Putting Medicaid in the Larger Budget Context: An In-Depth Look at Four States in FY 2016 and FY 2017


Economic and Budget Outlook

Economy and State Revenues

At the beginning of 2016, economists at the University of Montana Bureau of Business and Economic Research reported on the strong performance of Montana’s economy in 2015 noting that the state reached full employment with wage growth more than twice as strong as 2014 and experienced broad growth across most industries boosting state tax revenues and wages.1 While overall results were strongly positive, the economists also noted weaknesses in the energy, mining and agricultural sectors driven by falling prices for grains, oil and natural gas, weakened demand for coal and an associated slow-down in oil and gas-related energy activity. According to the Montana Department of Commerce, the state’s Gross Domestic Product (GDP) grew by 3.4 percent in 2014 and 2.8 percent in 20152 while the unemployment rate in July 2016 stood at 4.2 percent, below the national average rate of 4.9 percent.3

Montana’s total state General Fund (GF) revenue is heavily reliant on individual income taxes which comprise over half of total GF collections. Although oil, gas and coal revenues make up less than 3 percent of total GF revenues,4 oil production from the Bakken shale formation has brought a new oil boom to the state, making the price of oil an increasingly important variable impacting state revenue collections.5 The state experienced robust GF revenue growth of 5.9 percent in FY 2015, but revenue collections weakened in FY 2016, finishing the year $79 million (3.6%) below FY 2015 levels and $142 million (6.3%) below the budgeted amount largely driven by declining oil prices which affected revenues and corporate income taxes.6 GF balances were estimated to fall to $109 million by the end of FY 2017,7 down from $455.1 million at the end of FY 2015.8

State Budget

The Montana legislature meets only in odd-numbered years, when it addresses the full range of legislative issues and also must adopt a balanced biennial budget. Heading into the 2015 legislative session, Governor Bullock proposed a FY 2016-2017 budget that included a state general fund spending increase of 5.5 percent for FY 2016 and almost 3 percent for FY 2017, $300 million in public works projects statewide, and a projected FY 2017 general fund minimum ending balance of $300 million.9  The most contentious issue in the Governor’s proposal was the adoption of the Medicaid expansion under the Affordable Care Act (described further below).10 The biennium budget ultimately passed by the legislature included total general fund spending of $2.0 billion in FY 2016 and $2.05 billion in FY 2017, lower than the Governor’s proposal, but higher than FY 2015 spending levels.11

Montana’s ACA Medicaid Expansion

In January 2015, Democratic Governor Steve Bullock unveiled proposed legislation to create the “Healthy Montana Plan.”12 The Governor’s proposal to expand Medicaid to approximately 70,000 adults and serve them through competitive state contracts with managed care companies was modeled on the Healthy Montana Kids program, which provides coverage for children in low-income families. Republican lawmakers had narrowly defeated a similar bill at the end of the 2013 session on the grounds that the state would eventually have to cover the costs. Despite having the support of the Montana hospitals13 and a provision to terminate coverage if federal funding dropped below 90 percent; Republican lawmakers remained opposed and introduced a variety of alternatives to the Governor’s proposal, some that included the Medicaid expansion and others that did not (Big Sky Health14). One proposal, the Montana Healthy Family Plan, would have covered an estimated 15,000 Montanans providing Medicaid coverage on a smaller scale with the commitment of serving the “neediest among us” before considering expansion of non-disabled adults without children.15

A party-line vote (10-7) in the House Human Services Committee in favor of a “do not pass” motion, came after a marathon, six-hour hearing on the proposal, attended by scores of supporters who traveled from across the state to advocate for the measure.16 A “do not pass” vote was described as a rarely used motion that made resurrecting a bill very unlikely as a three-fifths vote of the House rather than a simple majority is needed to overturn the motion and allow the full House to consider the bill.17 Republicans held a 59-41 majority in the House. Three Republican alternatives to the Healthy Montana Plan were also voted down on the floor of the House that day. One Medicaid expansion bill survived, Senate Bill 405, the Health and Economic Livelihood Partnership (HELP) Act sponsored by Republican Senator Ed Buttrey. The HELP Act mirrored the Governor’s proposal calling for coverage of nearly 70,000 Montanans; however in an effort to obtain bi-partisan support the bill included measures intended to achieve a compromise and appeal to conservatives, most notably a jobs plan and premiums.18

Despite its bi-partisan approach, the HELP Act was subjected to numerous procedural motions to prevent a floor debate. In the House, it took nine mostly procedural floor votes before Senate Bill 405 reached its final vote for approval.19 Throughout the session, a group of Republicans joined with all Democrats to provide the majority needed to advance the bill through the process. On April 29, 2015, Governor Bullock signed the HELP Act into law.

Seven months later (on November 2, 2015) CMS approved Montana’s HELP program and 13 related state plan amendments, with coverage effective on January 1, 2016. The waiver expands coverage to approximately 70,000 parents and childless adults, aged 19 to 64 earning up to 138 percent of the federal poverty level (FPL).20 With the exception of certain exempt groups of people21, newly eligible adults receive services through a managed fee-for-service Third Party Administrator (TPA) arrangement (described below).  The HELP Program requires monthly premiums up to 2 percent of household income for newly eligible adults from 51 to 138 percent FPL receiving services through the TPA. Beneficiaries from 101 to 138 percent FPL may be disenrolled for failing to pay premiums after notice and a 90-day grace period. Re-enrollment is required (without a new application) upon payment of arrears or when the state Department of Revenue assesses the debt against income taxes. Beneficiaries subject to premiums receive a credit toward accrued copayments up to 2 percent of income. All cost-sharing is limited to 5 percent of quarterly household income. Finally, the waiver provides all HELP Program beneficiaries (including those exempt from the TPA) with twelve months of continuous eligibility to reduce the effects of churning between Medicaid and Marketplace coverage as income fluctuates. This continuous eligibility authority granted by an 1115 waiver is unique among states seeking Medicaid expansion waivers.

The Montana HELP Act also authorized the Montana Department of Labor & Industry (DLI) to administer a workforce program, HELP-Link22, in conjunction with expanded health coverage. HELP-Link offers enrollees the opportunity to develop a customized employment plan, connect with local employers, and open access to training resources. As of June 30, 2016, 1,004 Montana HELP Plan participants have or are currently receiving workforce services from DLI through the HELP-Link program, the Workforce Innovation and Opportunity Act (WIOA) program, and the RESEA program (an Unemployment Insurance partnership program providing intensive employment services to Montanans who have recently lost a job).23

Enrollment as of July 2016 (47,399) was nearly double Montana’s initial projection that 25,000 would enroll in the first six months. The state also reports that $5.3 million was saved by shifting 8,458 people from traditional Medicaid into the expansion.24 Further, the HELP Act has also had a significant impact on the state’s insured rate. In 2013, approximately 195,000 Montanans, or 20 percent of the population, lacked health insurance. In 2015, before the Medicaid expansion took effect, an estimated 151,000 Montanans lacked health insurance (15% of the population). Under the HELP Act, the percentage of Montanans who are uninsured dropped to 7.4 percent, a 50 percent decline from 2015 to 2016.25

Delivery System Reform

HELP Program Third-Party Administrator

Montana was the first state in the country to expand Medicaid using a private TPA arrangement where the TPA vendor receives an administrative fee but is not at risk for medical claims. Also, claims continue to be paid by the TPA on a fee-for-service basis. The state’s Healthy Montana Kids program, its Children’s Health Insurance Program uses a TPA model as well. Montana opted to contract with a TPA to deliver services to HELP Program enrollees using the provider network and administrative infrastructure of an insurer already providing services in the state. In order to implement the TPA and require enrollees to receive services from the TPA’s provider network, the state received approval to waive freedom of choice requirements (except family planning providers) using Section 1915(b) selective contracting authority.26 To promote continuity of care between Medicaid and the Marketplace, the state chose an insurer that offered a qualified health plan on the Marketplace.

Other Medicaid Initiatives

Benefit Expansions

With the expansion of Medicaid in Montana, the Bullock Administration sought to ensure that newly eligible adults would have access to a comprehensive benefit package. One example is dental coverage, which Montana’s children, aged, blind, and disabled population had long benefited from. Newly eligible adults now have access to dental coverage of $1,125 per benefit year exclusive of diagnostic, preventive, denture and anesthesia services. In order to provide access to dental coverage for the expansion population and to maintain the unlimited benefit for the aged, blind and disabled, Montana is amending an existing Section 1115 waiver to leverage savings that have accrued under the waiver. As of May 12, 2016, less than six months into the HELP Program, 11,727 preventive dental exams had been provided.27

In addition to dental services, Montana implemented changes to its behavioral health benefit to improve access to mental health and substance use disorder services. Limits on mental health therapies were removed and age limits for substance use disorder treatment were eliminated. Prior to the Medicaid expansion, substance use disorder services for the adult population were funded by the state mental health agency. Many individuals receiving these services were uninsured and therefore did not have access to a full benefit package. As a result of the Medicaid expansion and associated federal funding, these individuals now have access to a comprehensive benefit package and the state has realized savings in its state-funded mental health program.

Additional Medicaid policy actions taken in FY 2016 or planned for FY 2017 are described below.

Montana Medicaid Policy Changes FY 2016 and FY 2017
Eligibility, Application and Renewal Policies
  • Implemented the ACA Medicaid expansion on January 1, 2016.
  • Implemented twelve months of continuous eligibility for newly eligible adults on January 1, 2016.
  • Established new Medicaid outreach/assistance strategies to facilitate enrollment of corrections-involved individuals prior to their release in FY 2016 and plan to expand at least one of these strategies in FY 2017.
  • Expanded Medicaid eligibility suspensions for enrollees who become incarcerated in FY 2016 and plan to further expand this policy in FY 2017.
Provider Rates and Provider Taxes/Assessments
  • Increased rates for inpatient and outpatient hospitals, primary care physicians, specialist physicians, dentists and nursing facilities in FY 2016.
  • Plan to increase rates for primary care physicians, specialist physicians, dentists, and nursing facilities in FY 2017. Plan to hold other rates flat.
Monthly Contributions/ Premiums and Cost-Sharing
  • Implemented premiums and cost-sharing for non-exempt ACA Medicaid expansion adults on January 1, 2016.
Benefits and Pharmacy
  • Implemented a dental benefit with a monetary cap for expansion adults on January 1, 2016. The cap excludes diagnostic, preventive, denture, and anesthesia services.
  • Removed limits on mental health therapy and occupational, speech, and physical therapy for all Medicaid beneficiaries on January 1, 2016.
  • Removed age limits for substance use disorder treatment on January 1, 2016.
  • Implemented Actual Acquisition Cost (AAC) reimbursement with a Professional Dispensing fee for general and specialty drugs on July 1, 2016.
  • Plans to expand step-therapy edits to morphine and quantity limits to methadone.
Long-Term Services and Supports Rebalancing
  • Plans to expand the geographical service area and number of persons with Severe Disabling Mental Illness (SDMI) served under the state’s home and community-based waiver in FY 2016 and FY 2017.
  • Plans to add additional services available under the 1915(c) SDMI waiver in FY 2016 and FY 2017.
  • Transition residents of the Montana Developmental Center into community settings by the end of CY 2016 and close the facility by the end of FY 2017.
Delivery System Reform
  • Expanded enrollment in primary care case management with enrollment of non-exempt newly eligible adults into a TPA on January 1, 2016.
Maryland New York

KFF Headquarters: 185 Berry St., Suite 2000, San Francisco, CA 94107 | Phone 650-854-9400
Washington Offices and Barbara Jordan Conference Center: 1330 G Street, NW, Washington, DC 20005 | Phone 202-347-5270

www.kff.org | Email Alerts: kff.org/email | facebook.com/KFF | twitter.com/kff

The independent source for health policy research, polling, and news, KFF is a nonprofit organization based in San Francisco, California.