Why expanding Medicaid is good for Pennsylvania’s health, economy, and state budget

Curt Schroder is the regional executive, Delaware Valley Health Care Council of HAP, the association for southeastern Pennsylvania hospitals.

Pennsylvania is in the midst of a discussion about whether to expand Medicaid under the health reform law to cover residents up to 138% of the federal poverty level. Because Medicaid covers care for many of the commonwealth’s neediest patients, hospitals have a lot at stake. But so does the economy of the entire state.

To get a better idea of what expanding Medicaid would mean, we commissioned a study by a major national research organization, RAND Health. Their report has been followed in the last week or so by two similar studies released by respected research groups in Pennsylvania—the Pennsylvania Economy League, and the commonwealth’s Independent Fiscal Office

They each found the same thing. Expanding Medicaid would extend health coverage to hundreds of thousands more Pennsylvanians and contribute significant economic benefits across the state.

All three studies showed that expanding Medicaid would increase Pennsylvania's economic activity by at least $3 billion annually. Two of the reports (RAND and the Economy League) looked at job growth and found that in 2016 about 35,000 new jobs would result.

How can providing health coverage for more Pennsylvanians result in economic gains and job growth without adding to the state's budget woes?

As part of the Affordable Care Act (otherwise known as health reform), the federal government is required by law to pick up nearly all the costs for states that decide to expand Medicaid. If Pennsylvania forgoes expansion, then we will, at the very least, be forfeiting the chance to bring some of Pennsylvania’s federal tax dollars back home—sending them off instead to improve the health and economy of states that said yes to expansion.

Just how much in federal expansion dollars does Pennsylvania stand to lose? More than $2 billion a year at a minimum, say all three reports. However, should Pennsylvania expand Medicaid, these new federal dollars would in turn generate billions in annual economic activity and 35,000 jobs as forecast in the reports. 

According to all three reports, expansion will result in net gains for the state economy, tax collections, and the state budget. That’s welcome news as Pennsylvania grapples with next year’s budget, struggling to cover gaps brought about by lower-than-expected economic growth, with concurrent lower-than-estimated tax revenues for the current fiscal year and for 2013–14.

Although the state will incur some increased costs to administer the expansion in Medicaid coverage, the increased tax revenue generated by the inflow of federal expansion funds will cover these costs and then some, say all three reports—most notably, Pennsylvania's own Independent Fiscal Office.

Medicaid expansion makes sense for the health and the economy of Pennsylvania. It’s an important decision, one that all Pennsylvanians, irrespective of income levels, have a stake in.

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