The Time Is Ripe For Medicaid Expansion

Ronn Smith
Chair, Wyoming Rising
March 3, 2021

Simply put, Medicaid is a joint federal-state health insurance program for low-income people that traditionally focused on children, pregnant women, the elderly and the disabled. Under the Affordable Care Act (ACA), each state was permitted the option to expand eligibility to include low-income able-bodied adults. Most of these are working people who lack employer-provided health insurance and can’t afford to buy their own. Wyoming is one of 12 states that has yet to adopt the expanded coverage. Primary beneficiaries would be adults with incomes below 138% of the Federal Poverty Level, which includes the so-called coverage gap.

Support for Medicaid expansion in the Wyoming Legislature has ebbed and flowed over the last decade, never reaching the threshold to enact a program that offers 90% federal funding. The proposed budget cuts this year would lead to just the opposite – Medicaid contraction. By reducing the state’s allocation to traditional Medicaid by 9%, Wyoming will also forfeit $49 million in matching federal funds.

Despite the bad news, 2021 may afford the best opportunity yet, thanks to a one-time federal incentive that would more than pay for expanded Medicaid in Wyoming. A provision in the Biden Administration’s $1.9 trillion American Rescue Plan would increase the Federal Medical Assistance Percentage (FMAP) for any state that adopts Medicaid Expansion. For Wyoming, the FMAP would rise from 50% to 55% of traditional Medicaid costs for two years, amounting to about $120 million in new revenue. By comparison, the Wyoming Department of Health recently estimated Medicaid Expansion would cost the state $10 million per year.

Even without the extra incentive, Medicaid expansion is sound policy for both humanitarian and economic reasons. States that adopted it show half the uninsured rate of those that did not. Aside from obvious health benefits to the previously uninsured, expansion reduces private insurance costs that currently absorb the burden of uncompensated medical care. Recent analyses show an association between Medicaid expansion and decreased mortality, as well as reductions in rates of depression, food insecurity, poverty, and home evictions. They also show improvement in employment rates and self-reported health. Multiple studies suggest that expansion can result in state savings by offsetting costs in other areas. No wonder none of the 38 states that adopted Medicaid expansion has exercised the right to opt out at any time without penalty.

Wyoming need not look far to find justification for enacting this program. Expansion states include our neighbors, Montana, North Dakota, Nebraska, Colorado, Utah, and Idaho. A 2019 study found that in Montana expansion has resulted in 7,000 new jobs, $350 million in expanded personal annual income, and a half-billion-dollar increase in annual GDP. Medicaid expansion led to improvements in physical health, dramatic reductions in uncompensated care and higher provider operating margins, particularly among hospitals in rural Montana. In contrast, 65% of Wyoming’s rural hospitals have negative operating margins, ranking it among the five worst states (four of which lack expanded Medicaid).

To be fair, not all outcomes of Medicaid expansion are positive. The Wyoming Department of Health (WDH) expects a modest crowd-out of private insurance if Medicaid expansion is adopted. This happens when eligible people switch from private insurance to expanded Medicaid, lowering reimbursement rates to health providers. But most of those eligible have no insurance. Thus, WDH admits that net provider revenue will almost certainly increase. What’s more, WDH estimates a 10% decrease in average per-person costs for privately insured residents due to shifting of uncompensated care costs to expanded Medicaid coverage. It would also save the state the cost of certain safety-net programs since the beneficiaries could now access comprehensive medical coverage.

Even in Republican dominated states whose legislatures have opposed Medicaid expansion, public opinion has consistently favored it. Nebraska, Idaho, and Utah recently enacted Medicaid expansion through ballot initiatives. Florida, Mississippi, and South Dakota are expected to follow suit in 2022. A 2016 University of Wyoming poll shows that most Wyoming residents favor expanded Medicaid coverage. But the state constitution doesn’t allow ballot initiatives that encumber state funds. The only solution is to pass legislation like HB 162 and SF 154 introduced this week.

Medicaid expansion is sound policy for both humanitarian and economic reasons.

Common arguments against Medicaid expansion in Wyoming are: (1) it will discourage people from working; (2) the 90% federal match might disappear; and (3) the state can’t afford the 10% match. The unspoken (and perhaps unconscious) objections run deeper. Studies have shown that people tend to vote their political identities over their own best interests. Legislators are human too, subject to the same partisan bias but ideally held to a higher standard as they represent the interests of their constituents.

Regardless, the opposition deserves a reasoned response. First, a majority of Wyomingites who would enroll in the expanded coverage are already working (children, as well as disabled and retired people are at least partially covered by other insurance programs). Families USA estimates over 18,000 Wyoming workers would benefit from Medicaid expansion. These include hospitality and retail employees, truck drivers, construction workers, farmers, maintenance personnel, and service workers. In Montana, five years after adopting Medicaid Expansion, 73% of adult Medicaid enrollees are working. In Wyoming, with only traditional Medicaid coverage, this number is 61% despite more stringent eligibility rules. Expanded Medicaid benefits workers in higher proportions than traditional Medicaid. It also benefits employers through increased worker productivity and lower absenteeism.

Second, the durability of federal matching money is guaranteed by the ACA. To question the solvency of the federal government is peculiar, given that the Wyoming Legislature can’t even identify sufficient revenues to fund state government two years from now. Federal funding looks quite reliable alongside the oft-repeated but hollow hope that the coal industry will somehow rebound to erase Wyoming’s budget shortfall.

Third, the sticker price for Wyoming’s share of Medicaid expansion would be partially offset by other budget savings. The adoption of Medicaid expansion led to a national average reduction of 4.5% in state spending on traditional Medicaid. Expansion allows states to access an enhanced federal match for some people who would otherwise be covered by traditional Medicaid. This saves states like Wyoming $0.80 for every dollar it can shift to the expanded coverage. In 2020 Montana saved 70% of its expansion cost due to this shift, while Colorado saved 85%. Expanding Medicaid also reduces state spending on safety-net programs like mental health and substance abuse treatment, corrections health care, and provider reimbursement for uncompensated services.

Clearly, Medicaid expansion costs considerably less than the already modest sticker price. Assuming the offsets would halve the state share, the true impact on Wyoming’s budget would only be $5 million per year. Viewed as an investment in the future health of Wyoming’s economy and its citizens, Medicaid expansion might be compared to the Wyoming Business Council (WBC). The WBC also represents an investment in future prosperity, with a budget allocation double the net cost of Medicaid expansion. And the outcome of the WBC investment is far less tangible.

Beyond this investment bargain, the latest FMAP incentive nullifies any affordability argument. Not only would adoption result in a positive, near-term cash flow for the state treasury, but it would help the budget in the long run as well. Capitalizing the future stream of Wyoming’s $5 million net annual expansion costs at 5% interest, yields a lump-sum cost of $100 million – more than paid for by the $120 million FMAP boost.

Claims that Wyoming’s budget woes will not allow Medicaid expansion are simply not credible. The New England Journal of Medicine reported finding no evidence that Medicaid expansion forced states to cut back on spending on other priorities, such as education, transportation, or public assistance. The evidence for net benefits is overwhelming. The Kaiser Family Foundation summarized 404 state and national studies that attest to the benefits of Medicaid expansion, especially in affordability, utilization, reductions in uninsured rates, and state economic growth.

The State Legislature should seize this rare chance to enact Medicaid expansion, or it will cement Wyoming’s dubious distinction as the hold-out state. In 1988 Wyoming became the last state to raise the minimum drinking age (it leads the nation in per-capita drunk driving). The Legislature finally acted, not on the volumes of evidence that raising the drinking age saves lives, but on the threat of losing federal highway money. This time around, the federal government is holding out a carrot not a stick. Will it be enough?



Please share your thoughts

This site uses Akismet to reduce spam. Learn how your comment data is processed.