Montana Medicaid: How Trump and GOP-led Congress could alter health care for thousands

As Montana lawmakers debate the future of Medicaid this legislative session, threats from the federal government to enact sweeping changes to the program loom large.

Montana relies predominantly on steep federal subsidies to make the numbers pencil out, but the program is administered by the state. Tuesday’s announcement of an impending federal funding freeze that for a time shut down the Medicaid payments system showed just how much the state’s health care system depends on the partnership.

Medicaid provides health insurance to more than 218,000 people in Montana. Of those, about 77,000 low income adults are covered through Medicaid expansion, which will expire if not reauthorized this year by the state Legislature. The rest include children, adults with disabilities and seniors covered through traditional Medicaid.

But the Republican-majority U.S. Congress and Republican President Donald Trump have made it clear they intend to consider far-reaching policies to limit the scope of Medicaid in the name of slashing government spending.

Medicaid expansion rally

Medicaid expansion proponents rally on the steps of the Montana State Capitol on Jan. 15.

Federal reimbursement

A leaked memo enumerates a list of cuts being considered by federal lawmakers, any one of which could have significant impact on the Montana budget and, possibly, the Legislature’s appetite for continuing parts of the program in the coming years.

The Department of Public Health and Human Services forecasts $5 billion in spending over the next two years to fund Medicaid in Montana, the vast majority of which will be federal dollars.

That’s because the state and federal government share the costs of health care services provided to Medicaid enrollees. For people covered through traditional Medicaid, the feds cover around 64% of the costs; for the expansion population, they cover a fixed rate of 90%.

Changes to the reimbursement rate shift the cost of providing the same health care to the state.

The federal reimbursement rate — called the FMAP — for the traditional population is determined by a formula that provides more relief for states with lower average incomes. Already, Montana’s FMAP is declining as its per capita income rises faster than the national average.

House Bill 245

The House Human Services Committee hears House Bill 245 on Jan. 22 in the state Capitol.

DPHHS is requesting $86.7 million more in state money over the next two years to cover the gap.

“This is a larger amount than we are used to,” Josh Poulette, lead analyst for the Legislative Fiscal Division, told members of an interim budget committee last year. “It reflects a large drop in FMAP and we expect that to continue, though maybe not in the same magnitude in the future.”

Federal reimbursement is a central focus of GOP-led efforts in Washington D.C. to curb government spending. Congress would have to pass a law to change FMAP for low-income earners on Medicaid expansion.

A Congressional Budget Office report identified setting caps on the amount of Medicaid money a state can receive, restricting per-person annual spending and reducing the reimbursement rate as options that would shrink the deficit by giving less money to the states in health insurance subsidies.

The CBO anticipates that any of these options would cause states to discontinue certain types of Medicaid eligibility, lower payment rates to health care providers and cut some optional services from their programs.

In Montana, Medicaid expansion, currently up for reauthorization, would likely be the most affected by any of these changes.

Medicaid expansion rally

Medicaid expansion proponents rally on the steps of the Montana State Capitol on Jan. 15.

Over the next two fiscal years, DPHHS estimates it will need around $2 billion to run its expansion program. Poulette said even a 1% reduction in the current FMAP rate of 90% would roughly translate to an additional $10 million on the state’s dime.

The potential value of the FMAP changes under consideration could be “pretty darn high,” he told legislators at the Jan. 24 health budget committee meeting.

If the reimbursement rate for expansion was set equal to the traditional population’s — another idea that’s been floated by deficit hawks in Washington D.C. — another $560 million would have to come from the state’s coffers to sustain government-funded coverage for the 77,000 people enrolled in Medicaid expansion, according to Poulette.

Montana law requires the Legislature to take action should the federal government reduce the current Medicaid expansion reimbursement rate. Lawmakers would consider whether to continue expansion or appropriate additional state dollars to sustain it.

“The joy and responsibility of this committee is planning for the unthinkable but also preparing for it,” said Rep. Jane Gillette, R-Three Forks, during a budget committee meeting this month.

Medicaid work requirements

An embrace of work requirements, in which a person must prove employment, education or community service for a certain amount of time every month, could greatly impact Medicaid enrollment, particularly among individuals covered through expansion.

Fewer people enrolled means a smaller cost to the state, no matter the reimbursement rate.

The Centers for Medicare and Medicaid Services (CMS) under Trump during his first presidential term made work requirements a centerpiece of the agency’s approach to public benefits. For the first time, it allowed states to submit applications, otherwise known as waivers, to incorporate these mandates into Medicaid.

CMS approved such waiver requests for 13 states. When Trump left office, there were nine applications pending, one of which was from Montana. But when Democratic President Joe Biden took over, he rescinded almost all work requirements.

01_Unwind.jpg

People line up outside a public assistance office in Missoula, Montana, before its doors open at 8 a.m. on Oct. 27, 2023, hoping to regain Medicaid coverage after being dropped from the government insurance program for people with low incomes and disabilities.

The work requirements passed into law in 2019 when legislators narrowly reauthorized Medicaid expansion have never been implemented in Montana.

Gillette expects “an intensification” of work requirements under the second Trump administration. Work “gives you purpose and meaning and hope,” she said during a committee meeting.

Though data shows the overwhelming majority of Montanans covered through Medicaid expansion are either already working or acting as full-time caregivers, evidence shows that adding complex reporting requirements or paperwork burdens serves as an enrollment barrier.

More than 60% of the people who lost Medicaid coverage during the redetermination process did so due to administrative issues.

One analysis from KFF estimated that about 10,000 Montanans would lose Medicaid expansion coverage should a work requirement be approved, costing the state $72 million to keep them enrolled or forcing them to lose coverage.

Politics of Medicaid

One of the largest policy debates unfolding this session, Medicaid expansion already faces an uphill battle in getting through the Republican-led Legislature. Uncertainty about the costs that could be thrust upon the state if the federal government makes financial changes could make an already-slim margin of lawmakers supporting its renewal even tighter.

“The very real possibility that the federal government reduces its portion of Medicaid expansion funding — especially with the United States running an unsustainable budget deficit — is a huge financial liability for Montana taxpayers,” said Senate President Matt Regier in an email.

DPHHS director Charlie Brereton told legislators on the health budget committee that the agency monitors changes to federal policy, but the state doesn’t receive advance notice if there’s a “seismic shift” on the way beyond what Congress or federal agencies would provide to all state health departments.

Charlie Brereton

Charlie Brereton, the director of the Montana Department of Public Health and Human Services, is pictured at right, next to Gov. Greg Gianforte, in January 2024.

Even some more conservative Republicans recognize major changes are unlikely to happen overnight. However, they see the current moment as an opportune time to plan for how expansion could be pared back to reduce risk to the state if the federal government takes action.

Gillette encouraged fellow lawmakers to “brace ourselves” for the future and consider how the state will pay for things moving forward, a sentiment informing ongoing bill debates.

Already, a comprehensive Democratic plan to overhaul Medicaid was tabled in committee on Tuesday. The proposal from Rep. Mary Caferro, D-Helena, would have eliminated the sunset, nixed work requirements and directed the department to reduce access barriers.

It received no Republican votes on the House health committee.

House Bill 245

Rep. Ed Buttrey, R-Great Falls, introduces House Bill 245 to the House Human Services Committee on Jan. 22 in the state Capitol.

Another proposal from Rep. Ed Buttrey, R-Great Falls, that would continue Medicaid expansion in its current form and eliminate the sunset, did advance through the same committee, but only with the support of two Republicans.

At least two proposals that would either phase out or scale back Medicaid expansion are under consideration at the Senate health committee. The former, from Sen. Carl Glimm, R-Kila, advanced last week with support from every Republican.

Editor's note: This story has been updated to clarify Brereton's comments to the committee.

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