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Georgia Wins if Medicaid Expands

By Cindy Zeldin

This post was originally published in the Savannah Morning News.

The health reform legislation being debated in Congress right now features a range of provisions aimed at increasing the number of Americans who have health insurance.

One of these elements is a significant expansion of Medicaid, the joint state-federal program that provides health insurance to low-income, uninsured families. Under the bill recently passed by the House, Medicaid would be available to individuals and families with incomes at or below 150 percent of the federal poverty level, or approximately $27,465 in annual income for a family of three.

This expansion would go into effect in 2013, with full federal financing in 2013 and 2014. After that, the federal government would pay for 91 percent of the cost of the newly eligible population, leaving the state to pay for the remaining nine percent beginning in 2015. The Georgia Department of Community Health recently estimated that Georgia’s share of this expansion would cost around $2.4 billion over the five-year period between 2015 and 2019.

Georgia’s Medicaid investment would come with an infusion of federal funds into our state that is tenfold Georgia’s share of the cost, and this influx of funds could spur an increase in economic activity throughout the state, providing tangible benefits that would far outweigh the initial $2.4 billion investment and catalyze economic activity through a process known as the “multiplier effect.”

Here’s how the multiplier effect works: Let’s assume, for the sake of this example, that the Department of Community Health’s estimate that the state would be responsible for about $2.4 billion over five years for the Medicaid expansion is correct. By spending that $2.4 billion, Georgia would draw down more than $24 billion in federal funds.

These combined funds would be pumped into the health care economy and utilized to pay for health services through payments to medical providers such as physicians, hospitals and pharmacies throughout the state. In turn, vendors up and down the medical supply chain would need to grow and hire more staff to meet the increased demand for the goods and services they produce.

Several state officials have expressed concern about Georgia’s anticipated share of the cost, and while this is a real expense the state would incur in a difficult budgetary climate, these concerns reflect an incomplete picture of these expenditures.

According to a recent study released by researchers at George Washington University, for every dollar a state invests in Medicaid, the multiplier effect generates an average return of three dollars in new economic activity within that state, creating jobs and increasing revenues for the state’s coffers. Here in Georgia, that $2.4 billion investment would generate about $80 billion in economic activity because it would be combined with federal funds and would provide a jolt to the economy with a 3 to 1 rate of return.

This is textbook economic stimulus. Low-income Georgians have real, unmet health needs that could be met through the access to the health system that the Medicaid program could bring them, and local businesses throughout the state would need to meet the increased demand. For example, in 2008, more than 1 million Georgians reported not seeing a doctor because of the cost. By extending Medicaid to more of the working poor, we can improve not only the health of our local citizens but also the health of many of our local businesses and economies.

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