The economic stimulus of Medicaid

Posted by AzBlueMeanie:

if our ideological extremist Tea-Publican Governor and legislature say no to the expanded Medicaid provisions of the Affordable Care Act, they are also saying no to economic stimulus and job creation. You read that right.

Sarah Kliff at Ezra Klein's WonkBlog reports Medicaid’s stimulative effect:

Here’s one factor governors may want to weigh as they consider participating in the health law’s Medicaid expansion: Study after study has found that federal Medicaid dollars spur economic activity beyond the initial investment.

Researchers find that a dollar of Medicaid spending increases spending both in the health-care sector and in other industries.

“For every dollar that a state spends, federal funding filters through the state economies,” says Robin Rudowitz, associate director for the Kaiser Commission on Medicaid and the Uninsured. “That tends to go both into health service vendors as well as other sectors.”

Medicaid acts as a stimulus in two ways. First, increased federal spending on health care can, in tough budget times, free up state dollars for other spending. Medicaid spending can also ripple through the private sector, stimulating increased employment that leads to higher household spending.

Rudowitiz recently reviewed 29 state-level studies of Medicaid’s stimulative impact. Across the board, she says, “it was pretty consistent that Medicaid spending did generate economic activity.”

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One recent study found that every $100,000 in stimulus dollars increased employment by 3.8 job years. Each stimulus dollar had a multiplier of 2, meaning that every $1 of Medicaid spending resulted in a $2 increase in gross domestic product.

“We think Medicaid is particularly fungible,” says study author Gabriel Chodorow-Reich, a graduate student at the University of California-Berkeley. “If the federal government takes up a larger share of the program, the state can use those dollars in a more effective way.”

The vast majority of the employment gains in in Chodorow-Reich’s study — 84 percent — were outside of the health-care and government sector. “In health and education, there was a direct effect on hiring,” he says. ” A large amount of it was also spillover to other sectors.”

Chodorow-Reich is cautious in predicting how much his research says about the effect of the Medicaid expansion. Increased insurance coverage could reduce states’ spending on uncompensated care, which came in at $10.5 billion in 2008. But if the economy gets stronger, states may not ultimately invest those savings back into other projects.

“States are already less constrained now than they were two years ago,” he says. “If all this happens during a period where the money just goes into a rainy day fund, you’re not really freeing up additional money for other projects.”

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[O]ther state-level studies — bolster one argument made by some of the health law’s supporters: that on balance, the Medicaid expansion could actually save states money. The increased tax revenue is one element of that, alongside reductions in uncompensated care and new Medicaid payments for services such as mental health.

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“There are a lot of intangible benefits when you talk about having more money dedicated to the health-care system,” said Meghan Millea, an economist at Mississippi State University.

Tell Governor Jan Brewer and your state legislators that participating in expanded Medicaid is not only the morally just thing to do, but the economically beneficial thing to do — it puts money into the Arizona economy and creates jobs.