Washington, D.C. — Medicaid rule changes put in place by the Bush Administration will cost Pennsylvania more than $560 million in federal funds over the next two years. The cut in federal funding will, in fact, act like a giant anti-stimulus package. Those lost Medicaid funds will eliminate an estimated 5,800 jobs and an accompanying $221.4 million in wages, and cost the state an estimated $645.2 million in lost business activity.
Virtually all that economic pain comes in the first year of implementation, when Pennsylvania would fail to receive approximately $274.4 million in Medicaid payments, says a report released today by Families USA, the national organization for health care consumers. Titled “Bad Medicine,” the report analyzes the economic impact of seven new Medicaid regulations that were issued in 2007.
“The devastation caused by the Administration’s cuts will affect millions of people who rely on Medicaid for their health lifeline. This will be tragic for their families,” Ron Pollack, Executive Director of Families USA, said today.
“Additionally, these cuts will harm state budgets at the worst possible time. These cuts in federal Medicaid payments will have a ripple effect through state economies that are already struggling during this economic downturn. This economic harm will increase the number of people who may need Medicaid, as thousands of Pennsylvanians see their paychecks being cut or their jobs being eliminated.
“This lost business activity in Pennsylvania will hurt business and industry, and it will force governors and state legislators to make increasingly difficult choices about providing state services,” Pollack said. “This Bush Administration’s decision is ill-timed and ill-considered, and it should be reversed by Congress.”
“The cuts to Medicaid target those who need help the most: children, and the mentally and physically disabled,” said U.S. Rep. Tim Murphy (R-PA), who helped draft legislation preventing the cuts. “By eliminating preventative healthcare programs and assistance, there could be a devastating effect on the long-term healthcare of Medicaid patients. This would only lead to higher costs in the future, and put the health of millions at risk.”
The seven regulation changes issued by the Bush Administration in 2007—and imposed on states without congressional review or debate—restrict funding for a variety of Medicaid services, including rehabilitation services and school-based transportation, as well as Medicaid administrative services, such as outreach, enrollment, and case management. The seven rule changes are now either under a congressional moratorium or awaiting implementation.
The Families USA “Bad Medicine” report for Pennsylvania is based on the latest version an economic modeling tool known as the Regional Input-Output Modeling System, or RIMS II. Developed by the U.S. Department of Commerce, RIMS II has been used extensively for a variety of major projects calling for economic projections, such as military base closures, hospital and airport expansions, and the impact of natural disasters on regional economies.
“There is a multiplier effect when dollars stop coming into a state like Pennsylvania,” Pollack said, “and whether Pennsylvania loses funding because a business has closed or because a federal agency has reduced funding for a state program, the impact is the same—there are fewer dollars on the move in the state,” Pollack said.
“As our analysis makes clear, allowing these regulations to be implemented would be bad for Pennsylvania’s families, who will need the Medicaid safety net more than ever in the coming months,” he said. “It is also the wrong choice for Pennsylvania’s economy, which will be dramatically weakened by these cuts.”
All 50 states are affected by the Medicaid rule changes, Pollack said.
