscalImpact(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.Theyarebasedonthehistoricalaveragerelationshipsbetweeneconomicactivityandstaterevenuesandspending.However,givenfederaltaxreform,statebudgetshortfalls,etc.,thesehistoricalrelationshipsmaynotaccuratelydescribehowfutureeconomicactivitywillaffectMontana’sstatebudget.Ultimately,theFIATtoolprovidesasimpleintuitiveanswertothequestion,“HowdoesMedicaidexpansionaffectthestate’sbudget?”However,wenotethatstatebudgetsareveryflexibleandrespondtoshockslikeMedicaidexpansionincomplicatedways.45Assuch,itisdifficulttoisolatetheeffectsofMedicaidexpansionthroughoutthewholebudget(bothrevenuesandexpenses).

OurfindingthatMedicaidexpansionpaysforitselfisconsistentwithseveralother

studiesthathaveexaminedtheimpactofMedicaidexpansiononstatebudgets.For

45AlongerdiscussionofthechallengesofestimatingbudgetimpactsofMedicaidexpansioncanbefoundinDorn,S.,“TheEffectsoftheMedicaidExpansiononStateBudgets:AnEarlyLookinSelectStates,”(2015).


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instance,arecentstudyofMedicaidexpansioninMichiganfound"state-budgetgainsoutweightheaddedcost.”46Similarly,ananalysisofbudgetsavingsandrevenuegainsacross11expansionstatesarguedthat“projectedexpansionrelatedsavingsandrevenuegainsareexpectedtooffsetcostsofexpansioninmanystatesforseveralyears.”47ThisstudynotesthatcomprehensiveanalysesofspendinginArkansasandKentuckyshowsavingsandrevenuegainssufficienttooffsetcostsatleastthrough2021.ANoteonWoodworkEffects

SomearguethatthecostsofMedicaidexpansionshouldinclude“woodwork”effects,whichmeansthattheavailabilityofMedicaidexpansionincreasesenrollmentintraditionalMedicaid.Ifso,thecostofMedicaidexpansioncouldincludethecostsassociatedwiththeseenrollees.

Wedonotincludewoodworkeffectsinthisanalysis,primarilybecausetheliteraturefindsthattheAffordableCareActincreasedenrollmentintraditionalMedicaid,buttheseincreaseswerenotrelatedtoMedicaidexpansion.Forinstance,onerecentstudyfound“similarly-sizedwoodworkeffectsinallgroupsofstates,regardlessofMedicaidexpansionstatus.”48Similarly,ourownanalysisofwoodworkeffectsinlate-expansionstates(seeAppendixsectionK)doesnotfindevidencethatMedicaidexpansionincreasestraditionalMedicaidenrollment.

Ifoneweretoincludewoodworkeffects,itwouldbeimportanttoincludebothbenefitsandcosts,suchastheeffectsofincreasedactivityassociatedwiththisspending.Furthermore,evenifoneassumesthatthereissomelevelofwoodworkeffectsassociatedwiththeimplementationofMedicaidexpansion,oneshouldnotassumethatendingMedicaidexpansionwilleliminatethesecosts.ItisnotclearwhetherthoseeligiblefortraditionalMedicaidwillreturntobeinguninsuredifMedicaidexpansionweretocease.Itseemslikelythatmanywouldremain.

VII.ConclusionMedicaidexpansionhashadasubstantialpositiveeffectonMontana’seconomy.While

effectsvaryfromyear-to-year,itbringsapproximately$350millionto$400millionofnewspendingtoMontana’seconomyeachyear.ThisspendingripplesthroughMontana’s

46Ayanian,J.Z.,Ehrlich,G.M.,Grimes,D.R.,andLevy,H.,“EconomicEffectsofMedicaidExpansioninMichigan,”NewEnglandJournalofMedicine376,no.5(2017):407-410.47Bachrach,D.,Boozang,P.,Herring,A.,andReyneri,D.G.,“StatesExpandingMedicaidSeeSignificantBudgetSavingsandRevenueGains,”Princeton:RobertWoodJohnsonFoundation(2016).48Frean,M.,Gruber,J.,andSommers,B.D.,“PremiumSubsidies,theMandate,andMedicaidExpansion:CoverageEffectsoftheAffordableCareAct.”JournalofHealthEconomics53(2017):72-86.


23

economy,generatingapproximately5,000jobsand$270millioninpersonalincomeineachyearbetween2018-2020.Inadditiontogeneratingeconomicactivity,Medicaidexpansionappearstoimproveoutcomes—reducingcrime,improvinghealth,andshrinkingdebt.Whilethestatepaysforthesebenefits,thecoststothestatebudgetaremorethanoffsetbythesavingscreatedbyMedicaidexpansionandbytherevenuesassociatedwithincreasedeconomicactivity.

Likeanystudy,thisstudyhaslimitations.Theassumptionsusedtoestimatethedirect

impactsofMedicaidexpansionmaybeunderminedbyreal-worldevents.SimilarlytheassumptionsthatunderlietheREMImodelmayalsofailtoaccuratelycapturetheeconomicrelationshipsatissue.Inordertoaccountfortheseweaknesses,weconductedseveralsensitivityanalyses.Thatis,weestimatedseveraladditionalmodelsusingalternativeassumptions.WepresenttheresultsfromtwooftheseanalysesinAppendixsectionL.

Ingeneral,theseadditionalanalysesyieldresultssimilartothosedescribedhere.

Medicaidexpansiongeneratesseveralthousandadditionaljobsandseveralhundredmillioninadditionalincome.Italsopaysforitself,sincethesavingsgeneratedplusadditionalrevenues(orotherreducedexpenditures)exceedthecoststothestate.WhiletheremaybeconditionsunderwhichMedicaidexpansionimposesnetcostsonthestate,weexpectsuchinstancestooccurrarely,assumingMedicaidexpansionretainsitscurrentstructure.


24

Appendix

A.ChangeinUtilizationAssociatedWithMedicaidExpansion

ToillustratetheimpactofMedicaidexpansiononhealthcareutilizationinMontana,weobtainedBehavioralRiskFactorSurveillanceSystem(BRFSS)microdatafromtheCentersforDiseaseControlandPreventionfortheyears2013-2016.49WeimportedthesedataintoSTATA13.1andcompletedallanalysesusingSTATA’ssurvey(svy)commandstoaccountforBRFSSsurveydesignandsampleweights.

TheBRFSSincludesahandfulofquestionsthatmeasurehealthcareaccess.Specifically,

weexaminedtwoquestions:

● Wasthereatimeinthepast12monthswhenyouneededtoseeadoctorbutcouldnotbecauseofcost?● Abouthowlonghasitbeensinceyoulastvisitedadoctorforaroutine

checkup?50

Thesequestionsprovideaverycrudeindicationofhealthcareuse.ToidentifytheeffectsofMedicaidexpansion,werestrictedouranalysistolow-income

residentswhomaybeMedicaidexpansioneligible.TheBRFSSdoesnotreportMedicaideligibilityorincomerelativetopoverty.ToidentifypeoplewhomaybeMedicaideligible,weimputedincomeequaltothemidpointofthereportedincomecategories(fromvariable_income2).Wethencomputedhouseholdsizebysummingthenumberofchildrenandadultsinthehome(fromthevariableschildren,numadult,andhhadult).WeobtainedthepovertylevelbyhouseholdsizeforeachyearfromtheDepartmentofHealthandHumanServices.51Then,wecomputedimputedincomeasapercentofFPLforeachindividualandexaminedresultsforallindividualswithincomeslessthan150percentFPL.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.NoteverystateexperiencedeffectssimilartothoseinMontana.TheimpactsofMedicaidexpansionacrossstatesvary.SomestatesalreadyofferedMedicaidtoalargershareofpeoplepriortotheACA.Inthesestates,theimpactoftheexpansiononhealthinsurancecoverageandhealthcareaccessissmaller.Thus,tobetterillustratetheeffectsofexpandingMedicaidinanenvironmentmoresimilartoMontana,weexaminedeffectsinstatesthatexpandedMedicaidin2014andsawlargeincreasesinMedicaid(>5percentagepointincreaseinshareofpopulationwithMedicaidbetween2013and2016)andlargeincreasesintheshareofpeoplewithhealthinsurance(>8percentagepoints).Thestatesmeetingthesecriteriainclude:Washington,Oregon,California,Nevada,NewMexico,Kentucky,Arkansas,andWestVirginia.TableA1:ShareofAdultPopulationReportingHealthCareAccessinSelectedMedicaidExpansionStatesBeforeandAfterExpansion Montana OtherExpansion 2015 2016 2013 2016SkippedCareDuetoCost

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.ChangeinHealthCareSpendingAssociatedWithMedicaidExpansion

ToestimatetheimpactofMedicaidexpansion(ormorepreciselytheimpactofprovidinghealthinsurance)onhealthcarespending,weobtaineddataonhealthcarespendingbystatefromtheCentersforMedicareandMedicaidServices(CMS).53WemergedthesedatawithdataonhealthinsurancecoveragebystatefromtheAmericanCommunitySurvey.54Toidentifytheeffectsofinsurancecoverageonhealthcarespending,weregressedtotalpercapitahealthcarespendingontheshareofpeoplewithanyhealthinsurance,statepersonalincomepercapita,andstate(andsometimesyear)fixedeffects.Thisspecificationidentifiestheaveragechangeinhealthcarespendingassociatedwithachangeintheshareofpeoplewithinsuranceacrossallstates.Weestimatedtwodifferentversionsofthisregression.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

ThisspecificationcapturestheeffectsassociatedwiththefirstyearoftheAffordableCareAct.Second,welimitedthesampletoinclude2008-2013(yearspriortomostACAeffects).WepresenttheresultsoftheseregressionsinTableA2.Bothspecificationsyieldsimilareffects.Aonepercentagepointincreaseinhealthinsurancecoverageisassociatedwithanapproximately$46increaseintotalperpersonhealthcarespending.

Montana’suninsuredratefellby3.5percentagepointsin2016.Thissuggeststhat

healthcarespendingincreasedby$166millionduetothereductioninuninsured.ThequestioniswhatshareofthedecreaseinuninsuredcanbeattributedtoMedicaidexpansion.Giventhatnon-expansionstatessawa0.7ppdeclinein2016,weassumethatintheabsenceofexpansion,Montana’suninsuredratewouldhavefallenby0.7pp.Thus,weattribute2.8ppofthedeclinetotheexpansionin2016.Assuch,$46*2.8%*1.028millionpeople=$132million.Giventhemarginoferrorforalloftheseestimates,thisnumberiscrude.However,itprovidesausefulbenchmarkforouranalysis.

TableA2:RelationshipBetweenChangeinHealthCareSpendingPerCapitaandChangeinInsuranceCoverage Pre-toPost-ACA

ExpansionandExchangesPre-ACA

2013-2014 2008-2013PercentAnyCoverage 45.7***

(10.8)46.4(26.0)

PersonalIncomeperCapita

0.11***(0.02)

0.05***(0.01)

Constant -1006(548)

811(2448)

N 102 306StateFixedEffects Yes YesYearFixedEffects No YesNote:standarderrorsin(),***p<0.01

C.StateSpendingDPHHSreportsthatmovingpeoplefromtraditionalMedicaidtotheexpansionsaved

$8.1millioninFY2016,$22.3millioninFY2017,andatotalof$40millionduringthefirsttwoyearsofexpansion.SplittingFY2017betweenCY2016andCY2017inproportiontototalMedicaidspendingyieldssavingsof$15.2millionin2016and$24.8millionin2017.Montanatypicallypays35percentofthecostsfortraditionalMedicaid.Ifthatrateappliestothosewhoshifted,andMontanapaid0percentforthoseintheexpansionin2016and5percentin2017,wecancomputetotalspendingforthosewhowouldhaveremainedin


27

traditionalMedicaidintheabsenceoftheexpansion.WepresenttheresultsofthisanalysisinTableA3.

Tounderstandhowthisspendingwouldevolveovertime,weassumethattotal

spendingforthisgroupwouldgrowat5percentperyear,roughlyinlinewiththeratestheMedicaidactuaryforecastsMedicaidexpansionspendingperbeneficiarytogrow.TraditionalMedicaidbeneficiariescompriseapproximately16percentoftotalspendingonMedicaidexpansioneachyear(e.g.,the$82.6millionspentin2017is16percentofthe$516millionintotalexpansionspending).Thefederalgovernmentwouldhavepaidapproximately10percentofthisandthestatetheremaining6percent.

TableA3:WithinMedicaidTransfersAssociatedWithExpansion Reported

SavingstoMT($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,MedicaidexpansionalsoaffectsspendingbytheDepartmentofCorrections.DOCreportsthattheexpansionsavedthem$7.66millioninFY2017.Wealsoassumethatthesesavingscontinueandthattheygrowat5percentperyear.

TworecentreportssponsoredbytheMontanaHealthcareFoundationandpreparedby

ManattsuggestedthatMedicaidexpansionalsoreducesspendingonsubstanceusedisordersandmentalhealth.55Thesereportsdocumenta$1.5millionreductioninspendingonsubstanceusedisordersinhalfofFY2016andapotential$1.3millionreductioninspendingintheMentalHealthServicesProgram.Theyfurtherarguethatthestatemayrealize$3millionperyearinsubstanceusedisordersavings.Giventhedifficultiesinherentinattributingshiftsinstatespendingtoparticularprograms,weassumethatthestaterealizes$3millionperyearinsavingsintheseareasfrom2017-2020.Giventhatthisrepresentslessthan0.6percentoftotalMedicaidexpansionspending,ourresultsarelargelyunaffectedbytheinclusionofthesesavings. 55Bachrach,etal.,(2017)andGrady,Bachrach,andBoozang(2017).


28

D.ShiftinPayers Tocompleteouranalysis,itisimportanttounderstandwhattypesofinsurance,ifany,

Medicaidexpansionbeneficiarieswouldhaveintheabsenceofexpansion.Howmanyofthosewhoenrollthroughtheexpansionwouldhaveinsurancewithoutit?Ofthosewhowouldhaveinsurance,whatkindofinsurancewouldtheyhave(e.g.,traditionalMedicaid,employersponsored,directpurchase)?

Thepriorsectionsuggeststhatapproximately16percentofMedicaidexpansion

spendingisatransferfromtraditionalMedicaid.Thus,weassumethat16percentofMedicaidexpansionenrolleesarelikelytransferswithinMedicaid.

Amongtheremainder,thevastmajoritycomefromthepoolofuninsured.FigureA1

providesasimplewaytoillustratethis.ThisfigureshowstheaveragechangeofinsurancecoverageamongtheMedicaidexpansioneligiblebetween2013and2016.AmongstatesthatexpandedMedicaidinJanuary2014(initialexpansionstates),16percentoftheMedicaideligiblegainedinsurancecoverageintheaverageexpansionstate.WhiletherewassomeincreaseindirectpurchaseinsuranceandMedicare,thevastmajorityofthisincreasecamefromgrowthintheshareofpeoplewithMedicaid.56TheshareofthispopulationwithMedicaidgrewbyanaverage16percent.

ThisisconsistentwiththeliteraturethatfindsthatenrollmentindirectpurchaseinsurancegrewrelativelylittleinMedicaidexpansionstates(averagegrowthof2percentagepoints)andthatMedicaidexpansiondidnotcrowdoutemployersponsoredinsurance(averagedeclineoflessthan1percentagepoint).57

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


29

FigureA1:AveragePercentChangeinInsuranceCoverage2013-2016AmongPeople0%-138%FPLAges18-64,byTypeofInsuranceCoverageandExpansionStatus

Source:BBERanalysisofAmericanCommunitySurveydata.

Weassumethat68percentofMedicaidexpansionbeneficiarieswouldbeuninsuredintheabsenceofMedicaidexpansion.Wecomputethisusingthefollowing:

ChangeinMedicare+ChangeinDirect+ChangeEmployer=0.007+0.023-0.001=0.029ChangeinAny–ChangeinMedicaid=.165-.155=0.01! assume0.01ofthe0.029ledtoincreasedcoverageand0.019switchedto

Medicaid! 1-(0.019/0.155)=0.88ofMedicaidcoverageininitialexpansionstatescomes

fromtheuninsuredHowever,MontanawaslatetoexpandMedicaid.Assuch,moreMedicaideligiblesgaineddirectpurchasecoveragefromtheexchangesbetween2013and2015.WeexpectmoreofthosewhogainMedicaidviatheexpansioninMontanatocomefromthedirectpurchasepool.Giventhattheaveragenon-expansionstatesawa3percentagepointgreaterincreaseintheshareofMedicaideligiblewhogaineddirectpurchaseinsurance(seeFigureA1),we

10%

3%

5%

3%

1%

16%

0%

2%

16%

1%

Any Employer Direct Medicaid Medicare

Non-Expansion

InitialExpansion


30

assumeanadditional3percentagepointsofMontana’sMedicaidexpansioneligibleswitchfromotherformsofinsurance:

! 1-((0.019+0.03)/0.155)=0.68.Combined,theseanalysessuggestthat68percentoftheincreaseinMedicaidcoverageinMontanamaycomefromtheuninsured.

Thisimpliesthat16percentofMedicaidexpansionenrolleescomefromeither

employer-sponsoredinsuranceordirectpurchaseinsurance.Weassumethat,intheabsenceofMedicaidexpansion,40percentofthesepeoplewouldhavedirectpurchaseinsuranceand60percentwouldhaveemployer-sponsoredinsurance.PriortoMedicaidexpansioninMontana(2015),amonglow-incomepeoplewhohadeitherdirectpurchaseinsuranceoremployersponsoredinsurance,40percenthaddirectpurchaseinsuranceand60percenthademployer-sponsoredinsurance.

Thissuggeststhatapproximately5,800peopleswitchedfromdirectpurchaseinsurance.Giventhatfollowingtheimplementationoftheexchanges,Montanasawa2percentagepointincreaseintheshareoflow-incomepeoplewithdirectpurchaseinsurance,thisassumptionimpliesthatallofthenetincreaseindirectpurchaseinsurance(plussome)switchestoMedicaidexpansion.58Asaresult,theshareoflow-incomepeoplewithdirectpurchaseinsurancereturnstoslightlybelowwhereitwaspriortoACAimplementation.Thisisaconservativeassumption.Onaverage,initialMedicaidexpansionstatessawa1.5percentagepointincreaseintheshareoflow-incomepeoplewithdirectpurchaseinsurancetwoyearsafterACAimplementation.Byassumingalargershiftfromdirectpurchase(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,thefederalgovernmentwouldhavepaidanamountequalto11percentofMedicaidexpansionspendingviatraditionalMedicaidregardlessofthedecisiontoexpand.

Inaddition,asdiscussedinAppendixsectionC,intheabsenceofexpansion,someof

thoseeligibleforMedicaidexpansionwouldhavehaddirectpurchaseinsurance.Iftheypurchasedfromtheexchanges,thosewithincomesbetween100percentand138percentFPLwouldhavebeeneligibleforpremiumsubsidiesandcostsharingreductions.Determiningthemagnitudeoffederalspendingontheseindividualsisdifficult.WeneedtoknowbothhowmanypeoplewhoenrollinMedicaidexpansionwouldhaveobtainedcoveragefromtheexchange,andhowmuchthegovernmentprovidedtoeachoftheseindividualsviasubsidiesandcostsharing.

AsdescribedinAppendixsectionC,weassumethatasof2018,approximately5,800

Medicaidexpansionenrolleeswouldotherwisehavedirectpurchaseinsurance.Weassumethat100percentofthesepeoplewouldhaveenrolledviatheexchangesandwouldhavereceivedfederalsubsidies.Assuch,weassumethatallofthesepeoplehaveincomesbetween100percentand138percentFPL.

GiventhatDPHHSdatashowthat10,994Medicaidexpansionbeneficiarieshadincomes

between100percentand138percentFPLasofMarch2018,weassumethat53percentofthoseeligibleforsubsidieswouldhavereceivedthemintheabsenceofMedicaidexpansion.

Forthosewhowouldhaveenrolledintheexchangeandreceivedsomeamountof

subsidy/CSR,itisdifficulttoestimatethemagnitudeofthesesubsidies.ForallMontanans,theaveragesubsidy(premiumtaxcredit)was$3,600in2016and$5,700in2017.60Inaddition,theaverageCSRforindividualswitha94percentactuarialvalueCSR(thosewithincomesbetween100percentand150percentFPL)wasapproximately$1,500.61However,theaverageexchangeconsumerandtheaverageMedicaidbeneficiarywith

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


32

incomesbetween100percentand138percentFPLlikelydiffer.Therefore,itisnotclearthattheaveragesubsidyandCSRapplytotheMedicaideligiblepopulation.

Toestimatethesizeofthesubsidy,weusedtheKaiserFamilyFoundation’sHealth

InsuranceMarketplaceCalculatortoobtainsubsidyestimatesforsomeonewithanincomeequalto125percentFPLatfive-yearageintervalsfor2015,2016,2017,and2018.WeaveragetheseamountsweightingbytheshareofMedicaidexpansionbeneficiariesineachagegroup.62Tothisamount,weadd$1,500,theaverageapproximateannualCSRinMontanain2016.63Forfutureyears,weincreasethisamountby5percent.

TableA4presentsourestimatesforfederalspendingonsubsidiesbyyear.This

spendingrepresentsbetween4.4percentand8.3percentoftotalspendingonMedicaidexpansion.CombinedwithwhatthefederalgovernmentwouldhavespentontraditionalMedicaid,approximately19percentoftotalMedicaidexpansionspendingissimplytransferredwithinthefederalgovernment.Wedonotincludeanyofthistransferredmoneyinoureconomicimpactanalysis.TableA4:ChangeinFederalSpendingonExchangeSubsidiesinMontanaWithoutExpansionYear Assumed

FederalSpendingperEnrollee(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

SomeshareofMedicaidexpansionbeneficiariesmayhavebeencoveredbytheiremployerintheabsenceofMedicaidexpansion.AsdiscussedinAppendixsectionC,weassumethatby2018,approximately8,700Medicaidexpansionbeneficiarieswouldhavehademployer-sponsoredinsurance.

Weassumethattheemployershareofpremiumsequaled$5,075in2016.64Weassume

employerpremiumsgrowby4percentperyear.65Combined,weassumethatemployerscaptureapproximately9percentoftotalMedicaidexpansionspending.

It’shardtosaywhatemployerswilldowiththesesavings.Somearguethatthemarket

willforceemployerstomaintaintotalcompensation.66Assuch,reducedspendingononetypeofbenefitshouldincreasewagesorotherbenefits.However,itisalsopossiblethatemployerswillkeepsomeofthesesavings,particularlyinascenariowhereonlysomeoftheiremployeesareoptingoutofcoverage.Weassumea50-50split.

F.IndividualsIndividualsbenefitfromreducedout-of-pocketcostsandreducedpremiums.We

assumethatindividualscapture12percentoftotalMedicaidexpansionspending.Wederivethisnumberbyapplyingestimatesforpremiumsandout-of-pocketspendingfordifferentgroupstotheirestimatedpopulationsize.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.EnrollmentForecastOurenrollmentforecastisbasedontheexperienceofinitialMedicaidexpansionstates.

Onaverage,Medicaidenrollmentplateausapproximatelytwoyearsafterexpansion.Assuch,weassumethatenrollmentwillresemblecurrentenrollment.SeediscussioninIII.D.1.

Wealsonotethatundercurrenteconomicconditions,Montanamayhavelimitedroom

toexpandenrollmentfurther.TableA5presentstheestimatedsizeofMontana’spopulationages18-64withincomebetween0percentand138percentFPL.AsofMarch2017,theCurrentPopulationSurveysuggestedthatroughly95,000Montanansmetthebasiceligibilitycriteria.Thesesurveyestimatesdonotgathersufficientinformationtopreciselyestimatethesizeoftheeligiblepopulation.Furthermore,with12-montheligibility,someshareofexpansionenrolleesmayfalloutsideofthisrangeduringthemonthofthesurvey.However,thesedatasuggestlimitedroomforcontinuedgrowthinexpansionenrollment.TableA5:MontanaPopulationAges18-64WithIncomeBetween0%and138%FPLYear MontanansAges18-64With

IncomeBetween0%and138%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.SpendingForecastWebaseourforecastforMedicaidexpansionspendingperbeneficiaryontheforecast

fromthe2016ActuarialReportontheFinancialOutlookforMedicaid.68However,wecondensethetimelinebyaveragingtwoyearsofMedicaidforecastfor2015-16and2016-17.I.EmploymentEffectsofMedicaidExpansion 68https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/Downloads/MedicaidReport2016.pdf.


35

FigureA2presentsanalternativeviewoftherelationshipbetweenMedicaidexpansion

(orincreasesininsurancecoverage)andhealthcareemployment.Itshowsthepercentchangeinhealthcareemployment(obtainedfromtheQuarterlyCensusofEmploymentandWages)betweenJanuary2013andJune2017plottedagainstthepercentchangeininsurancecoverage(obtainedfromtheAmericanCommunitySurvey)between2013and2016.Thefigureshowsthatstatesthatincreasedinsurancecoveragetendedtoseelargerincreasesinhealthcareemployment.Whilethisanalysisissomewhatcrude,itisconsistentwiththeresultsreportedbyourREMIanalysis.FigureA2:CorrelationBetweenGrowthinHealthCareEmploymentandGrowthinInsuranceCoverage

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

ArizonaArkansas

CaliforniaColorado

Connecticut

Delaware

District of Columbia

Hawaii

IllinoisIowa

KentuckyMaryland

MassachusettsMinnesota

Nevada

New Jersey New MexicoNew YorkNorth Dakota

Ohio

Oregon

Rhode Island

VermontWashington

West Virginia

AlaskaIndiana

LouisianaMichigan

Montana

New HampshirePennsylvania

Alabama

FloridaGeorgiaIdaho

KansasMaine Mississippi

Missouri

Nebraska

North Carolina

Oklahoma

South Carolina

South DakotaTennessee

Texas

Utah

VirginiaWisconsin

Wyoming

05

1015

pct c

hg in

hea

lth c

are

empl

oym

ent 2

013-

2017

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


36

J.ImpactofMedicaidExpansion/HELP-LinkonLaborForceParticipation

AsdiscussedinsectionV,laborforceparticipationamonglow-incomeMontanans

increasedafterMontanaexpandedMedicaid.ThesefindingsarebasedonananalysisofdatafromtheCurrentPopulationSurveyAnnualSocialandEconomicSupplementobtainedfromIPUMS-CPS.69TheASECisadministeredinMarcheachyear.

Inthemaintext,wefocusonindividualsages18-64withincomesbelow138percent

FPLwhodonotreportadisability.70WereportthepercentageofpeopleinthisgroupwhoreportparticipatinginthelaborforcebeforeMontanaexpandedMedicaid(2013-2015)andafterMontanaexpandedMedicaid(2016-2017).

IntableA5,wereportresultsfromasimilardifferences-in-differencesanalysisthat

usesregressionanalysistoaddcontrolsforage,age2,sex,race(whitenon-Hispanic),region(censusdivisions),andyearfixedeffects.Theeffectsaresimilartothosereportedinthemaintext.Relativetolow-incomepeopleinotherstates,laborforceparticipation(LFP)increasedbynearly8percentagepointsmoreinMontanathaninotherareas.Thiseffectisnotobservedamonghigher-incomeMontanans,suggestingthatthechangeinLFPisnotaMontanaeffect,anditonlyappliestolow-incomeMontanans.Thefinalcolumnfurtherestablishesthis.Theresultsinthiscolumnarebasedonasimilaranalysis,butinsteadofcomparingthechangeinLFPamonglow-incomeMontananstolow-incomeresidentsinotherstates,wecomparelow-incomeMontananstohigh-incomeMontanans.Theresultsaresimilar.TheysuggestthatsomethingincreasedLFPamonglow-incomeMontanansin2016thatdidnotsimilarlyaffectotherlow-incomeAmericans(orlow-incomeresidentsofMountainstates)orhigher-incomeMontanans.MedicaidexpansionandHELP-Linkprovideaplausibleexplanationfortheseobservedeffects.

InTableA6,weshowthatAmericanCommunitySurveydatadepictasimilarpattern.

Weobservelargeincreasesinlaborforceparticipationamonglow-income(belowFPL)Montanansages20-64after2016.Weobservelargeincreasesamongpeoplewithandwithoutdisabilities.WedonotobservesimilarincreasesinLFPamonghigher-incomeMontanansoramongpeopleacrosstheUnitedStates.

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.


37

TableA5:Differences-in-DifferencesRegressionAnalysisofImpactofMedicaidExpansiononLaborForceParticipation 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/AYearFE Yes Yes YearFE YesN 93,988 442,652 N 6,969Note:Standarderrorsin(),***p<0.01,*p<0.05.TableA6:LaborForceParticipationbyPovertyandDisability WithDisabilities

WithoutDisabilities

Montana 2015 2016 Change 2015 2016 Change

BelowPoverty 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:BBERanalysisofAmericanCommunitySurveydataobtainedfromAmericanFactFinderTableB23024.K.WoodworkEffects

Whiletheexistingliteraturegenerallyfindslimitedwoodworkeffects,mostofthisresearchexaminedinitialexpansionstates.Here,weexaminedchangesintraditionalMedicaidenrollmentamonglateexpansionstatesusingMBESdata,whichincludesmonthlyenrollmentbystatefor2014,2015,and2016.Specifically,weperformedadifferences-in-differencesanalysis.Thatis,weregressedthenaturallogoftraditionalMedicaidenrollment(computedastotalMedicaidenrollmentminusthenumberofnewlyeligible)onanindicatorequaltooneformonthsafterthestateexpandedMedicaidandzerootherwise,andstate,year,andmonthfixedeffects.TheeffectsinthisanalysisareidentifiedbycomparingthechangeintraditionalMedicaidenrollmentinlateexpansionstatestothechangeinnon-expansionstates.Wedidnotfindevidenceconsistentwiththe


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hypothesisthatMedicaidexpansionincreasestraditionalMedicaidenrollment.Wefoundthatenrollmentinexpansionstatesincreasedby0.3percentrelativetonon-expansionstates.Thisresultisnotstatisticallysignificant(p-value=0.91notclosetostandardsignificancethresholdof0.05).L.AlternativeREMISpecificationsTableA7presentsstatewideresultsfortwoalternativeREMIspecifications.Thefirstspecificationshowsamuchmoreconservativeestimate,whereweassumethatthefederaltransferis25percenttototalspendingor32percenthigherthaninthebaselinespecification.Wealsoreduceenrollmentto92,000,whichfurthershrinkstheeconomicimpacts.Thesecondspecificationpresentsanestimatewithmuchhigherenrollmentof97,000in2018and105,000in2019-2020.Theconclusionsfromthesealternativespecificationsareconsistentwiththoseinthemainbodyofthereport.Medicaidexpansiongeneratesthousandsofadditionaljobsandhundredsofmillionsofadditionalincome,andcombinedsavingsplusincreasedrevenuesaresufficienttopayforthestate’sshareofthecosts.Therearemanyotherpossiblemodelspecifications,however,selectingmodelsfromwithinaplausiblerangeofassumptionsisverylikelytoyieldsimilarconclusions.TableA7:SummaryofEconomicImpactsofMedicaidExpansioninMontana/YearandCumulative(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

BBER 2018 The economic impact of Medicaid expansion in ... · $442 million in FY2017, and $215...

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