Investing in Wyoming’s future

by Evan Blauser

Lawmakers say Medicaid expansion is an "investment" for Wyoming. The numbers say otherwise.

Prior to the passage of a Medicaid expansion bill at the Interim Revenue Committee's meeting on November 12^th, 2019, select lawmakers made claims about Medicaid expansion functioning as an investment from the federal government into the state. This sentiment was echoed in an article from the website Better Wyoming. The argument that expanding Medicaid would introduce new federal money into Wyoming hinges entirely on an assumption that expansion would not affect the total Medicaid expenditures. Unfortunately for both lawmakers and Better Wyoming, total state Medicaid spending is absolutely affected by the decision to expand Medicaid to able-bodied, childless adults making 138% of the Federal Poverty Level (FPL), which comes out to about $26,000 for a family of four.

To gain a better understanding of why states end up having to spend more once they decide to expand Medicaid, we should be familiar with the Federal Medical Assistance Percentage (FMAP), which is the percent that the federal government will pay to each state for their Medicaid programs. In order to test the theory that expanding Medicaid would be an investment for the state, we should examine what happened in the surrounding states once they expanded their programs. Specifically, we should look at Colorado and Montana, who expanded their Medicaid programs in 2014 and 2015, a long enough time to discern what the fiscal impact was in each state.

The FMAPs for Colorado, Montana, and Wyoming are 50%, 65%, and 50% respectively. That means the federal government pays for 50-65% of the total Medicaid budgets for each state. This aspect of the Medicaid formula is entirely overlooked. While it is true that the federal government would pay for 90% of Medicaid expansion at the outset, the dramatic effects on total Medicaid spending for states should be considered when deciding whether or not to petition the Centers for Medicare & Medicaid Services (CMS) to expand Wyoming's program. The chart below highlights the increased total Medicaid spending, the FMAP, the percent increase, and the total state Medicaid spending for Colorado, Montana, and Wyoming.

The highlighted red sections in total spending represent the years that Colorado and Montana expanded their Medicaid programs. As you can see, total Medicaid spending for both states dramatically increased in both states following expansion. The most significant indicator of a shift in spending can be found in the "% increase since 2012" section. It is clear from the data that Medicaid expansion states can potentially expect to see their total Medicaid spending increase by almost 100% following expansion. Of course, each state is different and each Medicaid expansion situation reflects those differences.

Once we apply the FMAP to total Medicaid spending (and after comparing the numbers to Kaiser Family Foundation's data), we can see that Colorado spent almost $4 billion last year, Montana spent more than ½ billion, and Wyoming spent a little over ¼ billion in fiscal year 2018. If we were to apply the same FMAP numbers to previous year's Medicaid expenditures, then we could accurately demonstrate how the state's share of spending dramatically increased following expansion. Which leads to the question: how could Medicaid expansion be an investment if total spending increased by 91% or 92% in 6 years? Perhaps this is the reason that Montana sought to raise revenue through a tobacco tax following expansion. Either way, we should seriously consider the fiscal impact of expansion before jumping to the conclusion that it would equate to an investment for Wyoming.