Report: Medicaid Cuts Are Bad Medicine for Economic Health

As financially strapped states plan big cuts in their Medicaid programs, a new report documents that those cuts would significantly harm each state''s ailing economy. The report, issued by the health care consumer watchdog organization Families USA, indicates that states cutting their Medicaid programs would trigger large reductions in their states'' jobs, wages, and business activity.

The study, Medicaid: Good Medicine for State Economies, analyzed the Medicaid spending of the 50 states in 2001. The study found that the total $97.7 billion spent on Medicaid generated $279.3 billion in goods and services from increased business activity. Medicaid funding infuses the state with federal matching dollars. This creates more health care jobs, and these new workers spend their money on goods and services through the 'economic multiplier effect.'

According to the report, states stand to lose an average of 37 jobs for every million dollars cut in the Medicaid program in 2003. Such job losses would vary considerably from state to state, with Mississippi losing 72 jobs for each million-dollar cut while Delaware would lose 17 jobs. A reduction in Medicaid spending will therefore not only harm those in need of health insurance, but also will reduce the number of jobs and services available within a state.

'Cuts to the Medicaid program are short-sighted," said Families USA executive director Ron Pollack. "Medicaid is a powerful stimulus to state economies, and Medicaid cutbacks will exacerbate states'' economic problems."