• Chart: State cost of Medicaid expansion vs. spending to attract private investment

    From the new Commonwealth Fund document by Sherry Glied and Stephanie Ma:

    One way to look at these state payments [for Medicaid expansion] is to compare them with other efforts to attract investments to the state. In Exhibit 3 [see below], we compare the states’ costs with average annual state expenditures to attract private businesses, such as tax breaks provided to companies. On average, the states’ costs in 2022 will be less than one-sixth the amount they pay out annually to attract private businesses.

    Exhibit 3 in the document is a table. Below is the data in a chart, sorted from lowest to highest state spending to attract private business (click to enlarge). The footnote in the document says, “States with negative dollar amounts [] have previously expanded eligibility for their Medicaid programs prior to the enactment of the Affordable Care Act. These states will get enhanced matches on the expansion populations; thus, their total spending will fall.” Also, the data are obviously not from 2022, but the values are trended forward to 2022 using the consumer price index. (I don’t know why the authors did that, but it doesn’t change the basic story.) You can read the document for additional details.

    mcaid v private


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    • Interesting chart.
      I have always been appalled at the way business manipulates states for tax breaks, etc. but had no idea that it was this large amount.
      I could understand some assistance to business if there was any trickle down to real wages or benefits for workers but one thing has become clear is that all profits flow to the owners and that workers have to depend on meager food stamps and Medicaid (if they can qualify).
      Clearly business greed is more important than health.

    • I guess I am not seeing why the comparison between money spent on attracting businesses and a states share of the Medicaid expansion teaches us much. It would be nice if states just had good business environments that were not ad hoc, but if one state is trying to lure a big employer from your state, the rational thing to do is to try to keep that business in your state by giving incentives. Also, that spending may be, on net, cost-reducing because the state may not have to spend as much on social spending programs if the it can attract more employers that provide jobs to the states residents (I don’t think this is the case, especially for most states (take a look at Michigan), but it may be the case for some states).

      One nitpick: this chart compares yearly total money spent on attracting business to a change in money spent on Medicaid. It seems that if comparing money spent on business incentives and money spent on Medicaid tells us anything, then the relevant comparison would be to compare the projected change in money spent on business incentives with the projected share of cost in the Medicaid expansion.

      • I didnt read the paper, but the authors might delve into the false expectations of tax incentives to encourage business growth. My first hit on google:

        “State tax incentives often fail to live up to their promises to encourage economic growth and are usually given for business and industries with the most political clout. Lawmakers should avoid complicating the tax code by creating new tax credits and exemptions and instead focus on attracting business by simplifying and lowering marginal tax rates.”

        The ROI for Medicaid might surpass those of others.


    • States he spending to attract business is a very bad zero sum game, our politicians are soooo corrupt.

      • BTW the commerce clause is used for all manor thing that seem like it would not justify but preventing the states from engaging in this zero sum game which could easily be seen as interfering with interstate trade is ignored. Politics is sooo corrupt.

        • It takes two sides to be corrupt. Business and money run the political system since we allow unlimited bribes of our politicians. It’s hard for anyone to be virtuous in a system with so much money.

    • Austin,

      I like you as an economist, but I can’t help but notice you continuing to slip your political beliefs into a lot of your reporting.

      There are so many things wrong with this post, I almost dont know where to begin.

      1) What do state incentives to businesses have anything todo with Medicaid spending? Im still struggling to find how on earth these two variables correlate in any meaningful way? and your post fails to address this as well.

      So, all I am taking from this is that you are criticizing states that are refusing to expand medicaid, but also spend a lot on bringing in business?

      If this your point, why don’t you also compare those state economies and look at their growth rates compared to the states that do expand medicaid/don’t spend as much on business incentives. Texas is obviously the big violator, but surprise, I bet their economy has/will grow the most of any of those state. And I wonder if it will have any correlation to those incentives to keep businesses in their state…

      2) The units for this table/chart are so abstract. They are projections? for 10 years from now? The projections on both variables are so unbelievably hypothetical. How can you possibly make predictions on things that could go any of 1000-different ways? Both for how much they will spend on medicaid AND incentives for businesses.

      I like you. But please, avoid posting meaningless clutter like this to your site. Or if you do, at least make valid points about the research that you’re analyzing.

      • Go back to the very first link in his posting (You are
        obviously here because you want to learn something.) The report the
        information comes from is about how a state’s decision to opt in or
        out of the Medicaid expansion will affect the flow of federal
        funds. Since the funding mechanisms of the ACA generally are phased
        in, the time frame was multi-year, and they picked 2022 because
        that was how far out the Urban Institute carried its projections.
        In 2022, Texas will lose out on $9.6 billion in federal funds as a
        result of its decision to opt out of the expansion, even though its
        citizens will still be funding the program through their federal
        taxes. Meanwhile, California will see an extra $10 billion. And the
        reason for the comparison is that money spent on attracting
        businesses is a tax — if it’s an incentive for the company
        (usually) that means that in order to maintain level of services,
        the state would need to increase taxes on everyone else … or cut
        services. Perhaps you have read about parts of Texas where they can
        no longer afford to pave roads, mostly rural highways being torn up
        by heavy oil tanker trucks, and so they are turning them to gravel
        roads. The oil business is booming because of generous tax
        incentives to the industry, but now farmers will have to spend two
        to three times as much of their time driving as a result of this
        *technological innovation*. And for more about economic development
        spending by state and local governments to attract businesses and
        their dubious benefit claims, here’s a pretty good overview of the
        existing literature: