Study: GOP Plan for Medicaid Cuts Will Stifle Healthcare Job Creation

Tens of thousands could lose their jobs from Medicaid cuts included in a Republican budget proposal sponsored in April 2011 by Rep. Paul Ryan (R-Wis.), costing U.S. states $14 billion and effectively depressing spending among hospitals, nursing homes, and drug companies, among others, according to a study by Families USA.

“Such a drastic reduction would stifle business activity and job creation in states already struggling through the recession,” says the National Association of Public Hospitals and Health Systems, a Washington, D.C.-based industry group, in an Oct. 2011 Policy Brief.

The study outlines how states could be affected in terms of business activity and job loss in the event of 5%, 15% and 33% Medicaid cuts. Families USA notes that under the Republican debt reduction plan, Medicaid would be reduced by 5% in 2013, by 15% in 2014, and so on in incremental stages throughout the next ten years, culminating with 33% in 2021.


Medicaid spending buoys local economies because it not only flows to health care providers and their employees, but also pulls in federal dollars as the government matches state spending, economists say. The program can take up about one-third of a state’s budget, although the amount the federal government matches out of each dollar varies by state.

“Federal Medicaid cuts could severely worsen unemployment and further burden troubled state economies,” says the study.

As the super committee’s Nov. 23 deadline to lower the federal debt deficit approaches, cuts to healthcare and other federal programs look likely.


Some states’ business activity would be impacted more than others by 5% cuts. New York has the most to lose, the Families USA study shows, with its loss pegged at $3.8 billion, the hospital and health systems group said. California ranked next with a potential $3.7 billion loss, and six other states would have losses in the billions, including Texas and Pennsylvania.

Fallout from the cuts could leave thousands facing unemployment, including nursing home workers losing their jobs. New York and California could both lose more than 28,000 positions, and Texas, more than 18,000.

The numbers grow significantly higher as the budget cut percentages increase.

View the Families USA study.

Written by Alyssa Gerace