Proposed Medicaid Cuts Would Harm California’s Economy

Cuts Could Cost California as Many as 187,690 Jobs and as Much as $24.4 Billion in State Business Activity

Washington, D.C.—The Medicaid cuts in the House Republican budget proposal, if implemented today, would have a devastating impact on the struggling economy of California. These cuts would put as many as 187,690 jobs and as much as $24.4 billion in state business activity at risk. That’s the conclusion of a report for California released today by the national health care consumer organization Families USA.

Titled “Jobs at Risk: Federal Medicaid Cuts Would Harm State Economies,” the report focuses mainly on how Medicaid cuts would damage the state’s economy, although the report makes clear that the human toll of such cuts is far wider, affecting the health and well-being of low-income and middle-class families, children, seniors, and people with disabilities.

“Every federal Medicaid dollar that flows into a state stimulates business activity and generates jobs,” Ron Pollack, Executive Director of Families USA, said today. “Conversely—and tragically, for California—cutting Medicaid funds not only hurts the seniors, people with disabilities, and children who count on the program as their lifeline, but it also results in fewer jobs and stunts the economic recovery.”

The budget proposal adopted by the U.S. House of Representatives, sponsored by Rep. Paul Ryan (R-WI), calls for cuts in federal funding to current state Medicaid programs of 5 percent in 2013, 15 percent in 2014, and 33 percent in 2021.

Other Republican-sponsored proposals in Congress put global caps or deficit triggers on spending that would likely result in similarly sized cuts to Medicaid, and a successful effort to repeal the Affordable Care Act would cut Medicaid by an additional 13 percent, for a total of a 44 percent cut to Medicaid in 2021.

The report looks at the economic impact of a 5 percent, 15 percent, and 33 percent cut in current Medicaid funding levels. Implementing a 5 percent cut in Medicaid spending in 2011 would:

• Cost California nearly $1.6 billion in federal Medicaid dollars and put at risk approximately almost $3.7 billion in business activity and 28,440 jobs;

• Cost California and the remaining 49 states and the District of Columbia the $13.75 billion needed to support health care for vulnerable residents, including funding for nursing home care and other long-term care for seniors and people with disabilities.

A 15 percent cut in federal Medicaid spending in 2011 would have a greater impact and would:

• Cost California almost $4.7 billion in federal Medicaid dollars and put at risk approximately $11.0 billion in business activity and 85,320 jobs;

• Cost California and the remaining 49 states and the District of Columbia the $41.25 billion needed to support health care for vulnerable residents.

A 33 percent cut in federal Medicaid spending in 2011 would:

• Cost California more than $10.3 billion in federal Medicaid dollars and put at risk approximately $24.4 billion in business activity and 187,690 jobs;

• Cost California and the remaining 49 states and the District of Columbia the almost $90.8 billion needed to support health care for vulnerable residents.

“Medicaid is good medicine for seniors and people with disabilities needing nursing home and other long-term care, as well as children who need to see a doctor,” said Pollack. “It is also good medicine for state economies and job growth.

“This is exactly the wrong time for Congress to cut a program that boosts the economy while also providing a boost to individuals and families facing hard economic times.” 

The Families USA “Jobs at Risk: Federal Medicaid Cuts Would Harm State Economies” report for California is based on the latest version of 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. In preparing this report, Families USA worked closely with Richard Clinch, Director of Economic Research at the Jacob France Institute of the Merrick School of Business at the University of Baltimore.

###

Families USA is the national organization for health care consumers. It is nonprofit and nonpartisan and advocates for high-quality, affordable health care for all Americans.

1201 New York Avenue NW, Suite 1100 · Washington, DC 20005
202-628-3030 · Email: info@familiesusa.org · www.familiesusa.org