In the last several weeks, my colleagues have offered their takes on Medicaid expansion in Georgia. Dr. Drew Cagle wrote that Medicaid expansion, while controversial, is a “critical step” in maintaining quality healthcare in rural Georgia. Then, Dr. Roscoe Scarborough, in his recent piece on U.S. drug overdose deaths, called out Medicaid expansion as part of the solution to our ongoing addiction and overdose problems.
I am not typically the bandwagoning type, but this is a policy topic worth a look through an economist’s lens. Medicaid expansion makes good economic sense.
Studies show that many states report improvements to their budgetary bottom lines when they expand Medicaid. This is because Medicaid expansion opens the door for more federal funding to flow into states, and it also increases tax revenue streams from healthcare providers.
But we know the true economic impact of any policy is not as simple as its explicit budget implications. True economic impact lies in a product or outcome. For Medicaid expansion, the product is healthy people. And the positive impact on an economy of healthy people cannot be overstated.
According to the CDC, U.S. employers lose an average of $1685 per employee per year due to absenteeism, disability, or reduced output caused by health problems. This is a total of over $225 billion lost per year in the U.S.
Many of these health problems — e.g. heart disease, asthma, mental health disorders, diabetes, cancer – are more prevalent among poorer Americans and are treatable or avoidable altogether with access to quality, affordable healthcare.
Health disparities, defined as health differences attributable to social, economic, and/or environmental disadvantages, lead to around $42 billion in productivity losses per year.
Moreover, an April 2024 study in the journal Health Policy found that in many cases, illness even causes poverty, sometimes with generational effects, exacerbating the problem for individuals, families, and society. The conclusion of this study was that social insurance (e.g. Medicaid) significantly weakens the effect of poor health on poverty.
Adding insult to injury, a failure to expand healthcare coverage to low income Georgians may also end up denying healthcare options to many middle or upper class Georgians in rural areas. As Dr. Cagle’s From the Murphy Center article a few weeks ago pointed out, rural hospitals are shutting down, in part due to their inability to cover services to uninsured patients.
And, an economic analysis only strengthens Dr. Scarborough’s point that Medicaid expansion can help mitigate effects of America’s current opioid / drug overdose crisis. Supply-side policy solutions, like decreasing international drug smuggling, get a lot of press, but decreasing supply increases prices, making drug sales more lucrative, and makes only a small dent in the problem of illegal drug use. This is because the market for any addictive substance is characterized by highly inelastic demand, which means that buyers in this market are willing to pay whatever it takes to satisfy their addiction. When prices rise, we do not see a sharp change in market activity. The only truly effective policies against drug addiction are policies that are leveled at demand for the drugs—recovery programs, healthcare education, and mental and physical healthcare coverage. Medicaid expansion is low-hanging fruit in this fight.
Only ten states have not yet adopted Medicaid expansion. Georgia is among them. It may make political sense to keep holding out, but it does not make economic sense.
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Dr. Melissa Trussell is a professor in the School of Business and Public Management at College of Coastal Georgia who works with the college’s Reg Murphy Center for Economic and Policy Studies. Contact her at mtrussell@ccga.edu. The views expressed in this article are those of the author and do not necessarily represent those of the College of Coastal Georgia.
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