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The economic benefits of expanding Medicaid

Where the States Stand

A couple weeks ago, we pointed out that if Pennsylvania expands Medicaid (Governor Corbett has said he “can’t recommend it at this time,” but hey, we can dream), not only would 500,000 uninsured Pennsylvanians gain health coverage, but the new federal spending to pay for it would create 41,200 jobs throughout the state by 2016.

Those aren’t all healthcare jobs either. As report from the advocacy group Families USA explains, federal spending on Medicaid has an indirect effect on the rest of a state’s economy as well:

For example, a hospital may spend a portion of its revenue on facility upgrades that employ large numbers of local construction workers. Similarly, health sector employees will spend their income on all kinds of products and services, such as dining at local restaurants or purchasing new cars. This, in turn, increases the earnings of local restaurants or car dealerships, which adds to the income of the employees in those businesses, and so on.

The $3.3 billion the federal government would spend expanding Medicaid in Pennsylvania would generate about $5.1 billion increase in economic activity in the state. And Pennsylvania’s not the only state that would see a big economic boost by opting in. For example, Kaiser Health News reports on a recent study by Denver economic consultant Chuck Brown:

Brown analysis tries to quantify the overall economic impact to Colorado from expansion. It says it will grow the state’s gross domestic product by 0.74 percent, and add 22,388 jobs by 2025. “Of these jobs, 14,357 will be created in the first 18 months following expansion,” the report says. “Average household earnings … are $608 (per year) higher with Medicaid expansion.”

Studies in other states have shown similar results:

  • Texas: spending associated with the Medicaid expansion would create 68,700 jobs in 2014 alone (Perryman Group)
  • Ohio: expansion would generate between $2.7 and $2.8 billion in new state revenue over the next decade, creating 27,000 jobs (Urban Institute)
  • Virginia: more than 30,000 jobs would be created (Virginia Hospital and Healthcare Association)
  • Missouri: “Expansion […] is projected to generate an additional 24,008 jobs in Missouri in 2014. In one year, this is more than the employment of Missouri’s 10 Fortune 500 companies in the state. It also is 12.8% of the total unemployment number in Missouri in 2011.” (Missouri Foundation for Health)
  • Montana: federal funds would create and support between 11,500 and 12,700 new jobs, with an average salary of $42,000 “well above the average wage for private sector jobs in Montana economy-wide, which is $35,000.” (Montana Office of the Commissioner of Securities and Insurance)

The list goes on, but you get the point.

Many states are still dealing with high unemployment from the financial crisis, and the sequester isn’t going to help– hundreds of thousands of jobs will be lost later this summer if Congress doesn’t act to replace it. The Medicaid expansion is one thing the federal government is doing that will help– at least in states that choose to opt in. It will give security to low income Americans, and as a helpful side-benefit it will provide some economic stimulus that is still badly needed in many places.

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