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Wednesday, August 13, 2014

Medicaid Expansion’s Possible Effects on Health Sector Employment Growth

Dee Mahan

In most states, the health care sector is among the industry sectors with the largest employment. Health care jobs tend to pay more than a state’s median wages, and growth in this sector can have a positive economic effect on other areas of a state’s economy. Many organizations, ours included, have written about the effects of Medicaid expansion on a state’s economy. Recently, Missouri (a state that has not yet expanded Medicaid) compared its employment growth in the health care sector to that of select Medicaid expansion states. The findings point to a correlation between Medicaid expansion and more robust health sector growth. 

Released in June, following a U.S. Bureau of Labor Statistics report showing sluggish growth in Missouri’s health care and social services sector, Missouri’s Bureau of Economic Development and Assistance report examines health care sector employment growth in 10 states that are comparable to Missouri in overall employment size (five states that have expanded Medicaid and five that have not). 

Missouri study examines employment growth in health care sector in 5 Medicaid expansion states compared to 5 non-expansion states

The five Medicaid expansion states that the Missouri report examined were: Arizona, Colorado, Maryland, Minnesota, and Washington. These states had approved their Medicaid expansions by June 2013, and the expansions went into effect on January 1, 2014.The non-expansion states were Alabama, Indiana, Louisiana, Missouri, and Tennessee.

The study compared employment growth in the health care social services sector in the first five months of 2013—before the Medicaid expansion went into effect—with the first five months of 2014. 

The report found that, in the expansion states, employment in the health care and social assistance sector grew by an average of 2.1 percent. In the non-expansion states, growth in that sector was lower, averaging only 0.7 percent. 



Medicaid expansion was correlated with more growth in health sector employment

These preliminary data look at state experiences from just the first five months of the Medicaid expansion, which makes it tough to say whether this is a trend we will continue to see or whether it was the Medicaid expansion that caused the difference in growth. 

However, for non-expansion states, this study should serve as a caution.

Families USA and many other groups have examined how Medicaid expansion will generate jobs and economic growth in states that choose to expand. It is not surprising that the health care sector would be the first area in state economies to register this growth. Expanding Medicaid gives more residents health insurance so that they can afford to see a doctor. 

Also, by reducing the number of people who are uninsured, providers will have less uncompensated care. That helps their bottom line, which makes it easier to hire needed staff. We’ve written about how hospitals in states that have chosen to expand Medicaid are providing free care (also known as “charity care”) to fewer uninsured patients. 

Health care sector job growth can lead to overall state economic growth

Growth in the health care sector has broader implications. As one of the sectors that is among the largest industries in most states, growth in the health care sector ripples throughout the economy. And, as noted above, in many states, employees in the health care sector are (on average) making wages that are above the median. 

The Missouri report noted that, in 2013, the health care sector employed one in six Missouri residents, with an average wage of just over $41,300. 

These employees spend their wages on other goods and services in the state, leading to growth in other areas of the state’s economy over time. Additionally, hospitals that see a reduction in uncompensated care and associated growth in their bottom line may have more funds to undertake capital improvement projects that create construction and other jobs throughout the state.

In contrast, states that don’t expand Medicaid don’t see this economic growth, which is unfortunate, as it helps the state’s economy overall. Because people tend to move to areas where jobs are available, over time, non-expansion states could lose skilled health care employees to other states. 

Right now, 26 states have chosen to expand Medicaid. That’s a choice that gives more state residents access to affordable health insurance while the federal government covers most of the cost.

It’s also a choice that we’ve repeatedly argued will be good for state economies. Now, we’re beginning to see data showing that Medicaid expansion could be a contributing factor to employment growth in the health care sector.