A new study claims that state retirement savings plans do more than merely boost retirement security.
Segal Consulting conducted a review of all 50 states and the District of Columbia to estimate the impact of expanded retirement savings by individuals not currently participating in a retirement plan on future Medicaid expenditures.
The analysis showed a positive correlation between increased retirement savings, sufficient to remove a percentage of currently vulnerable households from the poverty rolls by the time they retire, and a related reduction in Medicaid spending. According to the study, every state had an estimated reduction in state Medicaid expenditures resulting from increased retirement savings from the first 10 years of the plan.
Fifteen states would save more than $100 million each, with total projected savings approaching $5 billion. The savings ranged from $11 million (Mississippi) to $604.7 million (California, which recently became the eighth state to enact a retirement program for private sector workers).
Those results were based on an assumption that the programs would incur savings starting at 1% per year reduction in spending for workers currently aged 64 or older, grading up to 5% for those currently aged 60. Of course, with those kinds of assumptions, it’s not surprising that the researchers described the impact over time as “exponential,” although they noted that they did not take into account different state “eligibility nuances” for Medicaid eligibility. Moreover, they did not assume that Medicaid access would be eliminated, merely that it would be delayed.
Ultimately, the paper was something of a promotion for Segal Consulting’s ability to act as a consultant to states contemplating establishing a state-run retirement program, or to help craft and execute an RFP for providing those services.
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And it didn’t mention that the same benefits – and likely more – could be reaped from an expansion of retirement coverage generally via the current employment-based savings system.
States that have enacted similar programs are Maryland, Connecticut, Illinois, Massachusetts and Oregon, while Washington State and New Jersey have both launched small plan marketplaces. Approximately half the states are currently considering measures to close the retirement coverage gap.
None of these programs have become operational to date, although Oregon has pledged to open its program for enrollment on a pilot program basis by July 2017.
