PRESS RELEASE

Contact:
Health Policy Institute of Ohio
(614) 224-4950

Study Estimates Economic Effects of Medicaid Spending Changes in Ohio
Job and Economic Losses Vary Across Counties

According to a study commissioned by the Health Policy Institute of Ohio, the reductions in Medicaid growth in Ohio’s current biennial budget could result in a $2.4 billion loss to the state economy, including the loss of almost 24,000 jobs. In addition, the study found that these effects were not spread evenly across the state, with urban and southeastern counties bearing the brunt of the costs. The job losses would also cause the state to lose $33 million in income taxes over the two years.

The study, “Estimating Local Effects of Medicaid Expenditure Changes,” examined the economic effects of Medicaid cost containment measures in Ohio’s current biennial budget. These measures reduced state-generated dollar spending on Medicaid by $745 million ($268 million in SFY 2006 and $477 million in SFY 2007) and federal-generated spending by $1.21 billion ($396.6 million in SFY 2006 and $810.3 million in SFY 2007) from the projected spending required to have maintained the Medicaid program’s existing payment and coverage policies. These numbers do not include changes to Ohio’s Disability Medical Assistance (DMA) program as DMA spending does not draw down federal matching dollars.

The economic effects of these cost containment measures are not a simple “one for one” loss of dollars because for every state-generated dollar Ohio spends on Medicaid, the federal government matches that dollar with an average of $1.40 in federal funds. 

In addition, these state and federal dollars create additional economic value as they ripple through the economy, known as the multiplier effect.  This rippling effect results in every state-generated dollar Ohio spends on Medicaid generating an estimated $3.18 in economic value.

The effect of Medicaid expenditures can be significant given as they account for over three percent of Ohio’s gross state product (the total value of goods and services produced in the state).  Moreover, research estimates that every one million dollars spent on Medicaid activities accounts for about 32 jobs in the Ohio economy.

In addition to the economic and job losses, the study also found that the economic burden of slower growth in Medicaid spending is not shared equally across Ohio’s 88 counties. Counties in the south, southeast and eastern parts of Ohio are the most economically vulnerable to changes in Medicaid expenditures.  In addition, most of Ohio’s urban counties and some counties in the middle of the state also show a greater vulnerability to changes in Medicaid expenditures.

This study does not mean that Ohio should ignore ways to slow the rate of growth in Medicaid spending. Nor does it mean that Ohio can afford to finance Medicaid through tax increases or reductions in other state spending. As this study shows, each method of financing Medicaid brings its own state and local economic consequences and trade-offs, which need to be considered in future budget cycles.

The study was completed by Anand Desai, Yushim Kim, and Robert Greenbaum of the Ohio State University and analyzed census data, tax and job information from the Ohio Department of Development, and Medicaid information from the Ohio Department of Job and Family Services. Additional support for the study was provided by the Health Foundation of Greater Cincinnati.

For more information, including references, analysis, and data tables, please see http://www.healthpolicyohio.org/publications/medicaidstudy.html.

The Health Policy Institute of Ohio is an independent, nonpartisan organization that forecasts health trends, analyzes key health issues, and communicates current research to Ohio policymakers, legislators, and others. For more information on the Institute, call (614) 224-4950 or go to http://www.healthpolicyohio.org.

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