Breaking Medicare and Medicaid - An Economic Perspective from Iowa
I have recently done a couple of analyses with respect to the current administration’s attempt to break Social Security (Privatizing Social Security and Social Security – A Local (Iowa) Perspective). This post is to follow up on the related risk to Medicare and Medicaid, two additional programs the administration is working to break.
The common reference point for Medicare and Medicaid is the public’s expenditure for health care. In 2023, Iowans spent nearly $26.4 billion on health care. That same year, Iowans received $9.3 billion in personal benefits from Medicare and $6.8 billion in personal benefits from Medicaid.
Medicaid is funded jointly by the state and federal government. It is estimated that $5 billion (73.5%) of 2023 Iowa Medicaid expenditures were federally funded. That gives a total of $14.3 billion in federal medical benefits received by Iowans from Medicare and Medicaid in 2023. This amounts to about 54 percent of Iowans’ health care expenditures in 2023.
Think about your local hospital, your local doctor, and your local dentist. What are the chances their doors stay open if they experience a 54 percent loss in patient revenue? Do you expect they will be installing the most modern equipment to monitor your heart, scan for tumors, or perform your surgery?
Think about your parents, your grandparents, and your grandchildren. Would you be able or willing to help cover their healthcare shortfalls as these programs are broken and these funds become unavailable? Would you let them go without care?
Beyond the individuals and families directly affected, a reduction in healthcare expenditures by $14.3 billion in Iowa would impact the entire economy. How serious that impact would be will depend upon how recipients, their families and communities react.
At the higher end, the reduction in benefits results in a reduction of recipient health care on a one-to-one basis. In this scenario, a $14.3 billion reduction in expenditures in the Iowa health care industry will reduce Iowa payrolls by over $10.6 billion statewide. This would eliminate almost 178,000 Iowa jobs. These losses would include 12,000 jobs in wholesale and retail trade, 18,000 jobs in finance and real estate, and over 100,000 jobs in health care. This does not begin to account for follow-up losses incurred for people who did not get medical care.
At the lower extreme, recipients losing benefits continue to get health care. Their families and communities chip in to cover the benefit loss. In this case, the $14.3 billion loss in benefits effectively reduces the available household incomes of recipients losing benefits and their families and communities. In this case, breaking Medicare and Medicaid will effectively reduce general household income in Iowa by $14.3 billion. As this flows through the economy, it would result in a $5 billion reduction in Iowa payrolls. This would eliminate about 105,000 Iowa jobs, including 20,000 jobs in healthcare, 20,000 in finance and real estate, and 19,000 in wholesale and retail trade.
The reality will be somewhere between these two scenarios. There is nowhere between these scenarios, however, that will not devastate broad swathes of the Iowa economy. It will constrict every Iowan’s ability to obtain the goods and services they need to live the lives they have become accustomed to.