Uncertainty Over Medicaid Costs Could Delay Montana Infrastructure Projects

Jan 9, 2020

Gov. Steve Bullock’s administration says an $80 million infrastructure package is facing an “unacceptable” delay after passage during last year’s legislative session. The bipartisan spending deal on public works is hung up after an audit questioning state finances and Medicaid spending.

Administration officials in a press conference Wednesday said bonding dollars to fund local water and sewer projects, money to renovate a building at Montana State University and to build the Butte-Silver Bow County Armory is on hold because of an audit of the state health department.

That review comes from the Legislative Audit Division, which reports to lawmakers and is not under the control of the governor’s office.

"The [Legislative] Audit Division is preventing us from moving forward and selling these bonds," says Raph Graybill, chief legal council in the governor's office.

The Division's full audit is not yet public, but according to the governor's office, it says the state may owe up to $130 million dollars because of errors in the state’s calculation of people eligible for Medicaid. The governor’s office rejects those findings. Graybill says usual underpayments and overpayments based on Medicaid enrollment range from $6,000 to $160,000.

"The state won’t recognize what we believe to be, essentially, a fictional liability associated with the Medicaid program."

Disagreement over the financial liability and how many people are eligible for Montana’s health care program for low income people has stalled the state’s sale of bonds to fund infrastructure projects. That’s because the federal government pays a majority of the costs of Medicaid. Changing the number of people qualified for the program could reduce federal money coming into the state to pay for it, and raise the state’s liability.

Audit Division staff told the Governor's office in a letter earlier this month that in their review of the Medicaid system, "we are dealing with an unprecedented level of questioned costs."

The Government agencies disagreement on the state’s financial risks and how to notify potential investors for state bonds, prevents the bond sales from moving forward. The state had planned to start selling bonds in November.

Angus Maciver, head of the Legislative Audit Division, says the agency does not comment on audits that are not yet public.

Core to the disagreement is the method used by the Legislative Audit Division for calculating the number of people eligible for Medicaid in Montana.

"They’re using criteria that are grossly oversimplified and have known limitations. It doesn’t stand up in robustness next to the existing eligibility system used by the department,” Governor’s Office Budget Director Tom Livers says.

The Governor's Office says the audit division looked at 63 of the 275,000 people enrolled in Medicaid to determine eligibility.

Livers says the Audit Division used its own methods for determining Medicaid eligibility instead of using the system developed according to federal guidelines, which has a track record of creating results with less than half a percent error. Livers says the Audit Division found a 50% error rate.

The Governor’s Office says delaying the sale of bonds means the state could see higher costs for proposed infrastructure work. Director Livers says delaying could mean the state misses the 2020 construction season.

The infrastructure bonding package tied up in this disagreement was regarded by many lawmakers as a major success during the 2019 legislative session. There was previously a more than decade-long stalemate over using bonds to pay for public work projects.

Legislative leaders say lawmakers will look into this issue when they gather next week to study trends in government and state budgeting.

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