AARP Encourages State to Avoid Medicaid Budget Cuts
Medicaid delivers health services to 600,000 Kentuckians providing jobs and generating tax revenues to local and state government
Louisville, KY − As Governor Beshear and Kentucky state lawmakers consider state budget priorities and cuts, AARP is urging Kentucky leaders to consider the benefits Medicaid funding brings to local economies at the same time ensuring protection for the Commonwealth's most vulnerable citizens.
AARP has created a new Kentucky Medicaid fact sheet with specific information on how the state’s economy benefits from the new job creation, increased tax revenue and the multiplier effects of spending that federal Medicaid funding brings to the state.
“We realize these tough economic times call a re-evaluation of state budget decisions, and we want to make sure that state leaders and policy makers are well aware that Medicaid spending is an effective way to stimulate our economy,” said Cathy Allgood Murphy, AARP KY's Associate State Director for Advocacy.
The new state fact sheet includes research by Moody's Analytics, the Kaiser Commission on Medicaid and the Uninsured, and the Rural Policy Research Institute that clearly shows how Medicaid fuels a state’s economy. The research shows that for every dollar Kentucky cuts in Medicaid, the state loses $2.35 in federal matching funds. An 8% increase in funding to states for 15 months, as recently proposed by Congressional leaders (H.R. 7110), would generate $508,749,212.00 for Kentucky, according to an analysis of the legislation by Health Management Associates, www.healthmanagement.com. That money then flows through the economy, providing jobs and generating tax revenue for both state and local governments.
Since the economic downturn began, AARP has coordinated a continuing effort to prevent state Medicaid cuts. On the federal level, AARP has strongly advocated for including a temporary increase in federal funding to states for Medicaid (known as “FMAP”*) in economic stimulus legislation. While Congress did not act on FMAP in the lame-duck session, AARP will continue to advocate strongly for FMAP increases, and the new Administration has indicated that it is receptive. *Federal Medical Assistance Percentages [FMAP] are the percentage rates used to determine the amount of matching funds allocated by the federal government annually to each state for Medicaid, which varies based on state income levels.
Medicaid Is Powerful Economic Stimulus Tool for Kentucky
Medicaid is a powerful economic force. Medicaid cuts harm the economy, and increased federal funding boosts local economies and can help prevent our economic crisis from getting worse. That’s because for every dollar Kentucky cuts in Medicaid, the state loses $2.35 in federal matching funds. An 8% increase in funding to states for 15 months, as recently proposed by Congressional leaders (H.R. 7110), would generate $508,749,212.00 for Kentucky.1 That money then flows through the economy, providing jobs and generating tax revenue for both state and local governments. Leading economists and academics agree that this is true:
Moody's Analytics, Inc., Mark Zandi2: An “economically potent tool of the federal government is aid to financially pressed state governments. This could take the form of general aid or a temporary increase in the Medicaid matching rate to help ease the costs of health coverage... Additional federal aid to state governments would fund existing payrolls and programs and so provide a relatively quick economic boost. States that receive a check from the federal government will quickly pass on the money to workers, vendors and program beneficiaries.”
Kaiser Commission on Medicaid & the Uninsured3: “New [Medicaid] spending can create a larger impact than the amount of new spending alone through “multiplier effects” because of the successive rounds of spending that occur when money is injected into a state economy. For instance, state businesses and residents spend their earnings on purchases from other businesses or residents in the state, who in turn make other purchases and so on.”
Rural Policy Research Institute4: “Medicaid payments in rural communities contribute directly to the community’s financial base, leading to additional employment in health care and associated occupations (e.g., suppliers, retailers serving the health care employees) and more local spending from workers, patients, and families while care is being provided.
Massachusetts Institute of Technology, Simon Johnson 5: “Direct aid to state and local governments… replaces money that state and local governments have been forced to cut from their budgets, it can have a very rapid effect, without the need to design new programs… The money will go to programs that these governments have already decided are important and worth funding, minimizing the risk that the stimulus will be wasted on inappropriate ends.”
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5 Testimony before the Joint Economic Committee, October 30, 2008 Government Relations & Advocacy
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keep health insurance. And we must look for innovative ways to reduce the cost and raise the quality of care throughout our health care system.
