Montana would have to shell out an extra $59 million over two years to keep its Medicaid expansion program running, but the state is expected to collect enough revenue to more than cover the additional costs, legislative analysts said Monday.
Legislative Fiscal Division staff members presented a new report to lawmakers that analyzes Democratic Gov. Steve Bullock's 2020-2021 budget proposal, which includes a plan to continue the Medicaid expansion program that covers 95,000 adults.
The program is scheduled to end next July after four years of existence unless the Republican-led state Legislature renews it. The decision of whether to keep the program created by former President Barack Obama's Affordable Care Act is expected to be one of the top issues of the session that begins next month.
The program would cost Montana an extra $126 million over 2020 and 2021 as the state takes on a greater share of the costs now covered by the U.S. government, along with the increasing cost of administering the program, according to the report.
Those new costs would be partially offset by $11 million in premiums collected and $57 million saved by avoiding enrollments in traditional Medicaid, for which the state pays a higher share of the costs compared to the expansion program, Legislative Fiscal Division director Amy Carlson said.
The net cost to the state would be $26 million in 2020 and $33 million in 2021.
That's in addition to what the state now spends. The state is expected to pay $46.5 million for its share of benefits and costs for the program for the financial year that began July 1. The U.S. government's share of the state program is $682 million.
The state's finances are still forecast to be in the black even with the increased Medicaid expansion costs, according to the report. Money from tax collections and interest is expected to rise to $2.6 billion by 2021, giving the state a cushion against the spending levels set in current law — including Medicaid expansion.
However, continuing the program would lower the state's ending-fund balance in 2021 — the amount of cash the state plans to have in reserve in case of revenue or spending fluctuations — by an estimated $77 million to $344 million.
Legislative analysts also recommended that lawmakers take more of a hands-on role in funding the expansion program if it continues beyond next year by making it a part of the regular budgeting process. The program is now funded through a rarely used process that automatically makes spending adjustments without requiring legislative approval.
Voters last month rejected a proposal that would have continued the Medicaid expansion program indefinitely and paid for its costs up to $26 million a year through an increase in the state's tobacco taxes.
One of the issues that a tobacco industry-funded opposition group raised was that the proposal didn't pay for all of the cost increases associated with continuing the program.