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House Medicaid Plan Would Stunt California Economic Recovery

Created: 01 July, 2011
Updated: 13 September, 2023

New America Media

    California could lose as many as 28,440 more jobs, and up to $3.7 billion in related revenue, if federal budget cuts to Medicaid proposed by U.S. Congressman Paul Ryan, R-Wis., were enacted, according to a new report released Wednesday by the nonprofit health-advocacy group, Families USA.

    The report, “Jobs at Risk” shows the impact on state economies of one part of Ryan’s sweeping national legislation aimed at slashing billions of dollars a year in federal spending. For one thing, the bill would dramatically change Medicare by not paying for care but instead only covering some costs of medical insurance.

    The Ryan proposal also would fundamentally change the nation’s Medicaid program—called MediCal in the Golden State—which is the focus of the Families USA report. The MediCal program is central to health care reforms passed under the 2010 Affordable Care Act, because it would cover 30 million uninsured Americans starting in 2014.

    During Wednesday’s media teleconference, Families USA’s executive director, Ronald Pollack, discussed the human and economic cost Ryan’s bill would exact on California and other states.

    Besides the hit to California’s economy, the new report reveals that only a five percent reduction in federal Medicaid spending would cost New York 28,000 jobs, Texas 18,000 jobs and so on across the nation. The report also shows job-loss projections were the program cut by 15 percent, such as a loss of 85,000 in California.

    Ryan’s plan passed the House of Representatives in April in an expected party-line vote, with no Democratic votes and only four Republican members of Congress opposing it.

    Although it stands no chance of passing the U.S. Senate, much less being signed into law by President Obama, the Ryan proposal to cut federal entitlement spending in Medicaid and other programs provides Republicans a tough line-in-the-sand stance as they bargain with Democrats over how much to slash before the GOP agrees to increase the U.S. debt ceiling ahead of the August 2 deadline.

    By not raising the ceiling in time, the United States would default on its international debt, which could send the economy into another tailspin.

    According to Pollack, the Families USA report “gives a good picture of the magnitude of what could happen.”  

GOP Plan Would Transform Medicaid

    The report indicates that Ryan’s GOP plan would fundamentally transform the current way of paying for Medicaid. Today, the federal government covers at least half of the cost and up to two-thirds for lower-income states. After that, each state covers the remaining cost.

    Ryan’s bill would turn Medicaid into a block grant that would pay states a lump sum each year. The federal government would cap its share at roughly the current level, but only increase that amount by the nation’s annual inflation rate, which is lower than the inflation associated with medical care.

    As a result, there would be a cut of five percent in the federal share of Medicaid spending in 2013, 15 percent in 2014, and 33 percent in 2021, according to the Families USA analysis. In addition, federal spending on Medicaid would fall by $1.4 trillion from 2012 to 2021. The bipartisan Congressional Budget Office estimates that under Ryan’s bill, federal payments to states would drop by 49 percent in 2030.

    The declining sum would force many states to make up the shortfall either by increasing revenue, such as through taxes or higher fees, or reducing costs – for instance, by limiting eligibility and benefits.

    For California, it would mean that as the Ryan cuts kick in, they would axe business activity generated by MediCal spending by $3.7 billion in 2013, rising to $10.3 billion in 2021.

    “MediCal is not just a lifeline for over seven million Californians, but it’s also a major economic driver for our state,” asserted Anthony Wright, executive director of the nonprofit health care advocacy group, Health Access California.

    “Cuts of the magnitude proposed by the House GOP would not just do major damage to the health system all Californians depend on, they would undercut the fragile economic recovery of our state and our communities,” he added.

    Aside from providing a safety net for the poor, people with disabilities, and elders, MediCal currently benefits 3.5 million children – half the state’s MediCal population.

    “Members of Congress would be directly jeopardizing children’s health, if they cut federal Medicaid funding,” said Kelly Hardy, health policy director of the nonprofit group, Children Now.

A “Direct Blow”

    Pollack noted that the health care sector would be the first to feel the “direct blow” if the Medicaid provision of the Ryan plan were enacted. For example, hospitals and clinics and home care agencies would hire fewer nurses and other health care workers.

    “Every federal Medicaid dollar that flows into a state generates jobs,” Pollack said. He noted that cuts in Medicaid would have a “multiplier effect” – people would be likely to spend less on consumer goods, further stunting the economy.

    According to Pollack, Medicaid “is good medicine for state economies and job growth.” He added, “This is exactly the wrong time for Congress to cut a program that provides a boost to individuals and families facing hard economic times.”

    With California’s economy already in the doldrums and cuts already in place to its health care system, “any additional loss would result in further reductions in eligibility, benefits and participation by health care providers, which in turn would send millions deeper into poverty and exacerbate health disparities,” said Lark Galloway-Gillian, executive director of Community Health Councils.