John Z. Ayanian, Gabriel M. Ehrlich, Donald R. Grimes, and Helen Levy
J. Z. Ayanian, G. M. Ehrlich, D. R. Grimes et al., “Economic Effects of Medicaid Expansion in Michigan,” New England Journal of Medicine, published online Jan. 4, 2017.
The debate over whether and how to repeal the Affordable Care Act often focuses on the cost of the Medicaid expansion—an area of concern for some states, which starting this year must assume a portion of the coverage costs for newly eligible enrollees. Less attention is paid to the economic benefit expansion states receive from the influx of federal money, including increased employment and tax revenue. The authors of this Commonwealth Fund–supported study assessed the economic impact of Michigan’s Medicaid expansion. The Healthy Michigan Plan has enrolled roughly 600,000 low-income residents.
Michigan’s Medicaid expansion will create at least 30,000 jobs in the state each year from 2017 to 2021 and raise personal income by more than $2 billion each year. The added economic activity is projected to yield $145 million to $153 million annually in state tax revenue.
After accounting for the $20 million annual expense of administering the program, savings accruing from reduced state spending on mental health and correctional health services ($235 million) and state taxes and contributions from health plans and hospitals (up to $200 million) would cover Michigan’s share of the program through 2021 and likely beyond. In fact, these savings would produce a net surplus, ranging from $432 million in 2017 to $162 million in 2021. The cost to the federal government would be roughly $3.4 billion per year.
Similar economic benefits to Michigan’s are likely in the other states that expanded Medicaid. The impact will likely depend on the size of each state’s program and its state tax rates.