BUREAU OF BUSINESS AND ECONOMIC RESEARCHIn this report, we update and replace our April 2018 report on the economic impacts of Medicaid expansion on Montana’s economy. This report

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

THE ECONOMIC IMPACT OF MEDICAID EXPANSION IN MONTANA: UPDATED FINDINGS

BRYCE WARD & BRANDON BRIDGEJANUARY 2019

The Montana Healthcare Foundation and Headwaters Foundation

Acknowledgements

ThisreportwasauthoredbyBryceWardoftheUniversityofMontanaandABMJConsulting

andBrandonBridgeoftheUniversityofMontana’sBureauofBusinessandEconomic

Research.Allstatementsandconclusionsincludedinthisreportbelongtotheauthorsand

donotrepresentthepositionoftheUniversityofMontana.

Wewouldliketothankthefollowingpartnersforsupportingthisresearch:

Formoreinformation,contact:BryceWard

[email protected]@mso.umt.edu

ABMJConsulting

(406)219-0694

www.abmjconsulting.com

BrandonBridge

BureauofBusinessandEconomicResearch

GallagherBusinessBuilding,Suite231

Missoula,MT59812

(406)543-5113

www.bber.umt.edu

TableofContents

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

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

II.Background..........................................................................................................................................4

III.REMIModel........................................................................................................................................7A.Directimpacts...............................................................................................................................................................7

B.Statewideresults.......................................................................................................................................................11

C.ByRegion......................................................................................................................................................................12

IV.Empiricalestimates.........................................................................................................................13

V.OtherEconomicEffectsofMedicaidExpansion..........................................................................17A.Healthcareaccessandhealthoutcomes........................................................................................................17

B.Financialsecurity.......................................................................................................................................................19

C.Crime..............................................................................................................................................................................19

D.Employment................................................................................................................................................................19

F.Healthcaresector.....................................................................................................................................................21

VI.FiscalEffects......................................................................................................................................24

VII.Conclusion........................................................................................................................................26

Appendix.................................................................................................................................................28A.Selectingcomparisonstates.................................................................................................................................28

B.DirecteffectsforREMImodel..............................................................................................................................29

C.Resultsfromalternativespecifications............................................................................................................39

D.Differences-in-DifferencesModel......................................................................................................................39

E.ImpactofMedicaidExpansion/HELP-LinkonLaborForceParticipation.............................................42

F.ImpactofMedicaidexpansiononhealthcaresector.................................................................................44

G.ANoteonWoodworkEffects...............................................................................................................................47

Abstract

MedicaidexpansionhasasubstantialeffectonMontana’seconomy.Eachyear,

expansionbringsover$600millionintoMontanathatwouldnototherwisebehere.This

moneyripplesthroughMontana’seconomy,generatingbetween5,900and7,500,jobsand

between$350-$385millioninpersonalincomeeachyearbetween2018and2020.These

resultsareconsistentwiththeobservedchangeineconomicactivityinotherexpansion

statesthatexperiencedchangesinMedicaidcoverageanduninsurancesimilartoMontana.

Inadditiontogeneratingeconomicactivity,Medicaidexpansionappearstoimprovea

varietyofotheroutcomes—reducingcrime,improvinghealth,loweringdebt,andcreating

amorerobusthealthcaresector.Whilethestatepaysanominalamountforthesebenefits,

thecoststothestatebudgetaremorethanoffsetbythesavingscreatedbyMedicaid

expansionandbytherevenuesassociatedwithincreasedeconomicactivity.

TheEconomicImpactofMedicaidExpansioninMontana

1

I.Summary

Inthisreport,weupdateandreplaceourApril2018reportontheeconomicimpactsof

MedicaidexpansiononMontana’seconomy.ThisreportusesmorerecentdataonMedicaid

expansionenrollmentandspending,insurancecoverage,andemployment.Whilewe

employnewdataandanalysis,wereachthesameconclusion:MedicaidexpansionhasasubstantialimpactonMontana’seconomy.1

Aneconomicimpactstudydescribeshowmanyjobsandhowmuchincomestemsfrom

Medicaidexpansion.Ouranalysiscoverstheperiodfrom2016to2020.Assuch,italso

implicitlyanswersthequestion:“HowwouldfailingtorenewMedicaidexpansionin2019

impactMontana’seconomy?”

MedicaidexpansioninMontana—createdbytheHELPACTof2015—infusesa

significantamountofmoneyintothestate’seconomy.Duringitsfirsttwoandahalfyears,

Medicaidexpansionprovidedbeneficiarieswithnearly$1.4billionofhealthcare.The

federalgovernmentpaidformostofthis,andmostofthesefederaldollarswouldnothave

beenspentinMontanawithoutMedicaidexpansion.Approximately85percentofMedicaid

spendingrepresentsnewmoneyinMontana.Thismeansthattheannualinfusionofnew

moneyintoMontana’seconomyisslightlybiggerthantheeconomiesinDawsonandBig

HornCountiesandslightlysmallerthantheeconomiesinStillwaterandLakeCounties.2

MedicaidexpansionspendingentersMontana’seconomyintwoways.First,itsupports

newhealthcarespending.NearlyoneintenMontananswasenrolledinMedicaid

expansionasofOctober2018.Mostexpansionenrolleeswouldhavebeenuninsuredinthe

absenceoftheexpansion.Assuch,Medicaidexpansionprovidestensofthousandsof

uninsured,underinsured,andlow-incomeMontananswithhealthcaretheywouldnot

otherwisereceive.Second,Medicaidexpansionspendingreplacesexistingspending.Even

withoutMedicaidexpansion,beneficiarieswouldhavereceivedsomehealthcare.Medicaid

expansionchangeswhopaysforthishealthcare.Withoutexpansion,thestate,thefederal

government,employers,providers,andthebeneficiariesthemselvesallpaidforsomeof

thecarethatisnowpaidviaMedicaid.Withexpansion,thefederalgovernmentpaysfor

nearlyallexpansionbeneficiaries’healthcare.

1WeincludeasummaryofthedifferencesbetweenthisreportandourpriorreportinAppendixH.2TheBureauofEconomicAnalysisrecentlyreleasedGDPestimatesforcounties.AccordingtotheseestimatestheGDPsofDawson,BigHorn,Stillwater,andLakeCountieswere$523million,$546million,$661million,and$685millionrespectivelyin2015(in$2018).WeestimatethatMedicaidexpansionwillinfuseover$600millioninnewmoneyintoMontana’seconomyeachyearbetween2018and2020.


2

Asaresult,Medicaidexpansionstimulateseconomicactivity.Weestimatethatitwill

generatebetween5,900and7,500jobsandbetween$350-$385millioninpersonalincome

annuallybetween2018and2020(seeTable1).Thisrepresentsapproximatelyonepercent

ofMontana’stotalemploymentandincome.Duringitsfirstfiveyears,Medicaidexpansion

isexpectedtogenerateapproximately$1.6billioninpersonalincomeand$2.1billionin

grossdomesticproduct.

Table1:SummaryofEconomicImpactsofMedicaidExpansioninMontana/YearandCumulative(incomeandsalesinmillionsof2018dollars) 2016 2017 2018 2019 2020 Cumulative

Jobs 3,456 6,537 7,442 6,874 5,906 PersonalIncome $168 $325 $385 $377 $348 $1,603GDP $229 $440 $509 $478 $420 $2,076Population 1,066 2,768 4,334 5,376 5,990

Notes:DetailsforthisanalysisinSectionIIIandAppendixB.

Theseresultsareconsistentwiththeresultsfromanewdifferences-in-differences

analysisoftheeffectsofMedicaidexpansiononstates’economies.Adifferences-in-

differencesanalysiscomparesthechangeinoutcomesinexpansionstatestothechangein

outcomesinnon-expansionstates.Weuseasubsetofexpansionstatesinthisanalysis.

Specifically,weincludestateswhereMedicaidexpansionledtolargechangesinMedicaid

coverageanduninsurance,similartoMontana.Wefindthat,onaverage,Medicaid

expansionincreasesthesizeofastate’shealthcaresectorbyapproximatelythree

percentagepointsthreetofouryearsafterexpansion.Furthermore,consistentwiththe

resultsinTable1,wefindthatMedicaidexpansionisassociatedwithaonepercentage

pointincreaseintotalemployment.

TheeconomicimpactsofMedicaidexpansionarenotlimitedtothejobsandincomeit

supports.MedicaidexpansionalsorepresentsasignificantinvestmentinMontanans’

healthandwell-being,andtheseinvestmentspayoff.Asubstantialbodyofresearchfrom

aroundtheU.S.hasevaluatedtheeffectsofMedicaidexpansionandfoundthatit:

• Improveshealth.OnestudyfoundthatMedicaidexpansionwasassociatedwitha5.1percentagepointincreaseintheshareoflow-incomeadultsin


3

excellenthealth.3Thisisconsistentwithalargerbodyofliteraturethatfinds

thatinsuranceexpansionsimprovementalhealthandreducemortality.4

• Improvesfinancialhealth.Forinstance,onerecentstudyfoundthatMedicaidexpansionreducedmedicaldebtby$900pertreatedperson,prevented50,000

bankruptcies,andledtobettercredittermsforborrowers.5

• Reducescrime.Medicaidexpansionreducedcrimebymorethanthreepercent,generatingsocialbenefitsworthmorethan$10-$13billionannually.6

• Makesthehealthcaresectormorerobust,particularlyinruralareas.Medicaidexpansionledtodramaticreductionsinuncompensatedcareand

improvementinprovideroperatingmargins,particularlyamonghospitalsin

ruralareas.

Furthermore,Medicaidexpansion,alongwiththeassociatedHELP-Linkworkforce

developmentprogram,mayhaveimprovedlabormarketoutcomesforlow-income

Montanans.Followingexpansion,laborforceparticipationamonglow-income

Montanans—ages18-64—increasedbyfourtosixpercentagepointsrelativetothechange

amongthesamepopulationinotherstatesorrelativetothechangeamonghigher-income

Montanans.ThissuggeststhatMedicaidexpansionandHELP-Linkimprovedlabormarket

outcomesforlow-incomeMontanans.

WhileMontanapayspartofthecostofMedicaidexpansion,thesecostsaremorethan

offsetbycostsavingsandincreasedrevenues.Medicaidexpansionhasallowedsome

peopletoswitchfromtraditionalMedicaidtotheexpansion.BecauseMontanapays35

percentofthecostfortraditionalMedicaidbutlessthantenpercentintheexpansion,this

hassavedthestatemorethan$50millionduringthefirsttwoandahalfyears.Medicaid

expansionalsosavedapproximately$3millionperyearbyreducingthecostofinmate

3Sommers,B.D.,Maylone,B.,Blendon,R.J.,Orav,E.J.,andEpstein,A.M.,“Three-YearImpactsoftheAffordableCareAct:ImprovedMedicalCareandHealthAmongLow-IncomeAdults,”HealthAffairs36,no.6(June1,2017):1119-1128.4Sommers,B.D.,Gawande,A.A.,andBaicker,K.,“HealthInsuranceCoverageandHealth—WhattheRecentEvidenceTellsUs,”NewEnglandJournalofMedicine377,no.6(August10,2017).5Brevoort,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).6Vogler,J.,“AccesstoHealthCareandCriminalBehavior:Short-RunEvidenceFromtheACAMedicaidExpansions,”(November14,2017);He,Q.,“TheEffectofHealthInsuranceonCrime:EvidenceFromtheAffordableCareActMedicaidExpansion,”(2017).Foranexpansiverecentbibliographysee:Antonisse,L.,Garfield,R.,Rudowitz,R.,andArtiga,S.,“TheEffectsofMedicaidExpansionUndertheACA:UpdatedFindingsfromaLiteratureReview,”(2017).


4

care7,andanadditional$3millionperyearinreducedspendingonmentalhealthand

substanceabusetreatment.Italsobenefitsstatecoffersbyincreasingeconomicactivity

andstaterevenues.AsshowninTable2,costsavingsandincreasedrevenuemorethan

offsetexpansioncosts.Thiswillremaintrueevenafterthestate'sshareofMedicaid

expansioncostsrisestotenpercentin2020.

Table2:FiscalEffectsofMedicaidExpansioninMontana/Year(inmillionsof2018dollars) 2016 2017 2018 2019 2020NetcostofexpansiontoMT(cost–savings–premiums)

-$10.2 -$5.3 $3.3 $10.7 $20.4

EstimatedtaxrevenuesbasedestimatesinTable1

$13.7 $26.4 $30.5 $28.7 $25.2

Neteffectonstatebudget $23.9 $31.7 $27.2 $18.0 $4.8Notes:DetailsforthisanalysisinSectionVI.

II.Background

In2015,MontanapassedtheHELPAct,whichexpandedMedicaidundertheAffordable

CareAct(“ACA”).Startingin2016,Montananswithincomesbelow138percentofthe

FederalPovertyLevel(“FPL”)couldenrollinMedicaid,andthefederalgovernmentwould

payformostofthecosts.Specifically,thefederalgovernmentpaid100percentofcostsfor

eligibleenrolleesin2016and95percentin2017.Itwillpay94percentin2018,93percent

in2019,and90percentin2020andbeyond.8

TheHELPActaddedsomeprovisionstothetypicalMedicaidexpansion.Forinstance,it

requiredenrolleestopaypremiumsandmakeco-paymentsforsomeservices,and

enrolleesmaybedisenrollediftheyfailtopaytheirpremiums.Italsoincluded12-month

continuouseligibility,whichallowsenrolleestomaintainMedicaidcoverageforuptoone

year,regardlessofchangestoincomeorfamilystatus.Additionally,theHELPAct

authorizedaworkforcedevelopmentprogram(HELP-Link)toimproveemployment

outcomesforMedicaidexpansionbeneficiaries.

7Pre-MedicaidexpansionannualoutsidemedicalcostsfortheDepartmentofCorrectionstotaled$8.3million.Afterexpansion,theytotaled$5.5million.Thus,spendingforoutsidemedicalcarefellby$2.8million.8 ThesharepaidbythefederalgovernmentinMontanadiffersslightlyfromtheseamounts.InexchangeforallowingMontanatooffer12-monthcontinuouseligibility,thefederalgovernmentloweredtheshareitpaysbylessthanonepercentagepoint.However,someofthisisoffsetbythefactthatthefederalgovernmentpaysfor100percentofcertaincosts(e.g.,IndianHealthServices).AccordingtoprojectionsbytheLegislativeFiscalDivisionthestatewillpay8.9percentofthetotalcostsofMedicaidexpansioninFY2021.https://leg.mt.gov/content/Publications/fiscal/BA-2021/2021BienniumVolume1_Final.pdf[accessedDecember22,2018]


5

Morethan40,000MontananshadenrolledinMedicaidthroughtheexpansionby

January2016,andenrollmentplateauedatapproximately96,000inMay2018.Medicaid

expansionspendingonbenefitsandclaimsinMontanawas$130millionduringFY2016

(whichcoveredJanuary-June2016),$558millioninFY2017,and$693millionduringFY

2018.Thus,duringitsfirsttwoandahalfyears,Medicaidexpansionspendingonbenefits

andclaimstotalednearly$1.4billion.

ThisreportcomputestheeconomicimpactsgeneratedbyMedicaidexpansion.An

economicimpactanalysisisappropriatetostudyMedicaidexpansionbecause,from

Montana’sperspective,thedecisiontoexpandMedicaidbringsfederaldollarsintothestate

thatarenotoffsetbyincreasedpaymentstothefederalgovernment.9Thatis,when

MontanaagreedtoexpandMedicaid,thefederalgovernmentdidnotimposeaspecialtax

onMontananstopayforthecostsoftheexpansioninMontana.Statesthatdonotexpand

Medicaiddonotreceiveaspecialtaxbreakorgrantequaltotheamountoffederal

Medicaiddollarsforegone.Thus,atthemargin,thedecisiontoexpandMedicaidis,inpart,

adecisiontobringasubstantialamountofmoney(andtheassociatedeconomicactivity)

intoMontana’seconomy.

Therearetwowaystothinkaboutthemarginalcosttothefederalgovernmentthatis

associatedwithMontana’sdecisiontoexpandMedicaid.First,aswritten,theACAwaspaid

for;itraisedsufficientrevenuetopaytheexpectedcostsofexpandingMedicaidinall50

states.Assuch,onecouldarguethatthemarginalcostsassociatedwithMontanaexpanding

Medicaidarezero.Thefederalgovernmentdoesnotneedtoraiseanyadditionalfunds

fromMontanansorotherstopayforthecostofMontana’sexpansion.Alternatively,ifone

viewsMontana’sMedicaidexpansionasamarginalfederalexpenditurethatmustbeoffset

atsomepointwithhigherfederalrevenues,theincreasedrevenuerequiredtopayfor

Montana’sexpansionwillbepassedontoallAmericans.GiventhatMontanansprovideless

thanonepercentoffederalrevenues,morethan99percentofthefederalmarginalcosts

associatedwithMontana’sMedicaidexpansionarepassedontotaxpayersinotherstates.

Thus,thetotalmarginalcosttoMontanansassociatedwiththedecisiontoexpandMedicaid

islimitedtothesharepaiddirectlybythestateplus,atmost,Montana’sshareofallfederal

revenues.

9AlargeamountofliteratureestablishesthatMedicaidexpansionspendinggeneratesamarginalincreaseineconomicactivitythatcanbeevaluatedusinganeconomicimpactanalysis.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).


6

SomehavearguedthatMedicaidexpansioncannotgenerateeconomicimpactsand

boosteconomicgrowth.10Thisargumentisrootedinthenotionthathealthcareispartof

thelocal(ornon-traded)sector.Demandforlocalsectorindustriescomesfromlocal

residents.Therefore,growthinthelocalsectorreflectsgrowthinthebroadereconomy.It

isnotacauseofit.Whilethislogicmayapplytopartsofhealthcare,itdoesnotapplyto

Medicaidexpansion.ThebulkofthemoneythatpaysforMedicaidexpansioncomesfrom

outsideofMontana.Assuch,theimpactofMedicaidexpansiononMontana’seconomyis

similartoanewfactoryoranewgovernmentcontract.Medicaidexpansionbringsmoney

intoMontana’seconomythatwouldnototherwisebehere,andthismoneyripplesthrough

thestate’seconomycreatingjobsandincome.

ToestimatetheeconomicimpactofMedicaidexpansion,weneedtocomparewhathas

happened(andwhatisforecasttohappen)withexpansiontowhatlikelywouldhave

happenedinitsabsence.Ofcourse,wedonotobservewhatwouldhavehappenedhad

MontananotexpandedMedicaid.Thisworldmustbeconstructedusingstatisticalanalyses

andassumptions.

WeusetwomethodstoidentifytheimpactofMedicaidexpansiononMontana’s

economy.First,weusetheREMImodel,aneconomicmodelcalibratedtorepresentthe

interactionsinMontana'seconomy,leasedfromRegionalEconomicModels,Inc.Usingthe

modelwecomputeabaselinemodelofMontana’seconomywithoutMedicaidexpansion.

Then,wecomputethesamemodeladdingMedicaidexpansion.Theeconomicimpactof

Medicaidexpansionisthedifferencebetweenthesetwoscenarios.

Second,weuseastatisticalapproachtoestimatetheeffectofMedicaidexpansionon

thehealthcaresector(wherethebulkoftheeconomicimpactsaregenerated)andthe

wholeeconomy.Thestatisticalapproachweemploy(calledadifferences-in-differences

analysis)comparesthechangeinoutcome(e.g.,healthcareemployment)instatesthat

expandedMedicaidtothechangeinoutcomeinstatesthatdidnot.Ifthechangein

outcomeislarger(orsmaller)inexpansionstatesrelativetonon-expansionstates,this

differenceplausiblyreflectstheeffectsofMedicaidexpansion.

10Seeforinstance,commentsprovidedbytheMontanaPolicyInstitutetotheChildrenandFamilyInterimCommitteeinMay2018.


7

III.REMIModel

First,wecalculatetheimpactofMedicaidexpansionusingtheREMImodel.TheREMI

modelisaneconomicmodelcalibratedtorepresenttheinteractionsintheMontana

economy.TheREMImodelisoneofthebestknownandmostrespectedanalyticaltoolsin

thepolicyanalysisarena,andhasbeenusedinmorethan100previousstudiesaswellas

dozensofpeer-reviewedarticlesinscholarlyjournals.Itisastate-of-the-arteconometric

forecastingmodelthatincorporatesdynamicfeedbacksbetweeneconomicand

demographicvariables.TheREMImodelforecastsemployment,income,expenditures,and

populationsforcountiesandregionsbasedonamodelcontainingmorethan100

stochasticanddynamicrelationshipsaswellasanumberofidentities.11

A.Directimpacts

TocompletetheREMImodel,wefirstestimatethedirectimpactsoftheMedicaid

expansion.Thatis,wedeterminehowmuchmoneygetsaddedorsubtractedfromvarious

partsoftheeconomyasadirectresultofexpansion.

Inthissection,webrieflyoutlinetheassumptionsusedtoquantifythedirectimpactsof

Medicaidexpansion.Amorecompletedescriptionofourassumptionsandtheir

justificationsareincludedinAppendixA-C.

Thedirectimpactsofexpansionstemfromthethreemajorchangesitcauses:

(1) MedicaidexpansionincreasesMedicaidcoverageandreducesuninsuranceandotherformsofcoverage;

(2) Medicaidexpansionincreaseslow-incomeMontanans’healthcarespending;and(3) Medicaidexpansionshiftswhopaysforthebulkoflow-incomeMontanans’health

carefromavarietyoflargelyMontana-basedsourcestothefederalgovernment.

Morespecifically,Medicaidexpansion:

(a) IncreasestotalspendingonhealthcareinMontanabyincreasinghealthcareconsumptionandreducinguncompensatedcare;

11Afullexplanationofthedesignandoperationofthemodelcanbefoundin:Treyz,G.I.,Rickman,D.S.,&Shao,G.(1991).TheREMIeconomic-demographicforecastingandsimulationmodel.InternationalRegionalScienceReview,14(3),221-253.


8

(b) IncreasesfederalgovernmentspendinginMontanabyanamountequaltothefederalshareofexpansionspendingminusthechangeinfederalspendingonother

programsliketraditionalMedicaidorexchangesubsidies;

(c) Increasesstategovernmentspendingbyanamountequaltothestateshareofexpansioncosts(includingadministrationcosts)minusthechangeinspendingon

otherprogramsliketraditionalMedicaid,correctionshealthcare,andother

programsthatprovidehealthcareforlow-incomepopulations;

(d) Reducesindividuals’(orhouseholds’)healthcarespendingbyanamountequaltotheirspendingonMedicaidexpansionpremiumsandout-of-pocketcostsminus

whattheywouldhavespentonpremiumsandout-of-pocketscostswithout

expansion(individual/householdspendingonothergoodsandservicesthen

increasesbyaproportionalamount);12,13and

(e) Reducesemployers’healthcarespendingbyantheamounttheyspendonhealthinsurancepremiumswithexpansionminuswhattheywouldhavespentinthe

absenceofexpansion(ownerand/orworkerincomeincreasesbyanequal

amount).14,15,

TheneteffectofthesechangesisalargeinfusionofnewmoneyintoMontana’seconomy.

ThesearethedirecteffectsofMedicaidexpansion.

Thereareavarietyofdirecteffectsofexpansionthatwedonotincludeinthemodel.

Forinstance,anewreportfromtheMontanaDepartmentofRevenueandtheMontana

DepartmentofLaborandIndustriessuggeststhatMedicaidexpansionallowedMontana

businesstoavoid$11.1-16.7milliondollarsofpenaltiesrelatedtotheACA’semployer

mandate.16Wedonotincludetheseeffectsintheanalysis.Similarly,wedonotincludethe

effectthatindividualswithbettercredit/lessdebtcouldhaveonMontana’seconomyor

individualmandatepenalties(whiletheyapplied).Theseomissionsmayleadustoslightly

understateexpansion’simpacts.

12TheimpactofMedicaidexpansiononthestateandfederalgovernmentisfurtheroffsetbytheamountofconsumptiontaxespaidonthisspending.13Thenetchangeinindividual/householdspendingmaybefurtherreducedifthefederalorstategovernmentlevytaxesonMontananstopayforincreasedspendingduetoexpansion;however,individual/householdspendingmayincreaseasaresultoflowerdebtandimprovedcredit.14Sinceemployerpaymentsforhealthinsurancepremiumsareuntaxed,theimpactofMedicaidexpansiononthestateandfederalgovernmentisfurtheroffsetbytheamountofincometaxespaidonthisincome.15Thenetchangeinemployer/workerspendingmaybefurtherreducedifthefederalorstategovernmentlevytaxesonMontananstopayforincreasedspendingduetoexpansion.16http://lmi.mt.gov/Portals/193/Publications/LMI-Pubs/Special%20Reports%20and%20Studies/MT-Medicaid_Report.pdf[accessedJanuary8,2019]


9

InAppendixB,wedetailourassumptionsforeachoftheseeffects.Inbrief,

approximately85percentofMedicaidexpansionspendingwouldnotbespentin

Montana’seconomywithoutexpansion.

Between48-60percentofMedicaidspendingpaysfornewhealthcareservices.This

spendingincludesdoctor’svisitsandtreatmentsthatwouldnotoccurintheabsenceof

Medicaidexpansion.Italsoincludesreductionsinuncompensatedcare.17

TheremainingspendingistransferredtothosethatwouldhavepaidMedicaid

expansionbeneficiaries’carewithoutexpansion.Withoutexpansion,someexpansion

beneficiarieswouldhaveenrolledintraditionalMedicaid.Thestateandfederal

governmentswouldhavepaidforthiscare.Somewouldhaveenrolledinanindividual

insuranceplan(e.g.,anexchangeplan).Thefederalgovernment(viaexchangesubsidies,

forthosewhoqualify18)andtheindividuals(viapremiumsandout-of-pocketpayments)

wouldhavepaidforthiscare.Somewouldhaveobtainedinsuranceviatheiremployer.The

employer(viatheemployer’sshareofpremiumcosts)andtheemployee(viathe

employee’sshareofpremiumsandout-of-pocketpayments)wouldhavepaidforthiscare.

Forinstance,anuninsuredindividualwhomayhavespent$1,700out-of-pocketon

healthcareintheabsenceofexpansioncanstillconsumethiscarewithexpansion.

However,thefederalgovernmentpaysformostofthiscare.The$1,700stayswiththe

individualandcanbespentonotheritems.Similarly,foranindividualwhowouldhavehad

employercoveragewithemployerpremiumsof$5,600,employeecontributionsof$1,100,

andout-of-pocketspendingof$800,Medicaidexpansionallowstheemployertoredirect

$5,600tootherthings(includingproprietorincomeorworkerincome)andallowsthe

individualtoredirectmostofthe$1,900dollarstowardothergoodsandservices.19

Table3summarizesonescenarioforhowMedicaidexpansiondirectlyimpacts

Montana’seconomyin2020.20Weestimatethatexpansionincreasesnetfederalspending

inMontanabyapproximately$617million.Netstatespendingwillincreaseby

approximately$20million.Individualspendingonhealthcarewillfall(andspendingon

17Weincludeuncompensatedcareas“new”spendingbecauseuncompensatedcareabsorbedbyprovidersisnotcountedinhealthcareexpendituredata.Assuch,fromtheperspectiveoftheREMImodel,thisisnewspending.18Individualswithincomesbetween100percentand138percentoftheFPLareeligibleforexchangesubsidiesandcost-sharingreduction(“CSRs”)instatesthathavenotexpandedMedicaid.19InMontana,expansionbeneficiariesmaystillpaysomeamounttowardpremiumsandout-of-pocketcosts.20AsdiscussedintheAppendixC,givenuncertaintyaboutdifferentassumptions,weexplorearangeofoutcomes.Thisexamplecorrespondstooneillustrativescenario.Otherscenariosdifferslightly.


10

othergoodsandserviceswillincrease)byroughly$185million.Employerspendingon

healthcarewillfall(andproprietorand/oremployeeincomewillincrease)by$93million.

Table3:IllustrativeestimatesformaincomponentsofthedirecteffectsofMedicaidexpansion($millions) Spending

2020Totalfederalspendingonexpansion $682

Reductionsinfederalspendingduetoexpansion(e.g.,traditionalMedicaid,exchangesubsidies)

-$60

FederalshareofHELPpremiums -$5Netchangefederalspending $617Totalstatespendingonexpansion $58

Reductionsinstatespendingduetoexpansion -$43StateshareofHELPpremiums -$0.4

Netchangestatespending $20Individualspendingtopayforexpansion(e.g.,premiums) $5.5

Reductionsinindividualspending(e.g.,insurancepremiumsandout-of-pocketspending)

-$191

Netchangeinindividualspending -$185Employerspendingtopayforexpansion -

Reductionsinspendingemployerspending(e.g.,premiums) -93Netchangeinemployerspending -93

TocomputetheeconomicimpactsofMedicaidexpansion,weinputsimilarvaluesinto

theREMImodeltoestimatehowMontana’seconomywoulddifferwithoutthesechanges.

Weallocatethesedirectimpactsacrossproviders,government,business,andindividuals

asdescribedabove.Newspendingonhealthcareisallocatedacrosshealthcaresectorsin

proportiontoreportedMedicaidexpansionspending.21Wefurtherallocatespending

acrossMontanaregionsinproportiontoMedicaidenrollment.22

Weestimateimpactsusingthefollowingprocess.First,abaselineprojectionofthe

economyisproducedusingtheREMImodel,utilizinginputsandassumptionsthat

extrapolategrowthandconditionsofrecenthistoryintheabsenceofMedicaidexpansion.

Themodelisthenusedasecondtimewithidenticalinputs,exceptthatMedicaidexpansion

isadded.Thus,Medicaidexpansionproducesadifferenteconomy,reflectingnotonlythe

expansion,butalsohowtherestoftheeconomyreactstoit.Thedifferencebetweenthe

21http://dphhs.mt.gov/Portals/85/Documents/healthcare/MedicaidExpansionHealthCareServicesProfile.pdf22WeallocateMedicaidenrollmentbycountyintothefiveregionsavailableintheREMImodel.http://dphhs.mt.gov/Portals/85/Documents/healthcare/MedicaidExpansionMemberProfile.pdf


11

baselineandalternativescenariosoftheeconomyrepresentstheeconomicimpactof

Medicaidexpansion.

B.Statewideresults

Table4presentsthestatewideeffectsofMedicaidexpansion.23Undertheconditions

andassumptionsoutlined,weestimatethatMedicaidexpansionadded3,456jobs,$168

millioninpersonalincome,and$229millioninGDPtoMontana’seconomyin2016.We

projectthattheseeffectspeakedalongwithexpansionspendingin2018andwilldecline

somethrough2020.In2020,Medicaidexpansionisexpectedtosupport5,906jobs,$348

millioninpersonalincome,and$420millioninGDP.

Bytheendofitsfirstfiveyears,Medicaidexpansionisexpectedtocreateatotalof

about$1.6billioninpersonalincomeand$2.1billioninGDP.Weexcludejobsand

populationfromthecumulativetotalbecausetheyarenotadditiveacrossyears.They

representthedifferenceinemployment(orpopulation)relativetonoexpansionineach

year.24

Table4:SummaryofEconomicImpactsofMedicaidExpansioninMontana/YearandCumulative(incomeandsalesinmillionsof2018dollars) 2016 2017 2018 2019 2020 Cumulative

Totalexpansionspending $332 $693 $798 $759 $745

Jobs 3,456 6,537 7,442 6,874 5,906 PersonalIncome $168 $325 $385 $377 $348 $1,603GDP $229 $440 $509 $478 $420 $2,076Population 1,066 2,768 4,334 5,376 5,990

Notes:TotalexpansionspendingestimatesobtainedfromLFDbudgetestimates.WetranslateFYtoCYbased

onenrollmentatthetime.https://leg.mt.gov/content/Publications/fiscal/BA-

2021/2021BienniumVolume1_Final.pdf.

Table5showsthebreakdownofemploymentbyindustry.Asonemightexpect,the

largestimpactsareinhealthcare.OuranalysissuggeststhatMedicaidexpansionwill

createapproximately2,500additionalhealthcarejobs.However,therearealsosignificant

effectsonretailtrade(morethan1,000jobs)andconstruction(morethan600jobs).

23Theseresultsreflectone(fairlyconservative)setofplausibleassumptions.WepresentarangeofalternativesinAppendixC.24Ouranalysisdoesnotsaythattheexpansioncreates6,000jobsinoneyearandthenadifferentadditional6,000newjobsthenextyear.Manyofthejobsarecreatedinoneyearandthenpersist.Forinstance,anursingpositioncreatedasaresultofexpansionin2017thatpersiststhrough2020wouldbepartofthe(approximately)6,000in2020.


12

Table5:IndustryBreakdownofEmploymentImpacts 2016 2017 2018 2019 2020HealthCareandSocialAssistance

1,261 2,574 2,874 2,631 2,441

RetailTrade 596 1,193 1,354 1,257 1,140Construction 341 702 878 837 667AccommodationandFood 203 399 465 448 416OtherServices,ExceptPublicAdministration

201 386 424 380 332

Professional,Scientific,andTechnicalServices

105 207 243 232 206

RealEstateandRental 90 178 208 198 179AdministrativeandWasteManagementService

94 180 202 184 160

Other 565 718 794 707 365

C.ByRegion

Table6summarizestheeconomicimpactsofMedicaidexpansionacrossfiveMontana

regions:Northwest,Southwest,Central,NorthCentral,andEast.25Medicaidenrollment

doesnotdeviatethatmuchfrompopulation.Assuch,economicimpactsacrossregionsare

somewhatproportionaltopopulation.

25TheNorthwestregionincludesFlathead,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.


13

Table6:EconomicImpactsbyRegion,2019andCumulative2016-2020(incomeandsalesinmillionsof$2018) NW SW Central

2019 Cumul. 2019 Cumul. 2019 Cumul.Jobs 2,557 1,458 1,505 PersonalIncome $128 $549 $84 $356 $89 $378GDP $170 $735 $103 $447 $113 $488Population 1,859 1,207 1,208

N.Central East

2019 Cumul. 2019 Cumul.Jobs 1,033 321 PersonalIncome $56 $241 $19 $80GDP $72 $315 $21 $93Population 817 230

IV.Empiricalestimates

Inthissection,weestimatetheeconomicimpactofMedicaidexpansionusinga

differentapproach:adifferences-in-differencesanalysis.Thedifferences-in-differences

approachusesnon-expansionstatesasacontrolgroup,andprovidesananswertothe

question:“Howmuchdidthetrajectoryofeconomicactivitychangeinexpansionstates

relativetonon-expansionstatesafterexpansion?”

Thisstatisticalapproachprovidesawaytocheckthereasonablenessoftheresults

generatedbytheREMImodelandtheassumptionsthatunderlieit.Italsoprovidesan

independentestimateoftheeffectsofMedicaidexpansionthatrestsonfewerassumptions.

Specifically,ifoneassumesthatexpansionstatesandnon-expansionstateswouldhave

followedparalleltrendsintheabsenceofexpansion,thenthisapproachcalculatesthe

effectsofMedicaidexpansion.InAppendixD,weprovideevidencethatsuggeststhis

assumptionisreasonablefortheanalysesusedinthisreport.

TheimpactofMedicaidexpansionvarieswidelyacrossexpansionstates,evenonthe

outcomesmostdirectlyaffectedbyexpansion–e.g.,theshareofpeoplecoveredby

Medicaidortheshareuninsured.Insomeexpansionstates,theshareofpeoplewith

Medicaidbarelychangedfollowingexpansion.Inotherexpansionstates,itchanged

substantially.AvarietyoffactorsexplainthedifferencesinMedicaidexpansion’seffectson

healthinsurancecoverage(e.g.,somestateshadalreadyexpandedMedicaidcoverageto

childlessadultswithincomesatorabovethepovertyline).


14

Inthisreport,wefocusontheeconomicimpactofMedicaidexpansioninMontana,a

statewhereMedicaidexpansionhadalargeeffectonMedicaidenrollment.Assuch,we

limittheanalysistoincludestateswhoseMedicaidexpansionexperienceresembles

Montana’s.Specifically,wefocusonMedicaidexpansionstatesthatexperiencedlarge

changesintheshareoftheexpansioneligiblewithhealthinsuranceandlargechangesin

theshareoftheexpansioneligiblewithMedicaidafterACAimplementationin2014.The

expansionstatesincludedinouranalysisare:Alaska,Arkansas,California,Illinois,Indiana,

Kentucky,Louisiana,Michigan,Montana,Nevada,NewMexico,Oregon,RhodeIsland,

Washington,andWestVirginia.26Theaveragechangeininsurancecoverageinthesestates

betweenthepre-expansionperiod(2010-2013)and2017isroughlyequaltothechangein

Montana.WeprovideadditionaldetailsontheselectedstatesinAppendixA.

First,weexaminetheeffectofMedicaidexpansiononthehealthcaresector.We

presentresultsforthreedifferenthealthcaresectoroutcomes:healthcareemployment,

healthcarecompensation,andhealthcareGDP.Ourregressionsincludecontrolsforstate,

year,totalpopulation,populationoverage65,populationwithadisability,populationover

age25withatleastaBachelor’sdegree,andtotalemploymentinthetradedsector.27A

morecompletediscussionoftheseregressionsisavailableinAppendixC.

Figure1presentsthecoreresultsfromtheseanalyses.Theseresultsshowthat

Medicaidexpansionisassociatedwithsubstantialincreasesinthesizeofthehealthcare

sectorinthestatesexamined.Theresultsalsoshowthatexpansion’simpactsgrowover

thefirstfewyearsofexpansion.Forinstance,fouryearsafterexpansion,employment

growthinthehealthcaresectorwas3.2percentagepointslargerintheincludedexpansion

statesthaninthenon-expansionstates.Similarly,bythefourthyearofexpansion,the

growthintotalcompensationinthehealthcaresectorwas2.9percentagepointslarger

thaninnon-expansionstatesandgrowthinhealthcareGDPwas2.6percentagepoints

larger.

26Ourresultsdonotchangesubstantiallywhenusingmoreorlessrestrictivecriteriaforinclusion.27Thetradedsectoristhesetofindustriesthatprimarilyselltocustomersoutsidetheirlocalregion.Stateswithlargershockstotheirtradedsectorwillexperiencelargerchangesineconomicactivityandlargerchangesinhealthcareactivity.WedefinethetradedsectorusingtheresultsdescribedinJensen(2012).Specifically,wemultiplytotalemploymentineach2-digitNAICSindustryobtainedfromBEAregionaleconomicaccountsdatabythesharesreportedinJenson’sTable2.3andsumtoobtainanestimatefortotalemploymentinthetradedsector.


15

Figure1:AverageeffectofMedicaidexpansiononhealthcaresectorgrowthinincludedexpansionstatesbyyearssinceexpansion

Notes:Datapresentedarecoefficientsfromdifferences-in-differencesregressions;allregressionsinclude

stateandyearfixedeffectsandcontrolsforln(population),ln(populationwithadisability),ln(population

overage65),ln(populationoverage25withBachelor’sdegree),ln(totalemploymentintradedsector);all

regressionshave272observations.Allcoefficientsarestatisticallysignificantwithp<0.05,exceptunderlined

values.Theunderlinedcoefficientsaresignificantatp<0.06.

TheseresultsalignwiththeresultsfromtheREMImodelpresentedinSectionIII.

ApplyingtheseresultstoMontanasuggestsweshouldexpectMedicaidexpansiontocreate

anadditional2,500healthcarejobs.TheresultsfromtheREMImodelindicatethat

Medicaidexpansionwillincreasehealthcareemploymentby2,441jobsin2020.Similarly,

theseresultssuggestMedicaidexpansionwillincreasehealthcareearningsby

approximately$130million.TheREMImodelcalculatesthatMedicaidexpansionwill

increasehealthcareearningsby$160millionin2020.

Next,weexaminetheimpactofMedicaidexpansionontotalemployment.Table7

presentsresultsfromregressionswiththesamespecificationasabove.Theseresultsshow

thatMedicaidexpansionisassociatedwithsignificantincreasesintotalemployment.For

instance,thecoefficientof0.013inyear4indicatesthatgrowthintotalemploymentinthe

includedexpansionstateswas1.3percentagepointshigherthaninthenon-expansion

statesfouryearsafterexpansion.

1.9%

2.1%

2.8%

3.2%

1.1%

2.0%

3.0%2.9%

1.2%

1.9%

2.8%

2.6%

Year1 Year2 Year3 Year4

Employment

Compensation

GDP


16

Table7:Differences-in-differencesestimatesoftheeffectsofMedicaidexpansionontotalemploymentinincludedstates Ln(totalemp.) Ln(tradedsector

emp.)Ln(localsectoremp.)

Year1 0.004

(0.002)

-0.011

(0.007)

0.006

(0.004)

Year2 0.006+

(0.003)

-0.011

(0.009)

0.009+

(0.004)

Year3 0.009*

(0.004)

-0.002

(0.012)

0.014*

(0.006)

Year4 0.013**

(0.005)

-0.005

(0.012)

0.020*

(0.007)

Notes:Cluster-robuststandarderrorsclusteredonstateinparentheses,+p<0.10,*p<0.05,**p<0.01;all

regressionsincludestateandyearfixedeffectsandcontrolsforln(population),ln(populationwitha

disability),ln(populationoverage65),ln(populationoverage25withBachelor’sdegree),thefirstandthird

columnsincludethecontrolln(totalemploymentintradedsector);allregressionshave272observations.

Table7alsopresentsresultsthatexaminethetradedandnon-traded(local)sectors

separately.28Asdescribedabove,Medicaidexpansionincreasesdemandforhealthcareand

allowsindividualstoshiftmoneyfromhealthcaretootherconsumption.Assuch,any

increaseintotalemploymentattributabletoMedicaidexpansionshouldbedrivenby

increasesinthenon-traded(orlocal)sector.Medicaidexpansionshouldnotsubstantially

increaseactivityinlocalfactories,farms,etc.thatprimarilyselltonon-Montanans.

Consistentwiththishypothesis,therelationshipbetweenMedicaidexpansionandtraded

28Incontrasttothetradedsector,thenon-traded(orlocal)sectorconsistsprimarilyoffirmsandindustriesthatsellgoodsandservicestolocalconsumers.Bothtradedandlocalsectorentitiiesarevitaltoeconomichealth,buttheircontributiondiffers.Thetradedsectorisimportantprimarilybecauseitbringsmoneyintotheeconomyfromoutside.Thisoutsidespendingcirculatesthroughtheeconomysupportingadditionaljobsandincome.Thelocalsectorisimportantbecauseitprovidesthegoodsandservicesthatarenecessarytomakeaplaceadesirableplacetoliveandwork.Withoutagoodlocalsector,firmsandworkerswillnotwanttolocateinaregion.ForadditionaldiscussionofthedifferencesbetweenthetradedandlocalsectorsseeWard,B.etal(2012)TheTradedSectorinPortland’RegionalEconomy[https://studylib.net/doc/8135122/traded-sector-final]andWard,B.(2016)TheContributionofHealthCaretoFlatheadCounty’sEconomy[https://kalispellchamber.com/wp-content/uploads/2017/03/the-contribution-of-health-care-to-flathead-countys-economy-nov-2016.pdf]


17

sectoremploymentissmallandnotstatisticallysignificant,buttherelationshipbetween

expansionandlocalsectoremploymentispositiveandstatisticallysignificant.29

TheseresultssuggesttheMedicaidexpansionisassociatedwithslightlylargereffects

thanprojectedbytheREMImodelpresentedinSectionIII.A1.3percentagepointincrease

intotalemploymentinMontanaisover8,000jobs.TheREMImodelprojectedatotal

increaseof6,874jobsinthefourthyearofexpansion(equaltoapproximatelyonepercent

oftotalemployment).ThissuggeststhattheREMIresultspresentedinTable1maybe

conservative.30

V.OtherEconomicEffectsofMedicaidExpansion

Theresultsabovefocusoneconomicimpactsanddonotaccountformanyother

expansionbenefits.Inthissection,wehighlightafewadditionalfindingsfromthe

literatureandourownanalyses.TheKaiserFamilyFoundationhasregularlycompileda

summaryoftheeffectsofMedicaidexpansion.Themostrecentsummaryisavailableat:

https://www.kff.org/medicaid/issue-brief/the-effects-of-medicaid-expansion-under-the-

aca-updated-findings-from-a-literature-review-march-2018/

A.Healthcareaccessandhealthoutcomes

Medicaidexpansionimprovesaccesstohealthcareandmayimprovehealth.31For

instance,afterMedicaidexpansion,theshareoflow-incomeMontananswhoskippedcare

duetocostfellby21percent.Similarly,thesharewhohadnothadacheck-upwithinthe

pasttwoyearsfellby17percent(seeFigure2).Thesedatacoveronlythefirsttwoyearsof

MedicaidexpansioninMontana.AsimilaranalysisofstatesthatexpandedMedicaidin

2014showsthattheseeffectsgrowovertime.

29Healthcareispartofthelocalsector,butexcludinghealthcareemploymentfromtheregressiondoesnotsubstantiallychangetheresults.Forinstance,inyear4,excludinghealthcarefromlocalemploymentonlycausesthecoefficienttofallto0.018(p<0.03).30AnalternativeREMIspecificationthatassumesahigher(55percentinsteadof48percent)shareofMedicaidexpansionspendingisnew,generateshigheremploymentestimates(7,256inyear4),buttheseestimatesstillfallbelowtheempiricalestimates.31Sommers,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.,Dustbin,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.


18

Improvedhealthcareaccessmayimprovehealthoutcomes.Whilenoteverystudyhas

foundthatMedicaidexpansionimproveshealthoutcomesinitsfirstfewyears,manyhave.

Forinstance,onestudyfoundthatMedicaidexpansionwasassociatedwitha5.1

percentagepoint(or23percent)increaseintheshareoflow-incomeadultsinexcellent

health.32AdifferentstudyfoundthatMedicaidexpansionwasassociatedwithareduction

inthenumberofpoorhealthdaysanddepressiondiagnosisamongadultswithchronic

conditions.33Analysesofotherinsuranceexpansionshavefoundthatprovidinghealth

insuranceimprovesdepressionoutcomesandreducesmortality.34

Figure2:ChangeinHealthCareAccessAmongLow-IncomeMontanansBeforeandAfterMedicaidExpansion

Source:Authors’analysisof2015-2017BehavioralRiskFactorSurveillanceSystemdata.

32Sommers,B.D.,Maylone,B.,Blendon,R.J.,Orav,E.J.,andEpstein,A.M.,“Three-YearImpactsoftheAffordableCareAct:ImprovedMedicalCareandHealthAmongLow-IncomeAdults,”HealthAffairs36,no.6(2017):1119-1128.33Winkelman,T.N.,&Chang,V.W.(2018).Medicaidexpansion,mentalhealth,andaccesstocareamongchildlessadultswithandwithoutchronicconditions.Journalofgeneralinternalmedicine,33(3),376-383.34Sommers,B.D.,Gawande,A.A.,andBaicker,K.,“HealthInsuranceCoverageandHealth—WhattheRecentEvidenceTellsUs,”(2017).

29%

36%

25%

29%

23%

30%

Skippedcareduetocost Nocheck-upinlast2years

2015

2016

2017


19

B.Financialsecurity

Medicaidexpansionalsogeneratesmajorimprovementsinfinancialsecurity.Itreduces

debtcollections,reducesbankruptcies,andimprovescreditscores.35Forinstance,one

recentstudyfoundthatMedicaidexpansionreducedmedicaldebtby$900pertreated

person,prevented50,000bankruptcies,andledtobettercredittermsforborrowers.36The

interestsavingsfromtheseimprovementswereworth$280pertreatedpersonor$520

millionoverall.Thesefinancialbenefitsareonthesamemagnitudeasthereductionin

uninsuredindividuals’out-of-pocketcosts.

C.Crime

MultiplerecentstudiesfindthatMedicaidexpansionreducedbothviolentcrimeand

propertycrime.37Onestudyarguesthesebenefitsmaystemfromincreasedmentalhealth

andsubstanceabusetreatment.Nationally,thebenefitsofexpansion-inducedcrime

reductionmayexceed$10billionannually.

D.Employment

SomeworrythatexpandingMedicaidwillreduceworkincentives.However,several

studiesfindnoevidencethatMedicaidexpansiondepressesemployment.38Onestudyeven

foundthatMedicaidexpansionincreasedemploymentamongpeoplewithdisabilities.39A

differentstudyofpre-ACAexpansionsinMedicaideligibilityfoundthatmoregenerous

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,erg,.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):1-23.39Hall,J.P.,Shartzer,A.,Kurth,N.K.,andThomas,K.C.,“EffectofMedicaidExpansiononWorkforceParticipationforPeopleWithDisabilities,”AmericanJournalofPublicHealth107,no.2(2017):262-264.


20

publichealthinsuranceincreasedtheprobabilityofsomeonepursuingriskier,buthigher

payingjobs.40

AccordingtoarecentsurveyofOhio’sMedicaidexpansionpopulation,Medicaid

expansionmakesiteasierforpeopletowork.41Amongemployed,continuouslyenrolled

beneficiaries,83percentreportedthatexpansionmadeiteasierforthemtowork,and60

percentofunemployed,continuouslyenrolledbeneficiariesreportedthatMedicaid

expansionmadeiteasierforthemtolookforwork.

DatafromMontanashownoadverseeffectofMedicaidexpansionontheemployment

oflow-incomeMontanans.Infact,Montanasawanincreaseinlow-incomelaborforce

participationfollowingMedicaidexpansion.Table8showsthechangeinlaborforce

participationobservedintwodatasets:theCurrentPopulationSurveyAnnualSocialand

EconomicSupplement(“CPSASEC”)andtheAmericanCommunitySurvey(“ACS”).As

showninthetable,laborforceparticipationroseinthefirst-twoyearsafterexpansion

amongnon-disabledMontanans,ages18-64,withincomesbelow139percentFPL.Similar

increasesinlaborforceparticipationwerenotobservedamonghigher-incomeMontanans

orlow-incomeresidentsinotherstates.Infact,laborforceparticipationfellintheseother

groups.Ifweassumethatlow-incomelaborforceparticipationinMontanawasexpectedto

followthetrendsinotherstatesoramonghigh-incomeMontanans,thentheincreasein

laborforceparticipationamonglow-incomeMontanansisevenlarger(6.2percentage

pointsintheCPSdataand3.9percentagepointsintheACSdata).

WhiletheseresultsdonotprovethatMedicaidexpansionincreasedemployment,they

suggestitmighthave.Thispatternofresultsisconsistentwiththehypothesisthat

MedicaidexpansionandMontana’sHELP-Linkprogramimprovedemploymentoutcomes

forMontana’sMedicaidexpansionbeneficiaries.Theseeffectscouldreflecttheimpactof

obtaininghealthinsuranceandanyassociatedimprovementsinhealth,theimpactof

HELP-Link,acombinationofthetwo,orsomeothernotyetunderstoodfactor.Wenote,

consistentwiththeinterpretationthatHELP-linkaffectedemployment,arecentanalysisof

aprograminNevada,similartoHELP-Link,thatprovidedeligibilityreviewandjob

counselingservicestorandomlyselectedunemploymentinsurancerecipientsledto

persistentincreasesinlong-termemploymentandearnings.42

40Farooq,A.,&Kugler,A.(2016).Beyondjoblock:impactsofpublichealthinsuranceonoccupationalandindustrialmobility(No.w22118).NationalBureauofEconomicResearch. 41OhioDepartmentofMedicaid(2018).2018OhioMedicaidGroupVIIIAssessment:Afollow-uptothe2016OhioMedicaidGroupVIIAssessment.https://medicaid.ohio.gov/Portals/0/Resources/Reports/Annual/Group-VIII-Final-Report.pdf42Manoli,D.S.,Michaelides,M.,andPatel,A.,Long-TermEffectsofJob-SearchAssistance:ExperimentalEvidenceUsingAdministrativeTaxData(No.w24422),NationalBureauofEconomicResearch(2018).


21

Table8:LaborForceParticipationAmongNon-DisabledPeopleAges18-64,BeforeandAfterExpansioninMontanaCurrentPopulationSurveyASEC

Before(2012-2015)

After(2016-2018)

Difference(afterminusbefore)

DifferenceinDifference

(MTdifferenceminusrestdifference)

0-138%FPL Montana 57.9% 60.7% 2.7%

RestofU.S. 57.6% 54.2% -3.5%*** 6.2%***>138%FPL

Montana 85.8% 84.0% -1.7%* RestofU.S. 83.4% 83.6% 0.2% -2.0%***

AmericanCommunitySurvey

Before(2012-2015)

After(2016-2017)

Difference(afterminusbefore)

DifferenceinDifference

(MTdifferenceminusrestdifference)

0-138%FPL Montana 63.0% 64.2% 1.3%

RestofU.S. 59.3% 56.7 -2.7%*** 3.9%***>138%FPL

Montana 86.0% 86.6% -1.7% RestofU.S. 85.6% 85.9% 0.1% 0.3%***

Source:Authors’analysisofCurrentPopulationSurveyASECandAmericanCommunitySurveymicrodata

obtainedfromIPUMS-CPSandIPUMS-USA.Analysesconductedattheindividuallevelwithprovidedperson

weights.Samplelimitedtoincludepeopleages18-64withincome<139percentFPLandnodisability,

***=p<0.01,*=p<0.05.Difference-in-differenceresultsobtainedfromregressionwithstateandyearfixed

effects.Standarderrorsclusteredatstatelevel.SeeAppendixEforadditionaldetails.

F.Healthcaresector

Finally,asdiscussedabove,Medicaidexpansionrepresentsasignificantinvestmentin

Montana’shealthcaresystem,particularlyitscriticalaccesshospitalsandruralproviders.

Italsosignificantlyimprovesthefinancialhealthofsafety-nethospitals.43Amorerobust

healthcaresectorbenefitsallresidents.Forinstance,ifaruralhospitalcloses,allresidents

suffer.Thus,totheextentexpansionpreservesorexpandstherangeofservicesavailablein

anarea,allresidentsbenefit.

43Dobson,A.,DaVanzo,J.E.,Haught,R.,andPhap-Hoa,L.,“ComparingtheAffordableCareAct'sFinancialImpactonSafety-NetHospitalsinStatesThatExpandedMedicaidandThoseThatDidNot,”IssueBrief(CommonwealthFund),(2017):1-10.


22

AhandfulofstudieshaveexaminedtheeffectofMedicaidexpansiononthefinancial

performanceofthehealthcaresector.Thesestudiesgenerateaconsistentpictureof

Medicaidexpansion’seffects–Medicaidexpansionimproveshospitals’financialhealthand

reducestheoddsthathospitalsclose.TheeffectsofMedicaidexpansionareparticularly

stronginruralareasandinareaswithsubstantialnumbersofuninsuredadultspriorto

expansion.

OnesetofarticlesexaminedtheimpactofMedicaidexpansiononhospitalfinances

through2015.44Thesestudiesfindthat,relativetonon-expansionstates,hospitalsin

Medicaidexpansionstates:

• ReduceduncompensatedcarerelativetoaFY11-FY13baselineby34percentandreduceduncompensatedcareasapercentageofexpensesby1.7percentagepoints;

• IncreasedMedicaidrevenueby18.2percent;

• Improvedoperatingmarginsby2.5percentagepoints(67.3percent);and

• Improvedexcessmarginsby1.7percentagepoints(41.4percent).

Thesestudiesalsofindthattheimpactsonnon-metrohospitalswerelarger,

particularlyontheirprofitmargins.Hospitalsoutsidemetro-areasinexpansionstatessaw

operatingmarginsincreaseby4.0percentagepointsandexcessmarginsincreasedby2.3

percentagepointsrelativetonon-metrohospitalsinnon-expansionstates.

Wequasi-replicatedtheseanalysesusingdatathatextendinto2017andfoundsimilar

results(seeAppendixEfordetails).Thepassageoftimehastendedtoincreasethe

estimatesoftheeffectsofMedicaidexpansion.Forinstance,weestimatethattheimpactof

Medicaidexpansiononuncompensatedcaregrewfrom1.5percentto2.6percentoftotal

expensesbetweenthefirstandthirdyearsfollowingexpansion.

Wealsoestimatethateffectsaremuchlargerforprovidersinstates(likeMontana)

withabove-averageMedicaidexpansionenrollment.Providersinhighenrollmentstates

sawmuchlargerincreasesinnetMedicaidrevenue,muchlargerdecreasesin

uncompensatedcare,andmorerobustimprovementinoperatingmargins.

AdifferentstudyexaminedtheimpactofMedicaidexpansiononhospitalclosuresusing

datafrom2008-2016.45Thisstudyfoundthat:

44Blavin,F.(2017).HowHastheACAChangedFinancesforDifferentTypesofHospitals?UpdatedInsightsfrom2015CostReportData;Blavin,F.(2016).Associationbetweenthe2014MedicaidexpansionandUShospitalfinances.Jama,316(14),1475-1483.


23

“theACA’sMedicaidexpansionwasassociatedwithimprovedhospitalfinancial

performanceandsubstantiallylowerlikelihoodsofclosure,especiallyinrural

marketsandcountieswithlargenumbersofuninsuredadultsbeforeMedicaid

expansion.”

Inparticular,thisstudyshowsthathospitalsinexpansionstatesweresixtimeslesslikely

toclosethanhospitalsinnon-expansionstates.ItalsofindsthattheimpactofMedicaid

expansionisstrongerincountiesthathadmoreuninsuredpriortoexpansion.Incounties

whereover30percentofadultswereuninsuredpriortoexpansion,Medicaidexpansionis

associatedwitha90percentreductionintheoddsofhospitalclosure.Similartothe

analysisdescribedabove,thisstudyalsofindsthatMedicaidexpansionimprovesprofit

marginsinruralareasbyalargeramount.

Figure3:TotalhealthcareemploymentoutsideMontana’smetro-areaandmicro-areas,2013-2017

Notes:Author’sanalysisofQuarterlyCensusofEmploymentandWages(QCEW)data.Figurerepresentstotal

statewideemploymentminusemploymentinYellowstone,Missoula,Cascade,Gallatin,Flathead,Lewisand

Clark,andSilverBowcounties.

Figure3helpsillustratetheimpactofMedicaidexpansiononthehealthcaresectorin

ruralareasinMontana.Consistentwithimprovementsinruralproviders’financials,health

45Lindrooth,R.C.,Perraillon,M.C.,Hardy,R.Y.,&Tung,G.J.(2018).UnderstandingTheRelationshipBetweenMedicaidExpansionsAndHospitalClosures.HealthAffairs,37(1),111-120.

15400

15600

15800

16000

16200

16400

16600

2013 2014 2015 2016 2017


24

careemploymentinMontana’sruralareasbegangrowingonceMontanaexpanded

Medicaid.Inthetwoyearspriortoexpansion,totalhealthcareemploymentinrural

Montanagrewbarelyatall,lessthanonepercent,only100totalnewjobs.However,once

Medicaidexpanded,ruralhealthcaregrew,addingnearly600jobsintwoyears.

VI.FiscalEffects

Medicaidexpansionalsoaffectsthestate’sbudget.Whileitreducessomestatecosts,it

imposesothers.Asnotedpreviously,thestate’sshareofexpansioncostswillrisetoten

percentin2020andbeyond.Technically,thecosttothestateismorecomplicatedthan

this.BecauseMontanaoffers12-monthcontinuouseligibility,itmustpayaslightlyhigher

shareofcosts.However,thefederalgovernmentpaysfor100percentofcertainexpansion

costs(e.g.,costsofservicesprovidedbytheIndianHealthService).Accordingtothe

LegislativeFiscalDivision’s2021BienniumBudgetAnalysis,theGeneralFundcostof

Medicaidexpansionrisesto8.9percentofthetotalMedicaidcostinFY2021.46

Asubstantialproportionofthecosttothestateisoffsetbyvarioussavings.As

discussedabove,MedicaidexpansionreducesthecostoftraditionalMedicaid,healthcare

spendingbytheDepartmentofCorrections,andspendingonsubstanceusedisordersand

mentalhealth.47PremiumspaidbyHELPbeneficiariesalsohelpoffsetcosttothestate

generalfund.48Intotal,weestimatethesesavingsoffset71percentoftheexpectedgeneral

fundcostsinFY2020and64percentoftheexpectedgeneralfundcostsinFY2021.Assuch,

theexpectedcosttothestategeneralfundnetofthesesavingsisapproximately$17

millioninFY2020and$23.7millioninFY2021.

However,asdescribedinSectionsIIIandIV,Medicaidexpansionalsoincreases

economicactivity.Increasedactivitywillincreasestaterevenues.Theincreaseinstate

revenuesattributabletoMedicaidexpansionwilllikelyexceedtheremainingcostof

46https://leg.mt.gov/content/Publications/fiscal/BA-2021/2021BienniumVolume1_Final.pdf[accessedDecember22,2018]47WeuseestimatesfrmMedicaidExpansion:HowitaffectsMontana’sstatebudget,economy,andresidents.https://mthcf.org/wp-content/uploads/2018/06/Manatt-MedEx_FINAL_6.1.18.pdfforsomeofthesesavings;however,forDepartmentofCorrectionssavingsweuseadifferentestimatebasedonthechangeinoutsidemedicalspendingbeforeandafterexpansion.Pre-MedicaidexpansionannualoutsidemedicalcostsfortheDepartmentofCorrectionstotaled$8.3million.Afterexpansion,theytotaled$5.5million.Thus,spendingforoutsidemedicalcarefellby$2.8million.Inaddition,weassume$2.6millionperyearinfacilityreimbursementsavings.WealsousetheprojectedtraditionalMedicaidsavingsfromtheLFDreportforFY20andFY21.48Asweunderstandit,premiumpaymentstothefederalgovernmentareincludedaspartofthetotalcosttothestate,sowesubtractthefullpremiumestimatefromthestatetotal.Basedoncorrespondencewithstateofficials,weassumepremiumswillbe$4.6millionperyearinFY20andFY21.


25

Medicaidexpansion.Table9presentsasimpleanalysisofthenetfiscaleffectsofMedicaid

expansionbasedonlyontaxrevenues.Onaverage,between2012and2016,totalstatetax

revenesequaledsixpercentofstategrossdomesticproduct.Assuch,weassumethatthe

staterecovers6percentoftheincreaseinGDPattributabletoMedicaidexpansion.49We

applythisvaluetotheincreaseinGDPpresentedinTable1andtotheestimatespresented

inAppendixC,TableA6forAlternative3.ThisanalysissuggeststhatMedicaidexpansion

hasapositiveneteffectonMontana’sstatebudget.

Forinstance,assumingthathalfofthenetcostestimatesineachofFY2020andFY2021

willbeincurredinCY2020thenetcostofMedicaidexpansioninCY2020willbe$20.4

million.TheREMImodelestimatespresentedinTable1suggestthatMedicaidexpansion

willadd$420milliontogrossdomesticproductin2020.Applyingthe6percentaverage

taxsharetothechangeinGDPsuggeststhatMedicaidexpansionwillgenerate$25.2

millioninstatetaxrevenueinCY2020.Thisexceedstheremainingcostestimateby$4.8

million.TheempiricalestimatesinSectionIVandalternativeREMIspecificationssuggest

thepositiveneteffectofMedicaidexpansiononthestatebudgetmaybeevenlarger.

Table9:NetfiscaleffectofMedicaidexpansion($millions)forcalendaryears2016-2020 2016 2017 2018 2019 2020NetcostofexpansiontoMT -$10.2 -$5.3 $3.3 $10.7 $20.4

EstimatedtaxrevenuesbasedestimatesinTable1

$13.7 $26.4 $30.5 $28.7 $25.2

Neteffectonstatebudget $23.9 $31.7 $27.2 $18.0 $4.8

EstimatedtaxrevenuesbasedonestimatesTableA6Alt.3

$14.5 $28.0 $32.4 $30.5 $26.9

Neteffectonstatebudget $24.7 $33.3 $29.1 $19.8 $6.5Notes:Taxrevenuesequal6percentofestimatedimpactonGDP.

TheresultsinTable9focusexclusivelyontheeffectofMedicaidexpansionontax

revenue.However,theincreaseineconomicactivityattributabletoMedicaidexpansion

willlikelyaffectotherpartsofMontana’sbudget.Itwillincreaseotherformsofrevenue,

anditmaychangeexpenditures.ThemarginaleffectofMedicaidexpansionontheseother

aspectsofthebudgetisuncertain.Table10presentstheresultsbasedonabroader

approach.TheseresultsusetheFiscalImpactAssessmentTool(“FIAT”),amodulethat

estimatesstaterevenueandexpenditureimpactsbasedontheoutputfromtheREMI

49StatetaxrevenuedataobtainedfromtheU.S.CensusBureau’sAnnualSurveyofStateGovernmentFinances.GrossstateproductobtainedfromtheBureauofEconomicAnalysis.


26

model.UsingtheFIAT,wefindthatby2020bothtotalrevenuesandexpendituresrise,but

theneteffectisa$42.1millionincreaseinstatefiscalresources.Thisissubstantiallymore

thantheestimated$20.4millionnetcostin2020.

Table10:NetfiscalimpactsofREMIresultsinTable1usingtheFIAT(millionsof$2018) 2016 2017 2018 2019 2020TotalRevenues 26.1 53.0 65.3 66.5 63.9TotalExpenditures -12.4 -15.7 -5.7 8.9 21.8NetFiscalImpact 38.5 68.7 71.0 57.6 42.1CumulativeFiscalImpact 38.5 107.2 178.2 235.8 277.9Note:TheFIATmodeloutputisin$2012.Weinflateto2018usingthechainedPCEindexobtainedfrom

https://fred.stlouisfed.org/series/PCEPI.

TheFIATmodeluseshistoricalaveragerelationshipsbetweeneconomicactivity

(particularlypopulation,personalincome,andemployment)andstaterevenuesand

expenditurestoprojecthowrevenuesandexpenditureschangeinresponsetochanging

population,personalincome,andemployment.Assuch,theseresultscomewithan

importantcaveat.Theyarebasedonthehistoricalaveragerelationshipsbetweeneconomic

activityandstaterevenuesandspending.However,thefuturemarginalfiscalimpactof

Medicaidexpansionmaydifferfromthehistoricalaveragerelationshipbetweeneconomic

activityandthestatebudget.Somerevenuesandexpenditureswilllikelybeunaffectedby

Medicaidexpansion.Otheraspectsofthestatebudgetmaymovebymorethanaverage.

Ultimately,itisdifficulttoisolatetheeffectsofMedicaidexpansionthroughoutthewhole

budget(bothrevenuesandexpenses).Statebudgetsareveryflexibleandrespondto

shockslikeMedicaidexpansionincomplicatedways.50However,inMontanaandinmost

otherstates,staterevenuesandexpenditurestendtoremainatarelativelyconstantshare

ofeconomicactivityoverlongperiodsoftime.Assuch,theapproachinTable9andthe

FIATapproachlikelyprovideareasonableestimateofMedicaidexpansion’sfiscaleffects.

VII.Conclusion

MedicaidexpansionhasasubstantialpositiveimpactonMontana’seconomy.While

impactsvaryfromyear-to-year,itbringsover$600millionofnewspendingintoMontana’s

economyeachyear.ThisspendingripplesthroughMontana’seconomy,generating

thousandsofjobsandhundredsofmillionsinpersonalincomeeachyear.Forinstance,in

50AlongerdiscussionofthechallengesofestimatingbudgetimpactsofMedicaidexpansioncanbefoundin

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


27

2020,weestimatethatitwillsupportnearly6,000jobsand$350millioninpersonal

income.Inadditiontogeneratingeconomicactivity,Medicaidexpansionappearsto

improveoutcomes—reducingcrime,improvinghealth,andshrinkingdebt.Whilethestate

paysforthesebenefits,thecoststothestatebudgetaremorethanoffsetbythesavings

createdbyMedicaidexpansionandbytherevenuesassociatedwithincreasedeconomic

activity.

Likeanystudy,thisstudyhaslimitations.Theassumptionsusedtoestimatethedirect

impactsofMedicaidexpansionmaybeunderminedbyreal-worldevents.Similarlythe

assumptionsthatunderlietheREMImodelmayalsofailtoaccuratelycapturetheeconomic

relationshipsatissue.Inordertoaccountfortheseweaknesses,weconductedseveral

sensitivityanalyses.Thatis,weestimatedseveraladditionalmodelsusingalternative

assumptions.Ingeneral,theseadditionalanalysesyieldresultssimilartothosedescribed

here.

Acrossavarietyofspecifications,Medicaidexpansiongeneratesseveralthousand

additionaljobsandseveralhundredmilliondollarsinadditionalincome.Thecumulative

effecttendstobeanapproximateonepercentincreaseinemploymentandincome.These

resultsalignempiricalestimatesfortheimpactofMedicaidexpansionontotalemployment

inasetofstateswheretheimpactofMedicaidexpansiononinsurancecoverages

resemblesthechangeinMontana.

Atthislevelofactivity,Medicaidexpansionalsopaysforitself.Thesavingsand

additionalrevenuesattributabletoMedicaidexpansionexceedthecoststothestate.While

theremaybeconditionsunderwhichMedicaidexpansionimposesnetcostsonthestate,

weexpectsuchinstancestooccurrarely,assumingMedicaidexpansionretainsitscurrent

structure.


28

Appendix

A.Selectingcomparisonstates

Inthedifferences-in-differencesanalysisinSectionIVandseveralsimilaranalyses

describedinthisappendix,welimitthesetofexpansionstatesincludedintheanalysis.We

limitthesetofexpansionstatesexaminedbecausestates’experienceswithMedicaid

expansionvarywildly,andMontana’sexperienceisaboveaverage.

FigureA1helpstoillustratethevariationacrossstates.Itplotstheshareofexpansion

eligible(peopleages18-64withincomelessthan139percentofFPL)withMedicaid

(horizontalaxis)againstthesharewithanyinsurance(verticalaxis).

FigureA1:ChangeinsharewithanyinsuranceandsharewithMedicaidamongpeopleages18-64withincome<139FPLinexpansionstates

Notes:Author’sanalysisofAmericanCommunitySurveymicrodataobtainedfromIPUMS-USA.Change=

Level2017–AvgLevel2010-2013.

Weincludethestateslistedinredinouranalyses.Inthesestates,theaveragechange

alongbothdimensionsisroughlyequaltothechangeinMontana.Theincludedstatesare

alsowellmatchedtothecontrol(non-expansion)states.Thatis,theincludedstateswere

similartonon-expansionstatespriortoexpansion.


29

FigureA2showstheaverageshareofpeoplewithanyhealthinsuranceintheincluded

expansionstatesandnon-expansionstatesduring2010-2013.Thedifferencesaresmall

andstatisticallyinsignificant.

FigureA2:Averageshareof18-64yearoldpopulationwithanyhealthinsurance2010-2013byincomelevel

Notes:Authors’analysisofAmericanCommunitySurveymicrodataobtainedfromIPUMS-USA.

Werecognizethatonecouldarguefortheinclusionorexclusionofvariousstates

aroundthemargins.Inlightofthis,weconductedsensitivityanalysesthatmodifiedtheset

ofincludedstates.Modifyingthesetofincludedstatesslightlychangesthecoefficientsand

levelsofstatisticalsignificanceslightly,buttheoverallpatternofresultsisunaffected.

B.DirecteffectsforREMImodel

ToestimatetheeconomicimpactsofMedicaidexpansion,weneedtounderstandthe

directeffectofMedicaidexpansiononMontana’seconomy.Thatis,weneedtoanswerthe

question:“WithoutMedicaidexpansion,whichpartsoftheeconomywouldhavemore/less

moneyandhowmuchmore/lesswouldtheyhave?”

AsdescribedinSectionIII,Medicaidexpansionintroducesthreekeychanges:

(1) Medicaidexpansionchangeslow-incomeMontanans’insurancecoverage(bothwhethertheyarecoveredandthetypeofinsurancethosewithcoveragehave);

(2) Medicaidexpansionchangeshowmuchhealthcarelow-incomeMontanansconsume;and

0.55

0.75

0.56

0.77

<139 All

Includedexpansion

Non-expansion


30

(3) Medicaidexpansionchangeswhopaysforlow-incomeMontanans’healthcare. Incombination,thesethreechangesproducethedirecteffectsofMedicaidexpansion.

1.HowdoesMedicaidexpansionchangeinsurancecoverage?

Medicaidexpansionreducesthenumberofuninsuredpeopleandchangesthe

proportionofpeoplewithdifferenttypesofinsurance(e.g.,traditionalMedicaid,employer

sponsored,directpurchase).

AportionofMedicaidexpansionbeneficiarieswouldhavebeenenrolledintraditional

Medicaidwithoutexpansion.Thistransfersavesthestatemoney.Weusesavingsestimates

fromthestatetoestimatethesizeofthispopulationusingthefollowingequation:

!"#"$ !"#$ !ℎ!"# !"#$%&!! = !"#"$ !ℎ!"#!"#$ ∗ !"#$%&$'!"#$%,!

Forpurposesofthiscalculation,weassumethatshiftingthispopulationfromtraditional

Medicaidtotheexpansiondoesnotchangetheirtotalspending.Giventheserelationships,

totalspendingamongthispopulationequals:

!"#$%&$'!"#$%,! =!"#"$ !"#$ !ℎ!"# !"#$%&!!

!"#"$ !ℎ!"#!"#$

Giventhisrelationship,weestimatethetotalhealthcarespendingamongtheMedicaid

transferpopulationisapproximately12percentoftotalexpansionspending.Ifweassume

thattheaveragespendingperpersoninthetransferpopulationequalstheaverage

spendingperpersoninthenon-transferpopulation,thissuggeststhat12percentof

expansionbeneficiarieswouldhaveenrolledintraditionalMedicaidwithoutexpansion.

ThevastmajorityoftheremainingMedicaidexpansionbeneficiarieswouldhavebeen

uninsuredwithoutexpansion.Toestimatethisshareandtheshareofpeoplewhoswitch

fromotherformsofinsurance,weuseadifferences-in-differenceanalysissimilartothe

onepresentedinSectionIV.However,inthisanalysis,theoutcomesaretheshareofpeople

withMedicaid,anyinsurance,orprivateinsurance.51

51ForthisanalysisweuseAmericanCommunitySurveypublic-usemicrodatafortheyears2010-2017obtainedfromIPUMS-USA.WenotethattheACSinsurancequestionshaveknownlimitations.E.g.,onestudyfoundthatitsystematicallyundercountsMedicaidenrollmentby23percent.Bourdreaux,M.,K.ThiedeCall,JTurner,B.Fried,andB.O’Hara(2013)AccuracyofMedicaidReportingintheACS:PreliminaryResultsfromLinkedData.SHADACandUSBureauofCensus.


31

WeusetheresultsfromthisanalysistoestimatewhattypesofinsuranceMedicaid

expansionbeneficiarieswouldlikelyhavewithoutexpansion.Specifically,wedividethe

differences-in-differencescoefficientforthechangeintheshareofpeoplewithaparticular

typeofinsurancebythechangeinthesharewithMedicaid.TableA1presentstheresults

fromthisanalysis.

TableA1:CompositionofchangeinMedicaidenrollmentforselectedpopulations. ComparisonStates,all18-64 Montanaonly,all18-64 Any Private Any PrivateYear1 0.75 0.27 0.88 0.11Year2 0.73 0.28 0.81 0.16Year3 0.77 0.23 Year4 0.74 0.26

Average 0.75 0.26 0.84 0.13

ComparisonStates,18-64<139FPL

Montanaonly,18-64<139FPL

Any Private Any PrivateYear1 0.83 0.18 0.62 0.29Year2 0.79 0.21 0.80 0.22Year3 0.81 0.20 Year4 0.75 0.27

Average 0.80 0.21 0.71 0.25

Averageasshareoftotalenrollment,assuming12percentwithinMedicaidtransfer Private Private Private PrivateAll 0.66 0.23 0.74 0.12<139 0.70 0.19 0.63 0.22Notes:Authors’analysisofAmericanCommunitySurvey2010-2017microdataobtainedfromIPUMS-USA.

Regressioncoefficientsthatformbasisforlistedsharesobtainedfromregressingsharewitheachtypeof

insuranceoninteractionsequaltooneifanincludedexpansionstateNyearsafterexpansioninthatstate

alongwithstateandyearfixedeffects.Thepopulationintheseregressionsislimitedasdescribedintable

withanadditionalrestrictionthattheindividualhaveonlyonetypeofinsurance.

Wereportresultsforfourdifferentpopulations.Thetopportionofthetableexamines

coverageamongtheentire18-64year-oldpopulation,andthebottomportionexamines

coverageamong18-64yearoldswithincomesbelow139percentofthepovertyline.The

leftportionofthetablepresentsresultsthatcomparetheselectedMedicaidexpansion

statestonon-expansionstates,andtherightportionpresentsresultsthatcompare

Montanatonon-expansionstates.Theresultsvarysome,butthegeneralpatternisthe

same–thevastmajorityofthegrowthinMedicaidcoveragecamefromtheuninsured

population.Forinstance,intheselectedexpansionstates(i.e.,stateswhereuninsurance

declinedbyasimilaramounttoMontana),approximately75percentofthenetchangein

Medicaidenrollmentcamefromtheuninsured.TheremaininggrowthinMedicaid


32

enrollmentprimarilyreflectsareductionintheshareofpeoplewithsomeformofprivate

insurance.

TheseestimatesfocusonthenetchangeintotalMedicaidenrollment.Assuch,theydo

notaccountforwithin-Medicaidtransfers.Forpurposesofouranalysis,weassumethat12

percentoftotalexpansionenrollmentareMedicaidtransfers.Assuch,weassumethat

roughly60-70percentofexpansionenrolleescomefromtheuninsuredpopulation.

Weassumetheremaining18-28percentofMontanaMedicaidexpansionenrollees

switchfromsomeformofprivateinsurance.Theallocationoftheseenrolleesbetween

employer-sponsoredanddirectpurchaseinsuranceismoredifficulttodetermine.Analyses

ofMedicaidexpansionseffectsontheshareofpeoplewithdifferenttypesofprivate

insurancedonotyieldconsistentresults.Someanalysessuggestthat70percentoftheshift

fromprivateinsurancetoMedicaidwasamongpeoplewithemployer-sponsored

insurance,otherssuggestthat70percentofthisshiftwasfrompeoplewithdirectpurchase

insurance.

Forthepurposesofthisanalysis,wealsoneedtoidentifythosewhowouldhave

receivedsubsidiesfromthefederalgovernmenttoobtaininsurancethroughtheexchange.

WhentheseindividualsswitchtoMedicaid,thefederalgovernmenteffectivelytransfers

whatitwouldhavespentonsubsidiestoMedicaidexpansion.Assuch,aportionof

Medicaidexpansionspendingfortheseindividualsdoesnotrepresentnewmoneyin

Montana’seconomyandshouldnotbeincludedasdirectimpacts.

Unfortunately,thedatatoestimatemovementfromtheexchangetoMedicaid

expansionislimited.Thesurveyusedintheanalysesabovedoesnotseparateexchange

coveragefromotherformsofdirectpurchaseinsurance.Giventhatsubsidiesareonly

availabletoindividualswithincomeabove100percentofthefederalpovertyline,theset

ofbeneficiarieswithincomeabovethisthresholdprovideanupperboundestimateforthis

value.AccordingtoDPHHS,11percentofexpansionbeneficiarieshaveincomesabove100

percentFPL.52Ofcourse,itisunlikelythatall(orevenmostofthispopulation)was

enrolledontheexchange.AccordingtodatafromtheMedicalExpenditurePanelSurvey

(“MEPS”),only6percentofAmericansages18-64withincomebetween100-150percent

oftheFPLwereenrolledonanexchangein2016.53Whilethesedataarenotreportedby

52https://dphhs.mt.gov/Portals/85/Documents/healthcare/MedicaidExpansionMemberProfile.pdf[accessedDecember22,2018]53MEPSdataobtainedfromIPUMS-MEPSincludedatafrom2010-2016.LynnA.Blewett,JuliaA.RiveraDrew,RisaGriffin,KariC.W.Williams,andDanielBackman.IPUMSHealthSurveys:MedicalExpenditurePanelSurvey,Version1.0[dataset].Minneapolis:UniversityofMinnesota,2018.http://doi.org/10.18128/D071.V1.0


33

thestate,thisvaluevariesonlyslightlyacrossregions.IntheSouth,wherefewstateshad

expandedMedicaidin2016,6.2percentofthispopulationwasenrolledinanexchange.In

theNortheast,wherenearlyallstateshadexpanded,thesharewas5.7percent.Adifferent

analysisofMEPSdatasuggeststhatonly3.5percentofthosewhogainedMedicaid

coverageinthispopulationwereenrolledintheexchangeatanypointduringtheyear

priortoMedicaidenrollment.

Thesedatasuggestthatonlyasmallproportionofthosewhoenrolledintheexpansion

otherwisewouldhaveenrolledintheexchangeandreceivedsubsidies.Weusethehigher

number(6percent)inordertoobtainamoreconservativeestimateofMedicaid

expansion’seconomicimpacts.Giventhat11percentofMontanaMedicaidexpansion

beneficiarieswereeligibleforsubsidiesthroughtheexchange,lessthanonepercentof

Medicaidbeneficiarieslikelywouldhaveobtainedsubsidieswithoutexpansion.

TableA2summarizesourassumptionsforthetypeofinsurancecoverageexpansion

beneficiarieswouldhavewithoutexpansion.Toillustratearangeofplausiblevalues,we

presenttwodifferentscenarios.

TableA2:IllustrativeallocationsofMedicaidexpansionbeneficiariestoalternativeformsofcoveragewithoutexpansionTypeofinsurance Uninsured 60% 70%TraditionalMedicaid 12% 12%EmployerSponsored 17% 11%Exchange 1% 1%Otherprivate 10% 6%

2.HowdoesMedicaidexpansionchangetotalhealthcarespending?

Individualhealthspendingchangeswithinsurancecoverage.Forthisstudy,themost

importantrelationshipisbetweenanycoverageandspending.Accordingtodatafromthe

MEPS,low-income(<150percentoftheFederalPovertyLine)individualsaged18-64

withoutinsurancespentapproximately$1,700onhealthcarein2016.54Thisis25percent

ofthespendingforsimilarindividualswhowereinsured($6,700).

Amongthosewithinsurance,spendingvariesbytype.TableA3presentsaverage

annualspendingforlow-incomeAmericansbetweentheagesof18and64withdifferent

54ThispopulationhasanagedistributionthatisverysimilartoMontana’sMedicaidexpansion.Weincludepeopleupto150percentoftheFederalPovertyLinebecausesurveymeasuresofMedicaidexpansioneligibilitytypicallyfailtoaccuratelyidentifythefullsetofMedicaidexpansionindividuals.Thismay,inpart,reflectthingslike12montheligibility.MEPSdataobtainedfromIPUMS-MEPS.


34

typesofinsurance.TheMEPSdoesnotseparatepeoplewithtraditionalMedicaidfrom

thoseintheexpansion.Assuch,theMedicaidvalueblendsbothpopulations;however,

reportedMedicaidspendingalignswithreportedperbeneficiaryspendinginthe

expansionpopulation.Accordingthemostrecentestimates,expansionspendingper

beneficiarywas$6,365inFY2015and$5,965inFY2016.55

TableA3:Averagehealthcarespendingforlow-incomeindividualsages18-64bytypeofhealthinsurance,2016 <150 Difference

withMedicaid

Uninsured $1,681 $4,886Privateinsurance $5,613 $948Group(e.g.,employer) $6,210 $345

Exchange $4,240 $2,341Medicaid $6,411 $0Notes:Authors’analysisofMedicalExpenditurePanelSurveydata.Foreachcategory,welimitthesampleto

individualsenrolledinthistypeofcoverageforthefullyear.TheMedicaidcategoryincludesbothtraditional

MedicaidandMedicaidexpansion.

WeobtainanestimatefornewhealthcarespendinginducedbyMedicaidexpansionby

combiningtheestimatesinTableA2withtheestimatesinTableA3.Multiplyingthe

differencewithMedicaidcolumnfromTableA3bythesharesinTableA2,summingthese

valuesanddividingbyaverageMedicaidspendingsuggeststhat48-55percentofMedicaid

expansionspendingisnewspending.

Asarobustnesscheck,wealsousetheMEPSdatafor2013-2016toestimatehow

individualhealthexpenditureschangewhensomeonegainsorlosesMedicaidcoverage.

Werestrictthesampletopeopleages18-64,andweregressthenaturallogofindividual

healthexpendituresonthenumberofmonthsofMedicaidcoverageoranindicatorequalto

oneiftheindividualwascoveredbyMedicaidinall12monthsalongwithindividualand

yearfixedeffects.TableA4presentstheresults.

Theseresultsareconsistentwiththeresultsabove.Theyindicatethat,onaverage,each

monthofMedicaidcoverageisassociatedwitha$267increaseintotalhealthcare

552017ActuarialReportontheOutlookforMedicaid.https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/Downloads/MedicaidReport2017.pdf[accessedDecember30,2018].


35

spending.TheseestimatessuggestthatobtainingMedicaidmorethandoubleshealthcare

spending.Assuch,50-60percentofMedicaidspendingisnewspending.56

TableA4:EffectofMedicaidcoverageonaveragehealthcarespending Totalhealth

expendituresTotalhealthexpenditures

Totalhealthexpenditures

Totalhealthexpenditures

Medicaidmonths

267***(29)

266***(43)

12monthsofMedicaid

3,560***(440)

3,637***(637)

Population All18-64 All18-64 Low-income18-64

Low-income18-64

N 85,007 78,010 47,228 21,837Notes:Authors’analysisofMEPSdataforyears2013-2016obtainedfromIPUMS-MEPS.Resultsfrom

regressionofln(totalhealthexpenditure+1)onMedicaidcoveragewithindividualandyearfixedeffectsfor

populationages18-64.Robuststandarderrorsinparentheses.***indicatesstatisticallysignificantat0.001

level.Fortheregressionthatfocusesonafull-yearofMedicaidcoverage,weexcludepeoplewithapartial

yearofMedicaidcoverage.TheMedicaidvariableincludesbothtraditionalMedicaidandMedicaidexpansion.

Asanadditionalrobustnesscheck,weusedataontotalhealthcarespendingbystate

between2010and2014toconductanadditionaldifferences-in-differencesregression.57

Again,welimitthesetofexpansionstatestothehighimpactstatesdescribedaboveand

comparethechangeinhealthcarespendinginthatsetofstatestothechangeinnon-

expansionstates.Specifically,weregressthenaturallogoftotalhealthspendingonan

indicatorforincludedexpansionstatesafterexpansionalongwithcontrolsforthenatural

logoftotalpopulation,thenaturallogofpersonalincome,thenaturallogofthepopulation

overage65,thenaturallogthepopulationwithadisability,andstateandyearfixedeffects.

ThisregressionsuggeststhatMedicaidexpansionincreasedtotalhealthcarespendingin

expansionstatesduringthefirstyearofexpansionby1.6percent(p<0.01).Applyingthis

estimatetoexpectedtotalhealthexpendituresinMontanain2016,suggestsMedicaid

expansionincreasedtotalhealthspendingbyapproximately$150million,or

approximately48percentof2016Medicaidexpansionspending.58

56E.g.,averageMedicaidspendinginthefull18-64year-oldpopulationaveragedapproximately$6,200.$267*12/$6,200=0.52.57Atpresent,2014isthemostrecentdatawithstatelevelhealthcareexpendituredataavailablefromtheNationalHealthExpendituresprogram.58ThemostrecentdataonhealthexpendituresinMontanaarefor2014.Toobtainanestimatefor2016,weapplythenationalrategrowthrateofpersonalhealthcarespendingin2015(6.1percent)and2016(4.9percent)tothe2014Montanaestimate($8.409billion).Wethenmultiplythisnumberby1.6percentanddividebytotal2016Medicaidexpansionspendingonbenefitsandclaims($315million).


36

Collectively,theseanalysessuggestthattotalhealthcarespendinginMontana

increasesbyanamountequaltobetween48-60percentoftotalMedicaidexpansion

spending.Inthemodelpresentedinthemainreport,weconservativelyassumethat48

percentofexpansionspendingisnewspending.

3.HowdoesMedicaidexpansionchangewhopaysforhealthcare?

ThefinalpartofdeterminingthedirecteffectsofMedicaidexpansionisdescribinghow

thesourceofhealthcarepaymentchanges.WithMedicaidexpansion,whopaysforcareis

relativelystraightforward.Thefederalgovernmentpaysformost(roughly90percentin

2020),thestatepaysalittle(roughly10percentin2020),and,becauseMontanahas

premiumsandcostsharing,thebeneficiariespayalittleaswell(lessthanonepercent).

WithoutMedicaidexpansion,whopaysforcareismorecomplicated.TableA2outlines

arangeofallocationsforthetypesofinsuranceexpansionbeneficiarieswouldhavehad

withoutexpansion.Theseestimatesprovideacrudeestimateforwhopaysforcare,but

therearecomplications.First,amongtheuninsured,mostspendingislikelyout-of-pocket;

however,someoftheirspendingmaybeoffsetbystateorfederalgovernmentprogramsor

bycharitabledonations.Second,amongthosewithemployersponsoredinsurance,

individualspayforpartofthecostintheformofpremiumsandout-of-pocketpayments.

Furthermore,economistsdebatewhopaystheemployershareofpremiums–the

employerortheemployee.

a.Federal

Thechangeinfederalspendingisgovernedby:

!"#"$%&! − !"#"$%&! = !! !" + !" + !" − ! − (!!!" + !")

where!! istheFMAPforexpansion,!"isexpansionspendingbypeoplewhootherwisewouldhavereceievedsubsidiestopurchasecoveragethroughtheexchange,!"isexpansionspendingbypeoplewhowouldhavebeencoveredbytraditionalMedicaid,!"isexpansionspendingbyeveryoneelse,!ispremiumspaidbyexpansionbeneficiaries,!! istheFMAPfortraditionalMedicaid,and!istheaverageexchagesubsidyforthosewhowouldhavereceivedthem.Overthelongruntheremaybeadditionalreductionsinfederal

spendingattributabletoMedicaidexpansion(e.g.,federalpaymentsforuncompensated

careweresupposedtobereducedbutthesereductionshavebeendelayed);however,we

havenotincludedthesepotentialreductionsinouranalysis.


37

Weassume!(averagespendingperexpansionbeneficiary)isthesameforallgroups.WeusethestatedFMAPforeachyear.Weassume!equals0.6percentoftotalspending(basedonstatebudgetreportsandforecasts).Wecompute!usingtheKaiserFamilyFoundation’sHealthInsuranceMarketplaceCalculatortoobtainsubsidyestimatesfor

someonewithanincomeequalto125percentFPLatfive-yearageintervalsfor2015and

140percentFPLfor2016-2019.Weaveragetheseamountsweightingbytheshareof

Medicaidexpansionbeneficiariesineachagegroup.59Tothisamount,weadd$1,500,the

averageapproximateannualCSRinMontanain2016.60Forfutureyears,weincreasethis

amountby5percent.

Wedonotincludeanychangeinfederalrevenuesinourcalculation.Forinstance,given

thatpaymentsforemployer-sponsoredhealthinsurance(“ESI”)arenottaxedasincome,

reducedspendingonESIwill(inpart)becomeincreasedincomeforworkers,proprietors,

orowners.Thisincomewillbetaxedatsomelevel.Suchrevenueincreasesoffsetthecost

ofexpansiontothefederalgovernment.However,wehavenotincludedsuchpaymentsas

partofourcalculationofthedirectimpactsofexpansion.

b.State

Thechangeinstatespendingisgovernedby:

!"#"$! − !"#"$! = !! !" + !" + !" − ! + !"#! + !"#! − !!!" + !"#! + !"#!

= !!(!" + !" − !) + !! − !! !" + !"#! − !"#! + (!"#! − !"#!)

whereallvariablesaredefinedthesameasinthefederalequationsand!! and!! arethestatesharesforexpansionandtraditionalMedicaid, !"#! − !"#! issavingstostate

facilitiesthatcannowbillMedicaidfor24hourinpatienthospitalizationandsimilar

savingstotheDepartmentofCorrections,and(!"#! − !"#!)issavingstothestatefromreducedspendingonmentalhealthandsubstanceabuse.Dataforthesavingfor24-hour

59http://dphhs.mt.gov/Portals/85/Documents/healthcare/MedicaidExpansionMemberProfile.pdf.60TheTrumpadministrationcanceledfederalCSRpaymentsfor2018.However,insuranceprovidersarestillobligatedtoprovidethem.Assuch,theyhaveraisedpremiums.Giventhestructureoffederalsubsidies,whichlimitpremiumstoapercentageofincomeforpeoplewithincomeslessthan400percentFPL,thefederalgovernmentstilleffectivelyfundsmostoftheCSRpaymentsbecausethegovernmentabsorbsmostoftheincreaseinpremiums.However,someoftheburdenforthehigherCSRpaymentswillfallonindividualswithincomesgreaterthan400percentFPLwhodonotqualifyforsubsidies.GiventhatMedicaidexpansionreducestheneedforCSRs,expansionmaylowerpremiumsforhigher-incomeMontanans.Wedonotincludethesesavingsinourmodel.


38

inpatientadmissionscomesfromthestateofficials.61Dataforthesizeofthesavingson

mentalhealthandsubstanceabusetreatmentcomesfromareportpreparedbyManatt.62

Wedonotincludeanychangeinstaterevenuesinourcalculation.Asdiscussedabove,

shiftingpeopleintotheexpansionlikelyleadstodirectchangesintaxrevenuethatmay

offsetpartofthecostofexpansiontothestate.However,wedonotincludetheserevenues

whencomputingthedirectimpactofexpansion.

c.Individualsandemployers

Thechangeinindividualspendingisgovernedby:

!"#! − !"#! = ! − !!! ∗ (!! + !!)! + (!! + !!)! + (!! + !!)!

where!equalstheindividual’sMedicaidexpansionpremium,Oequalsout-of-pocketspendingand!equalstheindividual’spremiumcontributionforeachtypeofcoverage(uninsured(U),unsubsidizeddirectpurchase(I),subsidizedexchangepurchase(X),

employer-sponsored(E))withoutexpansion.

WeuseMEPSspendingdatatocapturespendingamongtheuninsured.Weusethe

priceofanexchangepolicy(computedusingthesamemethodaswasusedtocomputethe

sizeoftheexchangesubsidy)tocomputethepremiumforindividualswithdirectpurchase

insurance.WeusedatafromtheMEPSInsurance/EmployerComponent63tocomputethe

individualcontributionforanindividualemployer-sponsoredplaninMontana.Wegrowall

valuesat5percentperyear.

Thechangeinemployerspendingequalstheemployercontributiontimesthenumber

ofpeoplewhoswitchfromanemployerpolicy.WealsouseMEPS-IEtoobtainaverage

employercontributionforanindividualpolicyinMontana.

CombinedtheseassumptionsguidehowweallocateMedicaidexpansionspendingin

theREMImodel.TableA5presentsareasonablerangeofallocationsgiventheabove

assumptions.Forinstance,onesetofassumptionsassumesthat48percentofMedicaid

expansionspendingsupportsnewhealthcarespending,9percentrepresentssavingsto

61Incorrespondence,stateofficialsdocumenta$2.8millionreductioninoutsidespendingonhealthcareintheDepartmentofCorrections.Theyalsonoteanadditional$2.6millionsavingstostatefacilitiesthatcannowbillMedicaidfor24hourinpatienthospitalization.62MedicaidExpansion:HowitaffectsMontana’sstatebudget,economy,andresidents.https://mthcf.org/wp-content/uploads/2018/06/Manatt-MedEx_FINAL_6.1.18.pdf63https://meps.ahrq.gov/data_stats/quick_tables_search.jsp?component=2&subcomponent=2


39

otherfederalprograms,5percentissavingstootherstateprograms,24percentrepresents

savingstoindividuals,and13percentrepresentssavingstoemployers.

TableA5:RangeofallocationsofMedicaidexpansionspendingacrossgroups Lowrange HighrangeNew 48% 55%Federal 9% 9%State 5% 5%Individuals 25% 25%Employers 13% 7%

C.Resultsfromalternativespecifications

TableA6presentsresultsfromseveralalternativeREMIspecifications.Ineach

specification,wekeepactualandprojectedMedicaidexpansionspendingfixed,butwevary

theshareofspendingthatsupportsnewhealthcarespending,thesharethatoffsetsother

federalorstatespending,andthesharethatoffsetsindividualoremployerspending.For

eachspecification,wepresentonlytheresultsfortheyear2020.

WhiletheassumptionsabouttheallocationofMedicaidexpansionspendingvary,the

basicorderofmagnitudeoftheresultsdoesnot.Givenprojectedspending,theREMImodel

calculatesthatMedicaidexpansiongeneratesroughly6,000jobs,roughly$350millionin

personalincome,androughly$430millioningrossdomesticproduct.Inthemaintext,we

presentthemostconservativeassumption.

TableA6:Alternativeeconomicimpactestimatesfor2020(millionsof$2018) Table1 Alternative1 Alternative2 Alternative3Jobs 5,906 5,977 6,080 6,272PersonalIncome

$348 $367 $351 $356

GDP $420 $428 $435 $449

Assumedallocationsbeneficiariesofexpansionspending

New:48%Federal:9%State:4%

Individual:27%Employer:12%

New:52%Federal:20%

State:9%Individual:12%Employer:8%

New:52%Federal:15%

State:7%Individual:14%Employer:14%

New:55%Federal:9%State:4%

Individual:24%Employer:9%

D.Differences-in-DifferencesModel

Thedifferences-in-differencesanalysespresentedinSectionIVresultfromestimating

equationswiththeform:


40

!!" = !!!"#!! + !!!"#!! + !!!"#!!+!!!"#!! + !!"!! + !! + !! + !!"

Wherethevariablesareasfollows:

• !!"istheoutcomeofinterest:ln(healthcareemployment),ln(healthcarecompensation,ln(healthcareGDP),ln(totalemployment).ThedataforeachoftheseoutcomeswasobtainedfromtheBureauofEconomicAnalysis’RegionalEconomicAccounts;

• !"#!" isavariableequalto1ifstateiisanexpansionstatejyearssinceexpansion(j=0isthefirstyearofexpansion),andzerootherwise;

• !!"isavectorofcontrolvariablesthatincludesln(totalpopulation),ln(tradedsectoremployment),ln(populationoverage65),ln(populationwithadisability),andln(populationoverage25withatleastaBachelor’sdegree)foreachstateandyear.Thedatafortotalpopulation,overage65,withadisability,andwithaBachelor’sdegreewereobtainedfromtheCensus.Totaltradedsectoremploymentwasobtainedbyapplyingestimatesforthepercentofemploymentineach2-digitNAICSindustryinthetradedsectorobtainedfromJensen(2012)tostate-year2-digittotalemploymentestimatesfromtheBureauofEconomicAnalysisRegionalEconomicAccounts;64

• !! arestatefixedeffects;and• !!areyearfixedeffects.

Weestimatethisequationusingdataforthe34includedstatesduringtheperiod2010-

2017.

Thecoreassumptionofadifferences-in-differencesanalysisistheparalleltrend

assumption.Thatis,thisanalysisrestsontheassumptionthat,intheabsenceofMedicaid

expansion,thechangeinoutcomesforexpansionstateswouldhavefollowedthesame

trajectoryasnon-expansionstates.

Onewaytotestthereasonablenessofthisassumptionistoexaminethechangein

outcomepriortoexpansion.Ifexpansionandnon-expansionstatesfollowedsimilar

trajectoriespriortoexpansion,itisplausiblethattheywouldhavefollowedsimilar

trajectoriesafterexpansion.Assuch,onecanperformadifferences-in-differencesanalysis

intheperiodspriortoexpansion.Ifoneobservesstatisticallysignificantresultsinthepre-

period,thentheexpansionstatesmayhavebeenfollowingadifferenttrajectorypriorto

expansionandthenon-expansionstatesmaynotprovideareasonablecontrolgroup.

64Jensen,J.B.(2011).Globaltradeinservices:fear,facts,andoffshoring.Washington,DC:PetersonInstituteforInternationalEconomics,Table2.3.


41

Totestthisassumptionweestimatethefollowingregression:

!!" = !!!!"#!!! + !!!!"#!!! +!!!!"#!!! + !!!"#!! + !!!"#!! + !!!"#!!+!!!"#!! +!!"!! + !! + !! + !!"

Thisdifferences-in-differencesanalysiscomparesthechangeinoutcomebetween

expansionandnon-expansionstateintheperiodspriortoexpansion.Wepresentselected

resultsinTableA7.Wedonotobserveaconsistentpatternofstatisticallysignificant

differences.Thereisabitofevidence(thoughnotstatisticallysignificant)thatexpansion

states’healthcaresectorsbegangrowingpriortoexpansion.Thismaybedrivenbythe

handfulofstatesthatbeganexpandingMedicaidin2013;itmayreflectprovidersbuilding

capacityinanticipationofexpansion;oritmayreflectsomeothereffect.65Totheextent

thesechangesaretheresultofexpansion,ourmainestimatesunderestimatetheeffectsof

Medicaidexpansion.

TableA7:Selectedcoefficientsfromtestsofparalleltrendassumption Ln(health

careemployment)

Ln(healthcareGDP)

Ln(totalemployment)

Ln(localsector

employment)4yearspre-expansion

-0.014(0.009)

-0.003(0.006)

-0.002(0.002)

-0.003(0.003)

3yearspre-expansion

-0.013(0.009)

0.000(0.005)

-0.001(0.002)

-0.002(0.003)

1yearpre-expansion

0.008(0.006)

0.010(0.007)

0.001(0.002)

0.002(0.003)


regressionsspecifiedasaboveandincludesamecontrolsasmainspecification.

Theinterpretationofourdifferences-in-differencesresultsisfurthercomplicatedby

thefactsthatnoteverystateexpandedatthesametimeandexpansiontimingvarieswith

respecttotheimplementationofotherpartsoftheACA.Assuch,wepresentanadditional

robustnesscheckwhereweseparatetheincludedexpansionstatesintothosethat

expandedin2014andthosedidnot.Theresultsfromtheseanalysesshowsimilareffects,

inspiteofthefactthatexpansioninthesegroupsoccurredatdifferentpointsrelativeto

otherchangesinducedbytheACA.

65Consistentwithanticipatoryeffects,healthcareemploymentinMontanabegantogrowatafasterrateinthequarterfollowingtheHELPact’spassage(whichwastwoquarterspriortoimplementation).


42

TableA8:Differences-in-differencesresultsfor2014expansionstatesandpost-2014expansionstates Ln(health

careemployment)

Ln(healthcare

employment)

Ln(totalemployment)

Ln(totalemployment)

Year1 0.020+(0.012)

0.009(0.006)

0.005(0.003)

0.000(0.002)

Year2 0.020(0.013)

0.016**(0.006)

0.006(0.004)

0.004+(0.002)

Year3 0.026+(0.014)

0.021*(0.010)

0.009*(0.004)

0.010**(0.003)

Year4 0.031+(0.016)

0.013*(0.005)

Expansionstates

Initial Late Initial Late


regressionsspecifiedasaboveandincludesamecontrolsasmainspecification.

Finally,wenotethestandarderrorsforourcoefficientsfrequentlyhoverrightaboveor

belowthestandard(thougharbitrary)0.05level.Thisisnotterriblysurprisinggiventhe

smallsamplesandrelativelysmalleffect.Wenotethatthecoefficients,though,remain

consistent.Changingthesetofstatesexamined,thesetofcontrolvariablesincluded,etc.

doesnotchangetheoveralltenoroftheresults.

E.ImpactofMedicaidExpansion/HELP-LinkonLaborForce

Participation

AsdiscussedinSectionV,laborforceparticipationamonglow-incomeMontanans

increasedafterMontanaexpandedMedicaid.Thesefindingsarebasedonananalysisof

microdatafromtheCurrentPopulationSurveyAnnualSocialandEconomicSupplement

andtheAmericanCommunitySurveyobtainedfromIPUMS.66

Inthemaintext,wefocusonindividualsages18-64withincomesbelow139percent

FPLwhodonotreportadisability.67Wereportthepercentageofpeopleinthisgroup

66Flood,S.King,M.,Ruggles,S.,andWarren,J.R,“IntegratedPublicUseMicrodataSeries,CurrentPopulationSurvey:Version5.0,”[dataset]Minneapolis:UniversityofMinnesota(2017).https://doi.org/10.18128/D030.V5.0;StevenRuggles,SarahFlood,RonaldGoeken,JosiahGrover,ErinMeyer,JosePacas,andMatthewSobek.IPUMSUSA:Version8.0[dataset].Minneapolis,MN:IPUMS,2018.https://doi.org/10.18128/D010.V8.067WecomputeincomeasapercentofpovertyusingIPUMS-CPSvariablesofftotvalandoffcutoff.


43

participatinginthelaborforcebeforeMontanaexpandedMedicaid(2012-2015)andafter

MontanaexpandedMedicaid(2016-2018).

TableA9:Differences-in-DifferencesRegressionAnalysisofImpactofMedicaidExpansiononLaborForceParticipationCurrentPopulationSurveyASEC Low-income

(0-138%FPL)HigherIncome(>138%FPL)

Low-income(0-138%FPL)

HigherIncome(>138%FPL)

Montana 0.056**(0.003)

0.043**(0.009)

0.062*(0.002)

0.049**(0.009)

After -0.053**(0.008)

0.007*(0.002)

-0.043**(0.006)

0.009**(0.002)

Montana*After

0.057**(0.006)

-0.022**(0.002)

0.037**(0.005)

-0.02**(0.002)

Controls Age,age2,sex,whitenon-Hispanic,child<18,stateand

yearFE

Age,age2,sex,whitenon-Hispanic,child<18,disabled

status,stateandyearFE

Population Non-disabled Non-disabled All AllN 129,925 617,458 154,341 658,173 AmericanCommunitySurvey Low-income

(0-138%FPL)HigherIncome(>138%FPL)

Low-income(0-138%FPL)

HigherIncome(>138%FPL)

Montana 0.074**(0.002)

0.032**(0.009)

0.079**(0.001)

0.043**(0.000)

After -0.036**(0.003)

0.006**(0.002)

-0.031**(0.003)

0.007**(0.001)

Montana*After

0.032**(0.001)

0.004**(0.001)

0.029**(0.001)

0.005**(0.001)

Controls Age,age2,sex,whitenon-Hispanic,child<18,stateand

yearFE

Age,age2,sex,whitenon-Hispanic,child<18,disabled

status,stateandyearFE

Population Non-disabled Non-disabled All AllN 2,040,660 8,091,695 2,604,575 8,848,404Note:Robuststandarderrorsclusteredatstatelevelinparentheses,**p<0.01,*p<0.05.

IntableA9,wereportresultsfromasimilardifferences-in-differencesanalysisthat

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

whethertheindividualhaschildrenlessthanage18,andstateandyearfixedeffects.The

effectsobtainedfromthisspecificationaresimilartothosereportedinthemaintext.


44

Relativetolow-incomepeopleinotherstates,laborforceparticipation(“LFP”)increased

by3-6percentagepointsmoreinMontanathaninotherareas.Thiseffectisnotobserved

amonghigher-incomeMontanans,suggestingthatthechangeinLFPisnotaMontana

effect,itonlyappliestolow-incomeMontanans.MedicaidexpansionandHELP-Link

provideaplausibleexplanationfortheseobservedeffects.

F.ImpactofMedicaidexpansiononhealthcaresector

TableA10presentsresultsthatareaquasi-replicationofthedifferences-in-differences

resultsinBlevin(2016,2017).Theyareaquasi-replicationbecauseouranalysisdiffersina

fewways.First,wepresentseparateresultsforproviderswhosefiscalyearextendsinto

somepartof2017(the2017group)andthosewhosefiscalyeardoesnot(the2016group).

Second,BlevinusesprovidercharacteristicsobtainedfromtheAmericanHospital

Associationinhisanalysis.Wedonothavethesedata,sowelimitthesampleanduse

controlvariablesobtainedfromCMS’sPOSfile.Third,weincludelateexpanders.Thatis,

weincludedatafromstates(NH,MI,PA,IA,MT,AK,LA)thatexpandedaftertheinitial

expansionintheanalysis.Third,weexcludealargersetofstatesas“pre-expansion”states.

InadditiontoexcludingstatesthatoptedintotheACAexpansionearly,wealsoexclude

statesthathadexpandedMedicaidtoalargersetofpeoplepriorto2014.68Fourth,wealso

tryandeliminatetheinfluenceofoutlierdatabyeliminatingthetopandbottomone

percentofnationaloutcomes;however,wearenotcertainweeliminatedoutliersinexactly

thesamemannerasBlevin.

Tocompletetheseanalyses,weusedataobtainedtheCenterforMedicareandMedicaid

Services’(“CMS”)HealthcareCostReportingInformationSystem(“HCRIS”)augmented

withdatafromCMS’sProviderofServices(“POS”)file.69AllMedicare-certifiedinstitutional

providersarerequiredtoreportinformationonfacilitycharacteristics,utilization,and

coststothesedatabases.Werestrictouranalysistoincludenon-federal,short-termand

criticalaccesshospitals.Wealsorestrictouranalysistoincludeproviderswhousea

consistent12-monthreportingperiodthroughouttheperiodexamined(2012-2017).70

Whilethesedatahavesomeknownlimitations(e.g.,implausiblevaluesforsome

variables),severalresearchershaveemployedthemtoinvestigatehospitalfinancial

68Specifically,weexcludeCalifornia,Colorado,Connecticut,Delaware,DC,Hawaii,Iowa,Massachusetts,Minnesota,NewJersey,NewYork,Vermont,andWashington.69HCRISdataobtainedfromhttp://www.nber.org/data/hcris.html70Someproviderschangedtheirreportingcycleatsomepoint.Asaresult,theseprovidersreportonlyapartialyearinoneoftheirreports.Thesesevenprovidersareexcludedfromtheanalysisbecausetheydonotfitconsistentlyintoeitherofthetwogroupsanalyzed.


45

performance.71Theyprovideconvenientaccesstoaconsistentsetofvariablesforalarge

numberofproviders.

HospitalsreportdatatoHCRISusingtheirownfiscalyear.Thiscreatesasignificant

challengeforthisanalysis.Noteveryobservationisclearlypre-orpost-expansion.For

someproviders,Medicaidexpansionbeganinthemiddleoftheirfiscalyear.Fortunately,

formostoftheseproviders,FY2017isavailable,sowehaveatleastonefullyearofpost

expansiondata,onethatincludesinformationfrom6to18-monthsafterthestartof

expansion.Otherprovidersfollowthecalendaryear.Theseprovidershaveacleanerpre-,

post-expansiondivide;however,weonlyhavedataforCY2016fortheseproviders

(CY2017dataisnotyetavailable).

TheresultsinTableA10aresimilartothosedescribedinBlevin(2016,2017).Relative

toprovidersinnon-expansionstates,providersinexpansionstatesexperiencerisingnet

Medicaidrevenues.Theaverageproviderinexpansionstatesenjoyedseveralmillion

dollarsofadditionalMedicaidrevenue.Theseeffectsgrowovertime.Similarly,relativeto

providersinnon-expansionstates,theaverageproviderenjoyedaseveralmilliondollar

reductioninuncompensatedcare.Theseeffectsalsogrowovertime.Theaverageprovided

sawuncompensatedcarefallby2.5percentoftotalexpensesmorethantheaverage

providerinnon-expansionstates.

Theaverageoperatingmarginalsoimprovedinexpansionstatesrelativetonon-

expansionstatesforthenearlytwo-thirdsofprovidersinthe2016group.Bythreeyears

afterexpansion,theaverageoperatingmarginhadimprovedby2.5percentagepoints.

However,operatingmarginsforprovidersinthe2017groupdonotshowsimilar

improvements.Theaveragechangeinoperatingmarginforthisgroupissmalland

statisticallyinsignificant.

TableA11replicatesTableA10butrestrictsthesetofMedicaidexpansionstatesto

includestateswithaboveaverageMedicaidgrowthafter2014.Thepotentialimpactof

Medicaidexpansionislikelylargerinthesestates.TableA2confirmsthis.Thebasicpattern

ofresultsissimilartothosepresentedabove;however,thesizeofthecoefficientsislarger

inalmosteverycase.

71SeeBlevin(2016,2017);Lindroothetal(2018);Bazzoli,G.J.,Fareed,N.,&Waters,T.M.(2014).Hospitalfinancialperformanceintherecentrecessionandimplicationsforinstitutionsthatremainfinanciallyweak.HealthAffairs,33(5),739-745.


46

TableA10:Differences-in-differencesanalysisofeffectofMedicaidexpansiononhospitalperformance

NetMedicaidRevenue UncompensatedCareUncomp.Careas%ofTotalExpenses

OperatingMargin

Yr 2017Group

2016Group

2017Group

2016Group

2017Group

2016Group

2017Group

2016Group

1 950568(740911)

1515697+(831667)

-617273(383278)

-2309174**(518020)

-0.006*(0.002)

-0.015**(0.003)

-0.003(0.007)

0.011*(0.005)

2 4936912**(1175690)

3086237*(1216801)

-2554580**(921546)

-3174756**(651988)

-0.018**(0.005)

-0.021**(0.003)

0.009(0.007)

0.014+(0.008)

3 6736014**(1485363)

4231590**(1214123)

-3062830**(877254)

-4446721**(518354)

-0.021**(0.006)

-0.026**(0.002)

0.004(0.008)

0.024*(0.010)

4 6979139**(2176856)

-3807065**(910543)

-0.023**(0.006)

0.002(0.009)

N 6481 10711 6334 10378 6332 10377 6347 10447

Notes:Authors’analysisofHCRISandPOSdataforshort-termandcriticalaccesshospitals.Allanalyses

includeproviderandyearfixedeffectsandcontrolsforruralstatus,bedcount,ownership,andservices

provided(openheartsurgery,alcoholanddrugservices,burncare,cardiaccatheterization,chemotherapy,

ob/gyn,andneurosurgicalservices).Providersinearlyexpansionstatesareexcluded.Topandbottomone

percentofoutcomemeasuresexcluded.AlldollarvaluesadjustedforinflationbasedonCPIformedical

expenses.Standarderrorsclusteredatstatelevel.+p<0.10,*p<0.05,**p<0.01.

TableA11:Differences-in-differencesanalysisofeffectofMedicaidexpansiononhospitalperformanceinaboveaverageexpansionstates

NetMedicaidRevenue UncompensatedCareUncomp.Careas%ofTotalExpenses

OperatingMargin

Yr 2017Group 2016Group

2017Group

2016Group

2017Group

2016Group

2017Group

2016Group

1 1775868+(1003950)

3750419**(872646)

-1125669**(264112)

-2547446**(403758)

-0.009**(0.003)

-0.017**(0.002)

-0.005(0.007)

0.012+(0.007)

29857050**(2786093)

8346136**(2555012)

-4579100**(790229)

-3702039**(498594)

-0.026**(0.005)

-0.026**(0.003)

0.018*(0.007)

0.014+(0.008)

311318310**(2111943)

7535823**(2084808)

-5097892**(634990)

-4253825**(488114)

-0.033**(0.005)

-0.025**(0.003)

0.015(0.010)

0.015+(0.008)

412657633**(3264866)

-5220159**(480428)

-0.030**(0.005)

-0.004(0.013)

N 5372 10163 5248 9737 5247 9736 5270 9742

Notes:Authors’analysisofHCRISandPOSdataforshort-termandcriticalaccesshospitals.Allanalyses

includeproviderandyearfixedeffectsandcontrolsforruralstatus,bedcount,control,andservicesprovided

(openheartsurgery,alcoholanddrugservices,burncare,cardiaccatheterization,chemotherapy,ob/gyn,and

neurosurgicalservices).Onlyaboveaverageexpansionstatesandnon-expansionstatesincluded.Topand

bottomonepercentofoutcomemeasuresexcluded.AlldollarvaluesadjustedforinflationbasedonCPIfor

medicalexpenses.Standarderrorsclusteredatstatelevel.+p<0.10,*p<0.05,**p<0.01.


47

G.ANoteonWoodworkEffects

SomearguethatthecostsofMedicaidexpansionshouldinclude“woodwork”effects,

whichmeansthattheavailabilityofMedicaidexpansionincreasesenrollmentintraditional

Medicaid.Ifso,thecostofMedicaidexpansioncouldincludethecostsassociatedwiththese

enrollees.

Wedonotincludewoodworkeffectsinthisanalysis,primarilybecausetheliterature

findsthattheACAincreasedenrollmentintraditionalMedicaid,buttheseincreaseswere

notrelatedtoMedicaidexpansion.Forinstance,onerecentstudyfound“similarly-sized

woodworkeffectsinallgroupsofstates,regardlessofMedicaidexpansionstatus.”72

Similarly,ourownanalysisofwoodworkeffectsinlate-expansionstatesdoesnotfind

evidencethatMedicaidexpansionincreasestraditionalMedicaidenrollment.

Ifoneweretoincludewoodworkeffects,itwouldbeimportanttoincludebothbenefits

andcosts,suchastheeffectsofincreasedactivityassociatedwiththisspending.

Furthermore,evenifoneassumesthatthereissomelevelofwoodworkeffectsassociated

withtheimplementationofMedicaidexpansion,oneshouldnotassumethatending

Medicaidexpansionwilleliminatethesecosts.Itisnotclearwhetherthoseeligiblefor

traditionalMedicaidwillreturntobeinguninsuredifMedicaidexpansionweretocease.It

seemslikelythatmanywouldremain.

H.Summaryofchangestopreviousreport

ThisreportupdatesandreplacesourApril2018report,TheeconomicimpactofMedicaidexpansioninMontana.Thecoremessageofbothreportsisthesame:

MedicaidexpansionbringsasubstantialamountofmoneyintoMontana’seconomy.

ThismoneycirculatesthroughMontana’seconomyincreasingtotalemployment

andincomebyapproximately1percentagepoint.Inadditiontothethousandsof

jobsandhundredsofmillionsinincome,Medicaidexpansiongeneratesother

benefits,e.g.,improvedaccesstohealthcare,betterhealth,betterfinancialhealth,

andlowercrime.InMontana,implementationofMedicaidexpansionandthe

associatedHELP-Linkprogramwasalsoassociatedwithimprovementsinlabor

forceparticipationamonglow-incomeMontanans.Similarimprovementswerenot

observedamonglow-incomeresidentsinotherstatesoramonghigherincome

Montanans.WhilethestatemustpaypartofthecostofMedicaidexpansion,the

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


48

combinationofbudgetsavingsattributabletoMedicaidexpansionplusthetax

revenuefromincreasedeconomicactivitymorethanoffsettheexpectedcosttothe

statebudget.

However,therearedifferencesbetweenthetworeports.Wesummarizethemain

differencesbelow.

(1) ActualandprojectedMedicaidexpansionspendingishigherinthenewreport.Thisgenerateslargereconomicimpacts.

Inourfirstreport,weprojectedMedicaidexpansionspendingusingacombinationof

datathatincludedexpansionspendingreportedbyDPHHSthroughlate201773,an

enrollmentforecast,andapermemberspendingforecast.74

Inthisreport,weusetheactualandprojectedspendingreportedbythestateonpage

13oftheLegislativeFiscalDivision’sLegislativeBudgetAnalysis:2021Biennium,Volume1:StatewidePerspectives.75

AsshowninFigure1,spendingintheLFDreportishigherthanweassumedinour

priorreport.Thedifferencelikelyreflectsavarietyoffactors:lagsinprocessingclaims,

higherenrollmentin2018-2020thanweassumed,andhigherspendingperbeneficiary

thanweweassumed.

Higherspendinggenerateslargereconomicimpacts.Inourlastreport,wereported

impactsofroughly5,000jobsand$280millioninpersonalincome.Inthisreport,we

reportimpactsofroughly6,000jobsand$350millioninpersonalincome.Thevast

majorityofthisdifferenceinimpactisattributabletothedifferenceintotalexpansion

spending.

(2) Theallocationofdirectimpactschangedbasedonupdateddataandadditionalanalyses.

Medicaidexpansionaddsmoneytothepocketsoffivegroups:providers(whoenjoy

increaseddemandandreduceduncompensatedcare),thefederalgovernment(Medicaid

73Specifically,wereportedspendingonhealthcareservicesintheMedicaidExpansionMemberProfilereportsregularlygeneratedbyDPHHS.https://dphhs.mt.gov/Portals/85/Documents/healthcare/MedicaidExpansionMemberProfile.pdf74OurspendingforecastwaslargelybasedontheperMedicaidexpansionbeneficiaryspendingforecastincludedinCentersforMedicareandMedicaidServices.2016ActuarialReportontheFinancialOutlookforMedicaid,(2016). 75https://leg.mt.gov/content/Publications/fiscal/BA-2021/2021BienniumVolume1_Final.pdf


49

expansionreducesspendingonsomefederalprograms),stategovernment(Medicaid

expansionreducesspendingonsomestateprograms),individuals,andemployers.How

muchexpansionspendingeachgroupcapturesaffectstheREMIresults.

TableA12comparestheallocationsweusedtocomputethemainresultsinboth

reports.First,inthisreport,wereducedshareofexpansionspendingthatrepresentednew

healthcarespendingfrom52percentto48percent.Thischangewasbasedonseveralnew

analysesconductedforthisreport.TheseanalysessuggesttheMedicaidexpansion

increasedtotalhealthcarespendingbybetween48-60percent.Whilethevalueassumedin

ourpreviousreportfallssquarelywithinthisrange,weoptedtochoosethebottomendof

therangeinordertoobtainamoreconservativeestimate.

TableA12:Allocationofexpansionspendingbetweenreports April2018 January2019New 52% 48%

Federal 19% 9%

State 8% 4%

Individual 12% 27%

Employer 9% 12%

Second,wereducedtheassumptionfortheshareofMedicaidexpansionspendingthat

wastransferredwithinthefederalgovernmentfrom19percenttoninepercent.Inpart,

thisreflectsadownwardrevisioninourestimatefortheshareofpeoplewhowouldhave

enrolledintraditionalMedicaidwithoutexpansion.Inpart,itreflectsadownwardrevision

intheshareofbeneficiarieswhowouldhavereceivedexchangesubsidieswithout

expansion.ThedeclineintheshareofspendingintraditionalMedicaidmostlystemsfrom

thefactthattheprojectedMedicaidsavingsremainedconstantbutestimatesforspending

increased.Thedeclineinexchangesubsidesreflectsadditionalanalysis.Inourfirstreport,

welookedatthechangeintheshareofexpansioneligiblepeoplewithdirectpurchase.To

ensureamoreconservativeestimate,assumedalargeshareofsuchpeoplereceived

subsidies.Inthisreport,weconductednewanalysesusinglongitudinaldatafromtheMEPS

thatindicatethattheshareofpeoplewhotransitionbetweenMedicaidandtheexchanges

isverysmall.Assuch,wereducedourassumptionfortheshareofexpansionbeneficiaries

whowouldhavereceivedexchangesubsidies.

Third,wereducedourassumptionfortheshareofexpansionspendingthatreduced

statespending.ThedownwardrevisionintheassumedshareofwithinMedicaidtransfers

describedinthepreviousparagraphdrivesthisresult.


50

Fourth,weincreasedourassumptionsforhowmuchMedicaidexpansionspending

reducedhealthcarespendingamongindividualsandemployers.Thisisthenatural

byproductofreducingtheassumedamountsintheothercategories.Theincreaseineach

oftheseareasreflectsbothanincreaseinthenumberofpeopleweassumewouldfallinto

thesecategorieswithoutexpansionandanincreaseinwhatweassumeeachpersonin

thesecategorieswouldpayinpremiumsandout-of-pocketcosts.

Thesechangesmakeonlyasmallimpactonourresults.TableA6Alternative1presents

resultsthatapplytheoldallocationtothenewspendinglevels.Thedifferencesinthe

resultsareveryminor(e.g.,lessthan100jobsin2020).

(3) WepresentanewanalysisthatestimatestheexpectedimpactofMedicaidexpansioninMontanabasedontheobservedchangesinotherexpansionstates.

TheresultsfromtheREMImodelrestonalargenumberofassumptions.First,theREMI

modelitselfisacomplicatedsetofassumptionsabouthowvariouspiecesoftheeconomy

interact.Second,weinputavarietyofassumptionsabouthowMedicaidexpansiondirectly

changesMontana’seconomy.WhiletheREMImodel’sassumptionshavebeenrigorously

investigatedandwhileweendeavoredtoselectreasonableestimatesforthedirecteffects

ofexpansion,itispossiblethatsomeofourassumptionsmissthemark.

GiventhatotherstatesexpandedMedicaidandmostexpandedbeforeMontanadid,we

canlookatwhathappenedintheseotherstatestoobtainanalternativeestimatefor

Medicaidexpansion’seffectsinMontana.Specifically,wedevelopadifferences-in-

differencesestimatethatcomparesthechangeinoutcomesinexpansionstatestothe

changeinoutcomesinnon-expansionstates.Theseresultsdonotrequireassumptions

abouttotalexpansionspending,theshareofthisspendingthatisnew,etc.Theysimply

provideananswertothequestion:“Howmuchdidthetrajectoryofeconomicactivityin

expansionstateschangerelativetonon-expansionstatesafterexpansion?”

ToobtainanestimatefortheeffectofexpansioninMontana(asopposedtotheaverage

effectofexpansionoverall),welimitthesetofstatesincludedtothosewhereexpansion’s

effectsoninsurancecoverageweresimilartoMontana.Conveniently,theuninsuredrate

amongtheeligiblepopulationinthissetofstatesmorecloselyresembledthatinnon-

expansionstatespriortoexpansion.

TheresultsfromthismodelareconsistentwithourREMIresults.Weestimatethat,

afterthreetofouryears,Medicaidexpansionincreasesthesizeofthehealthcaresectorby

roughlythreepercentagepointsandtotalemploymentbyroughlyonepercentagepoint.


51

Theconsistencybetweenthesetwoapproachesprovidesconfidencethatourestimates

fortheeconomicimpactsofexpansioninMontanaareroughlycorrect.

(4) WeupdateouranalysisoftheimpactofexpansionandHELP-Linkonlaborforceparticipationamonglow-incomeMontanans.

Weupdatetheanalysispresentedinourfirstreportonthechangeinlaborforce

participationamonglow-incomeMontanansbyaddinganadditionalyearofdatafromboth

theCurrentPopulationSurveyandtheAmericanCommunitySurvey.Specifically,weadd

datafromthe2018CurrentPopulationSurveyAnnualSocialandEconomicSupplement

andthe2017AmericanCommunitySurvey.Addingthisadditionaldatareducedthesizeof

theobservedchangesfromsixtoninepercenttofourtosixpercent.However,theseresults

remaineconomicallymeaningfulandstatisticallysignificant.

(5) Weupdatedourreviewofotherexpansioneffects.

Wereviewedadditionalliteratureandhighlightedsomeadditionalfindingsofthe

broadereffectsofMedicaidexpansion.Inparticular,weaddedextensivediscussionofthe

impactofexpansiononthefinancialhealthofproviders,particularlyinruralareas.Several

studiesshowtheMedicaidexpansionprovidesaparticularlylargeboontoruralproviders.

Consistentwiththis,weshowthathealthcareemploymentinruralMontanagrewquickly

followingexpansionafterseveralyearsofstagnation.

(6) Weupdatedouranalysisofexpansion’sfiscaleffects,butthechangesaretrivial.Wecontinuetoestimatethatsavingsandrevenueattributedtoexpansionexceedexpectedcosttothestate.

Inthenewreport,ourestimatesforstatebudgetsavingsattributedtoexpansion,the

expectedcosttothestate,andtheexpectedrevenuesfromincreasedactivityallchange.

However,theneteffectofthesechangesissmall.WecontinuetoestimatethatMedicaid

expansionhasapositiveimpactonthestatebudget.