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Medicaid impacts local economy

Thursday, February 17, 2005

SIKESTON -- In addition to providing health insurance to its recipients, Medicaid and State Children's Health Insurance Program (SCHIP) spending also generate $6 billion in economic activity and support 80,000 jobs in the urban counties as well as the rural counties, a report says.

Released earlier this month by economic professors at the St. Louis University John Cook School of Business, the report offers a county-by-county assessment of the overall economic impact of the state's spending on SCHIP and Medicaid, Missouri's health insurance program for low-income children and families, senior citizens and people with disabilities.

The report's authors found that total matching federal funds for the programs in 2004 generated $5.82 billion in economic activity and supported 79,892 jobs in Missouri.

"We're not trying to advocate (Medicaid) one way or the other, we're just simply saying, 'Hey. There is also this economic impact in each county in addition to covering health insurance costs," said report author Heather Bednarek, assistant professor of economics.

According to the Saint Louis University report, the counties that experienced the most significant economic impact were Jackson County in Kansas City, with $649.6 million in economic activity and 8,173 jobs and St. Louis County, with $608.9 million in economic activity and 7,618 jobs.

However, the report indicates every county in the state benefits economically from Medicaid and SCHIP spending.

For example, Scott County experienced $61.6 million in economic activity and 915 jobs; New Madrid County with $30.9 million in economic activity and 748 jobs; Mississippi County with $21 million in economic activity and 584 jobs; Stoddard County with $38.1 million and 841 jobs; and Pemiscot County 32.7 million and 670 jobs.

"Many people, including lawmakers, may be surprised to learn the significant economic impact Medicaid has not only on the entire state, but also on their own counties," Bednarek said.

The authors' analysis is simply meant to add to policy discussion, Bednarket said.

"What's special about Medicaid is the way program is set up. For every state dollar spent, the federal kicks in $1.60. So when the state cuts funding, it's not just cutting a dollar, it's cutting up to almost $2.60," Bednarek said.

In addition, economic analysis found that for every $1 million that the state spends on the program, the resulting federal matching funds generate 42 jobs and more than $3 million in business activity.

The Saint Louis University report also examines last year's legislative proposal that would have reduced the state's spending on Medicaid by $34.8 million and SCHIP by $8.2 million. The report concludes that Missouri stood to lose more than $76 million in matching federal funds, $150 million in economic activity and more than 2,000 jobs.

While that initiative ultimately failed in the Senate, the governor's new recommended cuts -- about $230 million -- to Medicaid total more than six times the amount debated by the legislature last year. Preliminary calculations indicate that the recently proposed cuts to Medicaid eligibility and services would cause Missouri to lose $689 million in economic activity and more than 9,000 jobs. The professors will fully examine the economic implications of the governor's proposal in the coming weeks.

Bednarek co-authored with the report with Muhammad Islam, economics professor, and Joel D. Ferber, a managing attorney with Legal Services of Eastern Missouri.