Part 2: So You Want to Cut Medicaid. Do You Really?

Last week, I described how Medicaid is a joint federal and state program; that it used to be funding more by the federal government than the state, but that federal funds are drying up. I also asked my readers a few questions about their own families, hopefully, showing them that their own family might use or already be using Medicaid even if they are not poor.

I think that federal/state point is important because here in Illinois, we're always being told that our state programs are in trouble because our Democratic legislators caused a big problem, forgetting that Illinois was majority Republican long before it was majority Democratic, but no one every seems to care about that. However, the point is that the cut in federal funding is the problem we're having with Medicaid. That's because our federal legislators feel that war and tax cuts for the wealthy are more important.

Our federal issue discourse is about cuts, cuts cuts because multinational corporations that send jobs to India and China are the "job creators".

Well, guess what. Medicaid is a job creator too.

In 2009, the Center for Tax and Budget Accountability, a bi-partisan  data- driven, research and advocacy think tank, issued a report titled Medicaid Plays a Critical Role in Illinois' Economy. In the report, CTBA shows how Medicaid "has a positive ripple effect throughout the state and local economy." CTBA found that Medicaid has a multiplier effect meaning:

...Medicaid dollars circulated through the economy have a far greater economic impact than just direct reimbursement to pay providers of Medicaid services. Medicaid also pays for a portion of the wages paid to the professionals, technicians, custodians and administrators employed by health care providers. These wages are then used to pay mortgages, buy groceries, pay bills and buy goods and services in the local consumer economy. Medicaid reimbursement is also used to acquire medical and other supplies from local businesses. These funds are then applied to support employees of the supply companies. In essence, Medicaid spending generates business activity throughout the medical industry, supports wages for health care workers, fosters consumer spending, boosts state tax revenue and produces general economic output. The multiplier effect is enhanced with respect to Medicaid because new dollars – federal matching funds – are pulled into the state economy.

In 2009, this multiplier effect resulted in $46 Billion of additional business activity, $15.8 Billion in Wages and 385,742 jobs statewide.

Economists in Florida came up with similar findings, that Medicaid cuts are a job killer. The Illinois Hospital Association agrees that Medicaid cuts are a job killer in 2012 Illinois.Although, one cannot help but wonder if medical spending has become the new economic bubble for this decade as real estate was in the 1990s and early 2000s.

The downside of cutting state Medicaid is that the state cut will cut federal matching dollars coming into the state, having a reverse multiplier effect on Illinois' economy. CTBA also noted that late payments to providers has hampered the positive economics of Medicaid and that increased us of Medicaid comes from the "unaffordability of private coverage for many struggling families as health care costs creep upward."

So, we have seen how federal spending cuts have adversely affected state Medicaid programs and how cuts to those programs lessen federal matching. We have also seen how the combined cuts result in loss of economic activity and jobs. When U.S. Congressman, Robert Dold, tells you that he's all about protecting the job creators, you might ask him what he's done to protect Medicaid, a true job creator.