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MT: Bullock seeks Medicaid expansion, but ‘Woodwork Effect’ could hurt state budget

By   /   January 8, 2013  /   News  /   No Comments

LET’S GROW: Bullock wants to add 60,000 Montana’s to the state’s Medicaid program.

By Dustin Hurst | Watchdog.org

HELENA — Newly sworn-in Democratic Gov. Steve Bullock says he wants to expand Montana’s Medicaid program, but his ambition might leave the state with a time bomb ticking deep inside the biennial budget.

Bullock, inaugurated Monday on the Capitol steps, has kept quiet about expanding Medicaid, which serves 120,000 Montanans and costs the state and federal government just less than $1 billion annually.

Bullock defeated Republican Rick Hill in last year’s gubernatorial election.

Friday, Bullock released his budget ahead of the 2013 legislative session, wherein he included $5 million for Medicaid expansion, a move that could add 60,000 more Montanans to the government-run health program.

The 2010 Patient Protection and Affordable Care Act, one of President Obama’s signature achievements, allows states to expand Medicaid to cover people making up to 133 percent of federal poverty level, up from 100 percent before the law. That means a single person earning less than $14,856 annually would qualify under the expansion.

The federal government deems anyone earning between 100 percent and 133 percent of federal poverty level as “newly eligible,” an important distinction.

For those newly eligible folks, Uncle Sam hands the states a sweet deal, at least initially. For the first few years, the feds will cover 100 percent of the cost of residents joining under the new guidelines. That breaks with normal operating procedure, which usually requires states like Montana to cover about 30 percent of costs, with the feds picking up the rest.

The 100 percent eventually drops, though. In 2017, the feds will dump the rate to 97 percent covered and continue decreasing it until 2020, when it hits 90 percent.

It’s a pricey proposition. The Kaiser Family Health Foundation, a key source of health news, revealed late last year that Medicaid expansion would cost the federal government at least $808 billion over the next decade while costing states $8 billion during the same period.

Therein lies the rub for some governors and state lawmakers. Eventually, the federal government will deal with its budget woes, which could mean lower Medicaid funding for states, which would then have to pay for hundreds of thousands more residents on the health program. According to The Advisory Board Company, some 15 states either will not expand or are leaning that way. Another 14 remain undecided.

Here’s a map depicting where states stand on expansion, via The Advisory Board Company:

Where the States Stand

Another problem exists.

The Woodwork Effect, as it’s known — which plays on the phrase “people coming out of the woodwork” — could blow holes in state Medicaid budgets nationwide.

As previously mentioned, the feds will completely cover those newly eligible folks who join Medicaid if Montana expands. Another class of folks, though, causes concern among lawmakers — people  “previously eligible” for Medicaid but not enrolled in the program. Essentially, these people make so little that they qualify for Medicaid benefits but, for one reason or another, haven’t signed on.

In Montana, just less than 70 percent of the people who qualify for Medicaid actually participate. That means another 20,000 or so Montanans could conceivably join the program in the next few years as the federal government imposes the mandate that Americans buy insurance or pay a penalty.

That scenario could prove dire to Montana’s budget, costing millions annually and eating up critical state dollars for other programs and projects.

CHECK IT OUT: Miller wants to examine all Medicaid’s potential costs before swelling the program.

State Rep. Mike Miller, R-Helmville, told Watchdog.org on Tuesday that lawmakers must examine the possibility of future budget trouble resulting from Medicaid expansion.

“I believe there will be a big push to enroll people in Medicaid if we approve the expansion,” Miller wrote in an email to Watchdog.org. “This would most likely pick up a lot of the currently qualified people which the State would have to pay for.”

Health reform itself creates the problem. On Jan. 1, 2014, Americans will buy health coverage or pay a penalty to the IRS. That means millions of uninsured Americans will scramble to consider their options, and Medicaid will serve as a backstop for the poorest.

The health exchanges, another creature of health reform, will also compound the problem. The exchanges, one in each state, will act as an online marketplace for health insurance. Middle-class families will buy health care through these portals and likely receive a government subsidy along with it. The exchanges will direct the poorest folks to Medicaid or Medicare, if they qualify.

That, too, will add takers to Montana’s Medicaid program, including those previously eligible residents.

The Congressional Budget Office estimates that more than 6 million previously eligible Americans will join Medicaid in coming years, adding millions of dollars to state and federal budgets.

Former Montana Gov. Brian Schweitzer, also a Democrat, opposed Medicaid expansion for years before including it in his final budget late last year. Schweitzer said the 100 percent match represents a sweet deal for the state.

Before flip-flopping, Schweitzer said Medicaid expansion could bankrupt Montana and warned that the federal government would renege on its pledge for high funding for newly eligible enrollees.

Contact [email protected] or @DustinHurst via Twitter. 

— Edited by John Trump at [email protected]