Expanding Medicaid: A Big Boost to New Jersey’s Economy

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Expanding Medicaid under the Affordable Care Act (ACA) would not only provide health coverage to 307,000 newly eligible low-income New Jerseyans, it would benefit the economy in all parts of the state and create many jobs. The Medicaid expansion would bring an estimated $15.4 billion to New Jersey from 2013 to 2022, an average of $1.7 billion a year.[1] The economic potential would be equivalent to building the Meadowlands’ MetLife Stadium, a casino the size of The Borgata, or three large hospitals every year in New Jersey.

New Jersey’s Economy Needs a Jolt

NJ's Recovery Lags the Nation'sIf there’s any state that should enthusiastically accept the Medicaid expansion on economic grounds, it is New Jersey. The jolt to the state’s economy is badly needed since the state lags the rest of the nation’s economic recovery. Among all states, New Jersey was 47th in economic activity in 2011 and has the 4th-highest unemployment rate.

When it comes to job creation, New Jersey is trailing badly. New York now employs more workers than it did before the Great Recession; Pennsylvania has restored about 75 percent of the jobs it lost. New Jersey has only regained around 35 percent. In the past three years, the state’s unemployment rate has moved from 9.7 to 9.6 percent. New Jersey is not likely to regain its 2007 level of jobs until 2018, three years after the rest of the nation, according to the Rutgers Economic Advisory Service.[2]

Compared to when the recession started in December 2007, twice as many New Jerseyans were seeking work in December 2012 (443,800 vs. 205,100).[3] While the number of jobs has been increasing lately, the rate has not been sufficient to meet the needs of a growing workforce. Hence, the jobless rate remains stubbornly high.

NJ's Health Care Sector is GrowingThe health care industry has been the state’s greatest job generator in recent years, and many of the jobs that would be created from the Medicaid expansion would be in the well-paying health sector. Since the recession officially ended in June 2009, the number of new outpatient health care jobs increased by 11 percent, while hospital workers increased by 5 percent – compared to a 1 percent drop in all other jobs. The increase in health care jobs (28,400) almost offset the total loss in all other jobs in New Jersey (33,600) during that period.

If New Jersey does not expand Medicaid, it will not keep pace with its neighbors like New York, Delaware, and Maryland and other mid-Atlantic states that are expanding Medicaid.

Economic Impact Would Be Spread Across All Counties

The residents who could gain health insurance under the Medicaid expansion live in all of New Jersey’s counties, so each county’s economy would benefit from the influx of federal funds from the expansion (see table). The amount of new federal Medicaid funding that would be spent annually ranges from about $9 million in Hunterdon County to $242 million in Hudson County.

Expanding Medicaid Would Boost Each County's Economy

The number of uninsured residents who would be newly eligible for Medicaid ranges from a low of 1,640 in Hunterdon to a high of 42,430 in Hudson; the rate ranges from about a third (29 percent) of all uninsured residents in Salem to about half (48 percent) in Somerset.

Benefits of Expansion Would be Widespread

Expanding Medicaid would have many job-related benefits:

It is likely to create jobs in many sectors.

As people gain health insurance and seek needed treatment, billions of federal dollars would flow to the state’s health care industry, which in turn would hire more nurses, technicians, support staff, and other health care workers. As those workers spend their earnings on food, housing, and other goods and services, the economic boost would ripple through the state economy, creating jobs in other sectors.

Expansion would foster a more productive workforce.

With more New Jersey workers obtaining health coverage, the state’s workforce would be healthier, and therefore more productive, making New Jersey more economically competitive. Productivity losses from personal and family health problems cost employers nationally about $226 billion annually.[4]

The expansion can boost jobs quickly.

Federal funding would start flowing in January 2014. Basically, all the state has to do is amend its state Medicaid plan. This is not like a construction project or other activity that may take years to plan or complete; the funding and the economic impact are immediate.

Jobs would be created where they are most needed.

Since most New Jerseyans without insurance are concentrated in low-income urban and rural areas with very high unemployment rates, these high-need areas would benefit the most from the new jobs that would be created to serve newly insured residents. This would give a significant boost to the local economies that need it most in our state. For example, Hudson and Essex counties are home to 27.5 percent of those who would be eligible for Medicaid, and would benefit from an estimated $468 million a year under the Medicaid expansion. This federal funding could help to reduce those counties’ very high jobless rates of 10.5 and 10.4 percent, respectively.

Expansion creates an incentive for businesses to locate or expand in New Jersey.

Expanding Medicaid would enable New Jersey to keep up with its neighboring states that are also opting in. It will also ensure that almost all workers will have access to a source of coverage, which makes for a better business environment.

Expanding Medicaid is a Good Deal for New Jersey

In the first three years, beginning January 2014, the federal government would cover 100 percent of the expansion costs. After that, it would be phased down to 90 percent of the cost permanently.

The modest 10-percent state contribution – about $170 million annually on average – would be more than offset by combined savings in other areas, such as reducing state support for hospitals that provide emergency room care to uninsured residents. New Jersey spent about $700 million last year on such charity care payments. Federal aid would also increase for certain adults covered by Medicaid and NJ FamilyCare, which would create immediate permanent state savings.

Without the expansion, about 307,000 adults whose incomes fall below 138 percent of the federal poverty level ($15,414 for an individual and $26,344 for a family of three) would be left out in the cold, with the likelihood that charity care costs would continue to rise.[5]

Urgency is Needed

Time is of the essence. Although there is no federal deadline for opting to expand Medicaid, New Jersey needs to decide soon in order to maximize enrollment beginning October 1, 2013, the application start date. According to a recent national survey, 83 percent of people likely to qualify for the Medicaid expansion were unaware of their status.[6]

The needed outreach and follow-up are not simple to organize, and should be integrated with the application process for the new marketplace for private health insurance also created by the ACA. The economic benefits to the state ride on enrolling as many uninsured residents as possible for the January 2014 rollout of federal funding.

New Jersey cannot stall in taking advantage of its best opportunity in years to create good jobs, foster a healthier workforce and improve its economy.

[1]John Holahan, Matthew Buettgens, Caitlin Carroll, Stan Dorn, The Cost and Coverage Implications of the ACA Medicaid Expansion: National and State-by-State Analysis, November 28, 2012
[2]Nancy H. Mantell, Ph.D.,Michael L. Lahr, Ph.D. Forecast of October 2012, New Jersey: A Slow Going Recovery
[3]NJ Department of Labor and Workforce Development, NJ 2011 Benchmarks, Seasonally Adjusted, January 17, 2013
[4]Stewart WF, Ricci JA, Chee E, Morganstein D. Lost productive work time costs from health conditions in the United States: results from the American productivity audit. J Occup Environ Med. 2003;45(12):1234-1246.
[5]Genevieve M. Kenney, Lisa Dubay, Stephen Zuckerman, and Michael Huntress, Opting Out of the Medicaid Expansion under the ACA: How Many Uninsured Adults Would not Be Eligible for Medicaid?, July 2012.
[6]Sarah Kliff, Many Are Unaware of Health-Care Changes, the Washington Post, November 21, 2012.