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Freedom Foundation: Milliman’s Cost Estimates for Prop 2 Medicaid Expansion Push are Not Credible

Freedom Foundation: Milliman’s Cost Estimates for Prop 2 Medicaid Expansion Push are Not Credible

Fred Birnbaum
October 6, 2018
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October 6, 2018

Idaho Department of Health and Welfare records show that Milliman, the controversial consulting firm that estimates the costs of Idaho’s proposed Medicaid expansion, changed its forecast seven times over the course of about a month. Further, Milliman cut its gross-cost estimates by more than 30 percent, from the first to the final draft, to sell Idahoans on Obamacare’s Medicaid expansion.

Idaho is not alone when it comes to problematic Milliman forecasts. The Iowa Insurance Division is suing Milliman for “professional malpractice,” because the firm improperly forecasted enrollments in that state. Iowa Insurance Commissioner Doug Omen pointed out that an insurer, CoOportunity, used Milliman’s financial projections to establish insurance premiumsand because of the low numbers CoOportunity lost more than $163 million and went bankrupt.

In the Gem State, Idaho Freedom Foundation Vice President Fred Birnbaum warns, “Milliman’s cost estimates for the proposed Medicaid expansion in Idaho are simply not credible and the final model that they have constructed to sell Medicaid expansion simply cannot be trusted.” Birnbaum points out, “Not only did Milliman reduce the enrollment estimate in Idaho, but it also tweaked enrollment growth to show a lower final enrollment.”

Through a public records request, Idaho Freedom Foundation researchers obtained all seven drafts of the 2018 Milliman report, “Financial Impacts from Medicaid Expansion in Idaho.” The drafts are dated: June 15, June 26, July 6, July 13, July 18 (two drafts on this date), and July 19.

Milliman’s estimated gross cost of expansion over 10 years dropped significantly from its first draft to its final report. Milliman’s initial June 15 draft cited total-gross costs at $7.6 billion. Interestingly, that figure dropped to $5.2 billion in the final July 19 report, a difference of $2.4 billion.

The difference between the initial and final gross-cost projections comes from a dramatic decrease in enrollment numbers, from 118,950 in the initial June 15 report draft to 91,000 in the final July 19 report. Though updated food stamp usage (SNAP) data could be used to explain the lower initial enrollment figures, the enrollment growth-rate change from a 3 percent annual enrollment growth rate in the June 15 draft to a 1 percent annual enrollment growth rate in later drafts is problematic.

Birnbaum asserts, “The problem with this recalculated enrollment number: Medicaid enrollment in Idaho already increased at a much higher annual rate with traditional Medicaid.” Between 2007 and 2017, traditional Medicaid enrollment in Idaho had a compounded annual growth rate (CAGR) of 5 percent a year. Birnbaum states: “The assumption that an expanded Medicaid program would have such a slower growth rate than the current program is unrealistic given the growth in the enrollment during the last decade. This distorts Milliman’s cost projections.”

State- and local-cost savings (offsets) changed dramatically throughout the drafts. They ranged from a local-cost offset low estimate of $97.3 million to a high estimate of $276 million. The state-cost offset ranged from a low estimate of $327.2 million to a high of $470.4 million.

Finally, Milliman’s analysts note in the July 19, 2018 Client Report, “A 5 percent increase to both the baseline per capita cost and enrollment estimate increases the state funds expansion cost (net of state and local offsets) by approximately 50 percent.”

In summary, the Milliman model is highly sensitive to enrollment and patient cost assumption changes and the changes made by Milliman are easily challenged and not to be trusted. Idaho should not expand Medicaid based on Milliman’s projections.

Idaho Freedom Foundation
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