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Medicaid expansion costs based on projected 10-year economic boom

Medicaid expansion costs based on projected 10-year economic boom

Wayne Hoffman
October 12, 2018
Wayne Hoffman
Author Image
October 12, 2018

Whatever you do, don’t make a move. Because the slightest decline in Idaho’s economy will collapse the estimate of how much money Medicaid expansion is expected to cost Idaho taxpayers. Milliman’s projections assume that Idaho’s unemployment rate will remain at 2.9 percent for the next 10 years.

Please read that sentence again, slowly. All the reports you’ve heard or read that claim Proposition 2 won’t break the bank are built upon the ridiculous idea that our healthy economy will remain excellent and unchanged for a decade. Immediately below, the actuarial firm Milliman's actual words about its precarious Medicaid-expansion estimates, written in a memo to the Idaho Department of Health and Welfare:

“The projected estimate is based on Idaho’s current economic environment and assumes current economic conditions will be the same for the projection period. Changes in the economy (e.g. unemployment rates) could significantly impact the projected expansion enrollment estimate.”

Voters need to know this house-of-cards information before making a decision about Medicaid expansion on November 2.

So, what if the economy begins to slide and unemployment increases? How would that impact Idaho's proposed Medicaid expansion and change its costs?

By Milliman’s own admission, even the slightest dip in economic conditions could propel the state’s Medicaid budget into freefall. According to Milliman, a 5 percent increase in baseline costs and/or enrollments, could increase expansion costs by between 25 and 50 percent. If that happens, other equally outrageous predictions for Medicaid expansion would come crashing down on state officials. For example, the state Department of Health and Welfare forecasts, almost laughably, that the administrative costs for Medicaid expansion would remain flat for ten years. On its own, that’s ludicrous, and it’s preposterous if unemployment ticks upward.   

All of this should yield even more skepticism when one considers that Milliman’s optimistic cost estimates were revised seven times over the course of a month before its final numbers went public this summer. Milliman’s expansion cost estimates dropped from $7.6 billion to $5.2 billion a month later.

Medicaid is already a budget buster: Cost estimates are repeatedly way off, forcing politicians to constantly make tough decisions year after year. In just a few months, state lawmakers and Idaho’s next governor will have to confront a multimillion-dollar shortfall in the state’s Medicaid budget. Medicaid ran out of money and couldn’t pay all its bills during the 2017-2018 budget year that ended June 30. Additionally, the department recently embarked on a process to recalibrate how much it pays hospitals for their services and learned, again, that an emergency appropriation will be required come January and a bigger pot of money for Medicaid in the budget year that starts next July. That’s regardless of whether new people are added via Medicaid expansion.

I have sat through numerous legislative budget-setting sessions where lawmakers were forced to pare back spending—for public schools, foster care, and police services—in order to make room for unforeseen Medicaid expenses. Now, add costly Medicaid expansion on top of that. The bottom line: If we all use our inside voices, avoid sudden movements, and hope nothing at all outside our control impacts our economy for a decade, the wishful predictions about Medicaid expansion will absolutely come true.

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