WVU study: Medicaid cuts would have deep impact on West Virginia’s economy

WVU Today
Wednesday, February 07, 2018
WVU's Bureau of Business and Economics Research director John Deskins.
WVU’s Bureau of Business and Economics Research director John Deskins said that state cuts to programs that Medicaid funds will take money out of the state’s economy.

Cutting Medicaid in West Virginia would have substantial economic impact on the state’s economy, according to a study released today by the Bureau of Business and Economic Research in West Virginia University’s College of Business and Economics.

The research was funded by the West Virginia Health Care Association, the West Virginia Hospital Association and the West Virginia Behavioral Healthcare Providers Association. Nearly 30 percent of state residents are enrolled in the program. In 2017, the study said, Medicaid accounted for nearly $3.7 billion in the state’s economy directly.

“The bottom line is that Medicaid has a pretty large effect on our state economy,” said John Deskins, WVU economist and BBER director. “Medicaid injects federal dollars into West Virginia’s economy, so any cuts to the program takes that money out of our economy.”

Deskins said the goal of the study was to look at the economic impact of Medicaid in West Virginia and determine what ripple effects, if any, such cuts would create. Economists looked at a hypothetical $10 million cut to Medicaid in West Virginia, and the result was a reduction of $49 million in overall annual economic output.

“In this study, we took a hypothetical scenario and looked at what would happen if West Virginia would cut Medicaid by $10 million, or around 1 percent,” Deskins said. “Medicaid is a joint program whose funding is shared by the federal and state governments. For every $1 the state puts up for Medicaid, the federal government provides nearly $2.90. Therefore, if the state cuts Medicaid by $10 million, you are immediately taking $29 million in federal funding out of the economy.”

The study noted that the impact does not stop there, as the multiplier effect of the cuts would result in a total economic impact loss of approximately $49 million, including a loss of an estimated 520 jobs annually.

“This $29 million in reduced federal spending would represent a direct loss in economic activity in West Virginia within the health care industry,” the report said. “In addition, however, this loss would generate spillover effects to other parts of the economy as supplier firms to Medicaid providers would receive less income and employees of Medicaid providers and subsequent supplier firms would receive less income, and therefore spend less.”

Patrick Kelly, CEO of the West Virginia Health Care Association, said the impact of Medicaid in the state is undeniable.

“Approximately, one-third of West Virginia’s population are Medicaid beneficiaries,” Kelly said. “It’s important for our state’s leaders to know the impact Medicaid has on our health and on our economy. This report highlights the enormous impact Medicaid has on our economy.”

The $2.90 the federal government provides for every $1 spent by West Virginia state government on Medicaid is near the top of the scale for matching funds. “Since West Virginia ranks near the bottom of states in terms of per capita personal income, the federal share for the Medicaid program in West Virginia is among the highest in the nation,” the study read.

The study may be viewed by visiting business.wvu.edu/centers/bureau-of-business-and-economic-research.

-WVU-

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CONTACT: Patrick Gregg, WVU College of Business and Economics
patrick.gregg@mail.wvu.edu; 304.293.5131

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