Lone Medicaid Expansion Defeat Offers Lessons for Other States

By: - December 17, 2018 12:00 am

Activists gather in front of the Montana Capitol in support of a measure to continue Medicaid expansion in the state. Voters rejected the citizen initiative last month, 53 to 47 percent. Three other red states passed similar measures the same day. Matt Volz/The Associated Press

Perhaps the chief takeaway from the rejected citizen initiative to expand Medicaid in Montana last month is this: Be careful when you poke a giant.

Montana was one of four red states with Medicaid expansion on the ballot, and the only one where it failed. And the reason why, many close observers both inside and outside of the state agree, almost certainly came down to a tactical decision to link expansion to an increase in the state’s tobacco tax.

Supporters thought that strategy would boost their effort with voters, but it attracted Big Tobacco into the fight, along with the $17.2 million it spent, much of it on a television advertising blitz. Opponents raised nearly $19 million to defeat the measure, finance reports filed with the state show.

Proponents, with about $9.7 million to spend, simply couldn’t keep up.

“It was impossible with the money we had to compete,” said one of the leaders of the coalition, who spoke with Stateline but asked not to be named because the coalition has not yet publicly addressed what went wrong. The tobacco interests “got too far ahead with their messaging.”

In retrospect, this activist said, it may have been a mistake to combine Medicaid expansion and a tax that targeted a deep-pocketed opposition.

The tobacco industry went nowhere near the other states where Medicaid expanding initiatives appeared on November’s ballot: Idaho, Nebraska and Utah. Medicaid expansion plans passed comfortably in those states, but the Montana version fell decisively, 53 to 47 percent.

“The basic lesson is that if you create a big political target, don’t be surprised if people pay attention to it,” said Matt Salo, executive director of the National Association of Medicaid Directors. “If you propose to raise tobacco taxes, don’t be surprised if tobacco pushes all its chips in. The same happens when you try to raise soda taxes.”

Adam Searing, an associate professor at the Georgetown Center for Children and Families, noted that the only difference between Montana and the three other states was the inclusion of a specific tax in the Montana initiative.

Instead of presenting voters with a clear choice between expanding and not expanding Medicaid, Montana threw an unrelated issue into the mix. “Basically it seems the more you focus on that central issue of expanding affordable health care to more working class people, the more successful you are likely to be,” he said.

It’s a lesson that advocates in other non-expansion states might want to take to heart as they continue their fight — which they are vowing to do, despite Friday’s ruling by a federal judge in Texas that the entire Affordable Care Act, including the Medicaid expansion provision, is unconstitutional.

Many legal analysts on both the left and the right say the decision by U.S. District Judge Reed O’Connor in a lawsuit brought by Republican governors and attorneys general from 20 states is unlikely to stand. In any case, the ACA will remain in place while the ruling makes its way through the appellate courts, perhaps ending up before the U.S. Supreme Court.

The Fairness Project, an advocacy group that reportedly spent $6 million in support of the initiatives in November, names Florida, Mississippi, Missouri, Oklahoma, South Dakota and Wyoming as states where Medicaid expansion initiatives could reach the ballot in 2020. Colin Diersing, a spokesman for the project, said Monday that the ruling in Texas hasn’t dampened the group’s conviction that most Americans support expansion.

In a tracking poll conducted by the Kaiser Family Foundation the week after the midterm elections, 59 percent of voters in non-expansion states said they favored expansion.

In Montana, Medicaid already had been expanded by law in 2016 to include any adult with income at or below 138 percent of the poverty line. In 2018, that translates to $16,753 for an individual. Before the expansion, only Montana low-income adults who were caregivers, pregnant or disabled qualified for Medicaid.

But the expansion had been set to expire in July 2019. The ballot proposal, Initiative 185, would have made the Medicaid expansion permanent. (The other three states will see expansion for the first time.)

Now it will be up to the Republican-controlled legislature to determine the future of the expansion in Montana, a high priority for popular Democratic Gov. Steve Bullock. Thirty-six states plus Washington, D.C., have adopted Medicaid expansion under the 2010 Affordable Care Act, also known as Obamacare.

Expansion proponents in the Treasure State think their losing campaign this fall, which entailed a grassroots operation, will pay off with a legislative victory in the winter.

The pro-expansion campaign, said Jessica Rhoades, Bullock’s health policy adviser, “created a volunteer network of very motivated nurses and doctors who can go into the legislative session with a strong base of support behind them.”

State Rep. Greg Hertz, a Republican and the incoming Montana House speaker, said Friday’s ruling in Texas is worth paying attention to, but it won’t halt work in Montana to craft a Medicaid expansion program that’s financially sustainable. “We’re still forging ahead,” Hertz said.

The legislative session begins Jan. 7, and lawmakers already are crafting bills in preparation for upcoming hearings, Hertz said. Republicans are interested in cost-control measures that could include performance audits and work requirements for single, able-bodied adults, he said.

Montana Senate President Scott Sales, also a Republican, agreed that expansion proponents will still have the votes.

“If you’d spoken to me a few days before the court ruling, I’d say Medicaid expansion is going to pass in some form; I think that’s still the case,” Sales said.

Financial Mismatch

The $19 million raised in opposition to the campaign, 91 percent of it from Altria, the parent company of Philip Morris, is more than twice the amount spent on Montana ballot measures since at least 2006, data compiled by FollowTheMoney showed. The nonprofit, which tracks campaign spending, found it was also more than $7 million above the amount spent by all candidates in the last Montana gubernatorial election, in 2016.

Supporters of Initiative 185 raised $9.7 million, also more than previous Montana ballot measures. That coalition — Healthy Montana for I-185 — included groups representing hospitals and health care providers in the state as well as advocacy groups representing the poor, retired people and labor unions. It also included state chapters of national organizations that support efforts to end diseases, such as the American Cancer Society and the American Lung Association.

Proponents say the financial mismatch doomed the initiative even as pre-election polls had shown voters evenly divided on the measure. Montana State University, for example, reported in late October that 41.4 percent of Montana voters were in favor of expansion versus 40.8 percent against, with a 2 point margin of error.

When asked for comment for this article, Chuck Denowh, the spokesman for Montanans Against Tax Hikes — created for the Medicaid campaign — and president of the Montana Group, a Helena political and public relationship consulting firm, said he was on a family vacation and couldn’t respond. He did not respond to a request to designate someone else with the organization. Altria did not respond by deadline to a request for an interview.

Other factors besides big spending by tobacco may have contributed to the loss.

The ballot language began with a description of the tax increase, and that didn’t help, said Jesse Cross-Call of the Center on Budget and Policy Priorities. “Unless you were intimately aware of it before going into the voting booth, it was hard to know what was at stake. It looked like the initiative was about raising taxes rather than extending health care to more people.”

Utah’s measure proposed a general sales tax increase and the initiatives in Idaho and Nebraska left it up to the legislature to decide how to pay for the expansion.

But, according to Rhoades with the governor’s office and with the campaign, early polling suggested that linking a tobacco tax to expansion would improve its chances. That doesn’t appear to have been the case.

Coalition members pushed for the tobacco increase not only as a source of financing for the expansion, but also as a discouragement to smoking, which itself, Healthy Montana claimed, costs Montanans $440 million in health care every year.

The initiative would have increased the tobacco tax by $2 for a pack of 20 cigarettes. It also would have increased taxes on snuff and created a tax on vaping.

Fewer Uninsured in Montana

By March of this year, Montana’s Medicaid expansion had extended benefits to 94,000 newly eligible beneficiaries, according to a 2018 analysis by the University of Montana. Bullock’s office said expansion, along with other elements of the Affordable Care Act, reduced the uninsured rate in the state from 15 percent in 2015 to 7.4 percent today.

In its economic analysis, the university report said expansion has injected $350 million to $400 million of new spending into the state each year. That money has generated about 5,000 new jobs and will produce about $270 million in personal income in each year between 2018 and 2020, the report found.

Under the ACA, the federal government agreed to pay 100 percent of Medicaid expansion costs, with its portion gradually falling to 90 percent by 2020. That’s compared with 65.5 percent for traditional Medicaid.

The proponents of Initiative 185 said the increased tobacco taxes, estimated to raise an additional $74 million a year by 2023, would pay for that extra 10 percent.

The university report estimates that after 2020, when the federal match drops to 90 percent, the increased state tax revenue from the economic activity generated by the expansion would be enough to cover the state’s expansion costs without raising taxes or creating new ones.

That is the position Bullock has taken in urging the legislature to pass expansion next year. The governor’s proposal does not call for an increase in tobacco taxes but would include a small increase in taxes on medical providers.

But that was not the message of the initiative’s opponents, who ran ads claiming — falsely, proponents say — that the proposed tobacco increase would not cover expansion costs. All Montanans would end up footing the bill, their ads proclaimed.

The looming question, of course, is what will happen in the legislature. Some of those who led the campaign for expansion have told Stateline they are pessimistic, fearing legislators who are inclined to vote against can now point to the election results to justify a “no” vote.

Casey Schreiner, the incoming House minority leader and supporter of expansion, said he wasn’t overly worried.

“The majority of the legislature sees the benefit of taking the sunset off,” the Democrat told Stateline, referring to the July 2019 expiration. “Everybody understands what happened, that a large amount of money got dumped into Montana and the initiative was mischaracterized as a tax increase rather than expanding health care.

“I would garner to say that when it comes before us, it’s not going to be a super close vote.”

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Michael Ollove

Michael Ollove covers health care for Stateline. Ollove worked for many years at The Baltimore Sun, as an enterprise reporter and an editor.