Where does Medicaid money go?

HELENA — If Montana chooses to expand Medicaid coverage as proposed by Democratic Gov. Steve Bullock, hundreds of millions of federal dollars will pour into the state — and into the pockets of hospitals, physicians, pharmacies and other medical providers.

These providers, and others, say this influx of money will reverberate through the entire economy in a positive way, creating jobs, improving Montanans’ health, and perhaps even reducing the cost of health care and health insurance.

“We’ve already passed up $700 million (for two years by rejecting expansion in 2013),” says Rep. Pat Noonan, D-Ramsay, the sponsor of House Bill 249, which enacts the governor’s plan. “Are we going to pass up another $700 million this biennium and $700 million the next biennium? It just doesn’t make any sense.”

Opponents, however, argue that the money isn’t free — it’s taxpayer money, after all, mostly from the federal government — and that the real economic impact may be more complicated.

“I think the economic boon to the state has been far over-estimated,” says Rep. Nancy Ballance, R-Hamilton, who’s sponsoring a bill with a much smaller expansion of the program. “I don’t know if I’ve seen anything that shows that it is (an economic benefit).”

Regardless of the ultimate impact, expanding Medicaid means a lot of additional cash going to healthcare providers and private contractors who help administer the program — on top of the $1 billion a year they already receive.

Medicaid, financed jointly by the state and the federal government, currently provides mostly free coverage to nearly 128,000 low-income citizens in Montana, but they don’t see the money.

It’s paid directly to hospitals, physicians, nursing homes and many others after they bill the program for their services.

Without any expansion, an estimated $1.2 billion in Medicaid will be spent in Montana for the fiscal year beginning July 1. About one-third is financed by the state, the rest by the federal government.

Hospitals will get close to one-fourth the money, or $278 million. Other big recipients are mental health providers ($215 million), nursing homes ($166 million), and in-home care services for the disabled and elderly ($107 million). Physicians and psychiatrists are well down on the list, receiving only about 5 percent of the money, or an estimated $61 million.

About two-thirds of the people currently covered by Medicaid are children in poor families; most of the adults are disabled, blind or elderly. The expansion, as proposed by Gov. Bullock, primarily extends coverage to able-bodied adults earning up to 138 percent of the federal poverty level, about $16,200 for a single person.

The Bullock administration estimates that next year 37,000 additional Montanans will be covered by Medicaid under the expansion and another 10,000 the following year and that they’ll consume almost $700 million in healthcare — all of it covered by the federal government.

It also says enrollment will climb to 65,000 the following two years at a cost of $900 million.

Bob Olsen, vice president of MHA, the lobby group for Montana hospitals, says a lot of that money will go to physicians, hospitals and pharmacies.

Of the current Medicaid spending on non-disabled adults, almost half goes to hospitals, 16 percent to physicians and 10 percent on prescription drugs. Olsen says it’s likely the expansion spending will reflect those proportions because it will be spent mostly on non-disabled adults.

Olsen also says much of the money will cover services hospitals now do for nothing and write them off as charity care.

Getting paid for those services will lead to many economic benefits, he says.

“If we reduce the amount of unpaid care we deliver, it gives us the opportunity to restrain cost-shifting (to patients who can pay), it gives us the opportunity to take the pressure off price, and it gives us the opportunity to improve clinical outcomes, which saves money, too,” Olsen says.

Olsen also says hospitals likely will hire more workers, to handle more paying customers.

A recently released study by Kentucky, which expanded Medicaid in 2014, said the state will see 40,000 new jobs and a net economic gain from the expansion over the next seven years — even after accounting for the hundreds of millions of dollars the state must spend to cover its share of the costs.

Opponents of the expansion say claims of economic gain are short-sighted and don’t consider that expansion could discourage people from working and earning more money, because they want to stay under the income eligibility to keep Medicaid coverage.

Zach Lahn, state director for Americans for Prosperity-Montana, a free-market group, also says government money spent on the expansion is coming out of the private economy and could crowd out other state spending when the state has to start picking up a larger share in 2017 and beyond.

“They’re not looking at the long-term impacts of what this will do to the state,” he says. “I think at some point, you have to pay the piper.”

Supporters, however, say they don’t see how the money won’t benefit the state, its economy and its people, both in the short and long terms.

“Any time there’s a long-term payoff, it’s always a struggle around here to sell that,” says Noonan. “Just in the health of our citizens and the type of payoff for that? That’s where it’s hard to quantify.”