SEPTEMBER 27, 2005 -- Expanding Medicaid may be one of most important tools lawmakers could use to recover from economic recession, according to a report for the Joint Center for Political and Economic Studies released Tuesday.

The report comes as Hill lawmakers are scrambling to fund Katrina relief and debating a $10 billion reduction in the growth of Medicaid spending as part of the budget reconciliation process.

If Congress decides to place a cap on Medicaid enrollment or federal Medicaid spending, it would not only deny health coverage to low-income and laid-off workers, it could also effect how the country could recover from recession, according to Stan Dorn, an analyst from the Economic and Social Research Institute who co-authored the report.

Dorn's reasoning is that when the economy is weak, more households have low incomes that qualify for Medicaid. As Medicaid enrollment rises, state and federal spending increases, which stimulates the economy as more goods and services are being purchased by the government, the report said.

The report also said Medicaid has an important role as a "fiscal stabilizer."

Medicaid's stimulus to the economy is comparable to the stimulus provided by unemployment insurance, which lessened the loss in real GDP by 15 to 17 percent during the five recessions between 1969 and 1999, the report said.

"A huge problem with Medicaid is that during recession when people need coverage most, that is when Medicaid cuts are most likely to happen," Dorn said.

The study recommends solutions other than Medicaid enrollment caps or federal spending caps. It suggests Congress should automatically increase federal matching payments whenever the unemployment level rises to a certain level.

The study points to the Federal Medical Assistance Percentage (FMAP) enacted in May 2003, which increased the percentage of Medicaid costs paid by the federal government. The study suggests making the increase in FMAP automatic to reflect a certain unemployment rate, which would automatically stimulate the economy when unemployment level is high.

"What we are suggesting is to take the issue out of the hands of the lawmakers and have Medicaid funding automatically be determined," Dorn said. "What economists have been telling us is that if you wait for lawmakers to stimulate the economy, the stimulus can be ill timed."