How Medicaid Cuts Hurt the Economy
Medicaid acts as an economic stimulus, funding job creation and supporting hospitals, physicians, nursing homes, and other health services. Medicaid spending ripples through the economy as health care workers spend their wages and health care facilities purchase necessary materials. In short, Medicaid adds billions of dollars in economic activity. The federal government boosts this activity by matching state Medicaid spending at least dollar for dollar, bringing new money into states.
Cutting Medicaid spending forfeits federal funds, short-circuits the economic engine of Medicaid, and significantly worsens a state’s economic situation.
Tools to quantify Medicaid’s economic impact on your state:
- Federal infusion: The federal government matches each state's Medicaid spending according to a formula called the Federal Medical Assistance Percentage (FMAP). Find your state’s FMAP. For every $1 in state spending, a state with a 65 percent matching rate would receive an additional $1.86 from the federal government. To translate the FMAP percentage into dollars for your state, use the following formula:
For every state $1: (% matching rate) / 1- (% matching rate) = federal share
or (.65) / 1- (.65) = 1.86
- Economic multiplier: The Medicaid Calculator produced by Families USA shows the economic consequences of decreasing Medicaid funding, including job and salary losses. Medicaid Calculator
- Show the cost of not insuring people: A recent report by the New America Foundation includes state-by-state calculations of the economic costs of the uninsured. Use this to argue for expanding Medicaid as a smart economic strategy. See the report here.
- State research: There are many state reports on the economic importance of Medicaid. Kaiser Commission on Medicaid and the Uninsured documents those reports on page 7 of this paper.