Expanding Medicaid Will Not Expand the Economy or Create Jobs

By Filed under Medicaid on December 12, 2014 with 2 comments

Hospitals, especially, but Obamacare supporters generally, have been championing the idea that Medicaid expansion creates jobs. Not true, according to new research by Robert Book of the American Action Forum:

Expanding Medicaid may have many effects; however, we find that increased employment and economic activity are not among them. Instead we find that Medicaid expansion, if adopted by all states, would result in a direct net loss of up to $174 billion in economic growth nationwide over ten years, and would result in the loss of over 206,000 full-year-equivalent jobs for the years 2014 to 2017.

The main difference between Book’s analysis and those which he criticizes is that Book accounts for the deadweight cost of taxes required to pay for the Medicaid expansion.

(I think Book may have underestimated the jobs and income lost due to Medicaid expansion, because he used Professor Feldstein’s model of deadweight loss. There is also the problem of marginal income-tax “cliffs”, which are effectively high marginal income taxes created by phasing out benefits, such as Medicaid, when people’s household income rises.)

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  1. Devon Herrick says:
    December 12, 2014 at 2:44 pm

    The idea that Medicaid expansion would create jobs is based on the idea that hospitals will need to hire more people to treat the influx of Medicaid enrollees. These new hires would then buy houses, cars, restaurant meals, etc. Consultancy, Altarum recently looked at health care job creation in states that expanded Medicaid. It found that health care employment growth was actually greater in states that did not expand Medicaid. Basically, Medicaid doesn’t pay well. Hospitals are doing their best to hold the line on labor costs. As Robert Book indicated, expanding Medicaid really isn’t an economic development strategy states should emulate.

    • John R. Graham says:
      December 19, 2014 at 11:53 am

      If the government taxed 100 percent of our incomes to fund hospital spending, we would all work in the hospitals and the country would be a very boring place.

      Imagine: No restaurants or coffee shops or food trucks – just hospital food!