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How Medicaid Expansion Can Help a State’s Economy

The U.S. Supreme Court ruled in 2012 that states can choose whether to expand their Medicaid programs under the Affordable Care Act (ACA), or Obamacare. To date, 32 states have decided to do so, finding that ultimately it would be beneficial to them. Studies, furthermore, show that the states opting out of Medicaid expansion are actually losing billions of dollars, thus reducing job growth and economic activity.

In 1965, President Lyndon B. Johnson signed into law Medicaid, a program jointly administered by the federal and state governments to provide free medical care to low-income Americans. Many Republicans consider it a form of welfare, an anathema to their traditional ideology that centers on limited government and fewer regulations and taxes to spur job growth.

Many claim that since taxpayers’ dollars fund Medicaid, rolling back the program would help the economy by saving taxpayers money. But, in what economists call “a multiplier effect,” it becomes evident that Medicaid expansion actually saves the states money.

The multiplier effect applies in this context to the money generated from the funds the federal government gives the states to expand their Medicaid programs. Some of the money goes to healthcare workers, who then spend their money on things like homes, restaurants, and theaters. This generates additional revenue, which then goes into the states’ coffers in the form of taxes.

When states decide against Medicaid expansion, they risk putting hospitals and clinics in financial jeopardy when uninsured people become unable to pay their medical bills. Also, when an uninsured person needs to see a doctor, they may end up going to the emergency room instead, in which case the hospital won’t turn them away. As John Holohan, a fellow at the Urban Institute, said, “You can’t make an economic case against expansion.”

For more information on Medicaid expansion, please contact us.