Medicaid! – It has a stimulative effect

TIE doesn’t have a monopoly on Medicaid coverage. As I said last night, there are others out there beating the drums as well.

Sarah Kliff had a nice post in July on the stimulative effects of Medicaid:

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.”

Much of the research has focused on the recent stimulus law, which increased Medicaid spending by about $88 billion between 2008 and 2010. For those three years, the federal government picked up a larger share of state Medicaid bills, freeing up state dollars to spend on other services.

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.

My health care coverage is pretty good, and I make a nice living. Making my benefits better has little effect on my economic life. But for those at the lowest end of the socio-economic spectrum, getting health care coverage in the form of Medicaid can free up a significant amount of income. The same holds true for states.

If you severely cut Medicaid, or if you kick a lot of people off of it, then states will have to pick up the slack (block grants) and people will have to redirect their money. If Medicaid has a stimulus effect, then cutting it might do the opposite.

I’m just saying.


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