Gov. Paul LePage and his administration have claimed repeatedly over the past few years that Maine can’t afford to expand Medicaid to about 70,000 low-income parents and adults without children.
But policymakers in Maine can now inform their decisions with the experience so far of states where Medicaid coverage expanded on Jan. 1, 2014. Drawing on that experience, a new analysis of Medicaid expansion’s potential impact on Maine’s state budget complicates the narrative that extending health coverage would be prohibitively expensive.
The analysis, released Wednesday by the Maine Health Access Foundation, projects a $26.7 million budget benefit in 2016 if Maine expands Medicaid due to a combination of savings from shifting expenses elsewhere in the state budget to Medicaid and new revenues the state would take in from hospitals treating newly covered patients. Those $43.9 million in projected savings and new revenues for 2016 would more than offset the $17.2 million projected in new costs.
The organization that conducted the analysis, Manatt Health Solutions, drew on its examination of the expansion-related costs and savings experienced by eight states that extended Medicaid coverage. Those states all faced costs due to the expansion — to be sure, Maine would see higher initial costs than many — but the savings more than offset them.
Those savings came in part from enrolling newly eligible residents in Medicaid who would otherwise qualify for services funded entirely or mostly with state funds. By shifting state spending for mental health services, breast and cervical cancer screening, and prescription drug assistance for older residents to Medicaid, the federal government effectively takes over the responsibility of paying for them.
States also saw savings from billing Medicaid for prison inmates’ hospital visits, reducing corrections budgets. And the states were able to cover some pregnant women, some with serious medical needs and some awaiting disability determinations — all of whom typically have high health care costs — as newly eligible childless adults rather than shifting them to conventional Medicaid categories or other state programs. As a result, the federal government fully funded their health care rather than splitting the cost with the state.
In Maine, the federal government currently picks up 62.67 percent of most Medicaid costs; with the expansion, the feds would pick up 100 percent of costs for the 60,000 or so adults without children who would be newly eligible for coverage (their incomes are around $16,000 or less). The federal government would fund 62.67 percent of costs for another 15,000 or so eligible, low-income parents.
The $26.7 million savings projection might seem high, but there’s reason to believe Maine could experience even greater savings. “We wanted this to be a very conservative estimate,” said Wendy Wolf, president and CEO of the Maine Health Access Foundation, which contracted Manatt to perform the analysis.
The foundation sought the “most conservative estimates of savings and revenue and your highest projections of costs so we are not overestimating the good news,” Wolf said.
Why could Maine’s savings exceed $26.7 million?
— The Manatt analysis assumes that 85 percent of those who become eligible will sign up for coverage — and do so on Day 1, an unlikely possibility. Eighty-five percent participation is rare for any public service, and researchers have projected Medicaid expansion participation at anywhere from 57-82 percent. Enrollment below 85 percent, especially among parents, means lower costs for Maine.
— In projecting the costs of covering parents, Manatt assumed the federal government would kick in 60 percent of costs. Federal match rates, however, have actually hovered above 60 percent in recent years.
Although the Medicaid expansion’s 100 percent federal funding rate will start to drop after 2016, it’s reasonable to expect savings to continue. When expansion funding bottoms out, after all, it will be at 90 percent in 2020 rather than the 60-or-so percent for other Medicaid expenses.
Beyond direct state budget savings, there’s also the economic impact of hundreds of millions of dollars flowing into the state to consider, along with the financial benefit to hospitals from providing less care for free. Not to mention the health and financial benefits to thousands of Maine’s poorest.
Throughout Maine’s debate over Medicaid expansion, lawmakers lacked a comprehensive, Maine-specific, cost-benefit analysis. In his $108,000 “feasibility study,” the LePage administration’s hand-picked consultant, Gary Alexander, made no effort to fully examine expansion’s impact on the state budget, choosing instead to focus solely on — and exaggerate — the costs.
The lack of information allowed misunderstandings and misinformation to dominate the expansion debate. Now, with the benefit of other states’ experience, there’s no excuse not to reconsider.