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Perryman for expanding Medicaid

Economist Ray Perryman makes the straightforward economic case for expanding Medicaid in Texas.

Ray Perryman

According to our analysis, every $1 spent by the State of Texas to expand Medicaid coverage under the Affordable Care Act returns $1.29 in dynamic State government revenue during the first 10 years of the expansion.

Medicaid expenditures lead to substantial economic activity, federal funds inflow, reduction in costs for uncompensated care and insurance, and enhanced productivity from a healthier population. When these outcomes and the related multiplier effects are considered, the program actually far more than pays for itself and provides a notable economic stimulus. This pattern also continues beyond the initial 10 years.

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During the first 10 years after implementation of a Medicaid expansion, The Perryman Group estimates that the total cumulative gross benefits to the state economy include $270.0 billion (in 2012 dollars) in output (real gross product) and 3,174,640 person-years of employment.

These overall gains stem from spending for health care which would be provided through the expansion, reducing uncompensated care (and, thus, the local government and private funds needed to pay for it), and improving outcomes through better care (reducing morbidity and mortality and thus increasing productivity).

State revenues required to implement the Medicaid expansion will of necessity be diverted from other potential uses, either in terms of the fiscal resources funding other public goods and services, lower taxes allowing for greater private sector activity, or some combination of spending increases and tax reductions. When this diversion is accounted for, the outcomes from expanding Medicaid are still $255.8 billion (in 2012 dollars) in output (real gross product) and 3,031,400 person-years of employment (about 300,000 per annum during the first 10 years of implementation).

Federal Medicaid funding returned to the state would total $6.78 for every dollar of state funds spent. The federal tax burden on Texas citizens and firms will remain the same irrespective of whether the state chooses to receive these benefits. The burden on local government entities is reduced (by $1.21 for every dollar of state funds for Medicaid expansion), while dynamic local government revenue rises by $0.51 per dollar of state money expended. Insurance premiums would be less due to a reduction in uncompensated care, and overall quality of life and productivity would be enhanced.

For every dollar spent by the State for additional Medicaid coverage, total spending in the economy would go up by $43.50, output (real gross product) would rise by $21.72, personal income would grow by $14.34, and retail sales would expand by $6.13. In addition, the gains rise over time with population growth and aging and the resulting increase in the need for health care.

The bottom line is that the relevant question at present is not philosophical, but practical.

Unfortunately, it’s political. If such things as “data” and “facts” could sway Rick Perry, Ray Perryman would not have needed to write this. You can see Perryman’s press release here, his report here, and his report with tables included here. Via Grits, who reminds us again that the criminal justice system, specifically in how it deals with mentally ill defendants, would also benefit greatly from Medicaid expansion.

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One Comment

  1. […] the mountains of evidence in its favor, I still can’t say that I see a path to Medicaid expansion in Texas. […]

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