Families USA Report: California Will Lose 46,700 Jobs, $5.4 Billion in Business Activity Due to Bush Administration’s Medicaid Cuts

California to lose $10.8 billion in Medicaid funding if administration’s rule changes are allowed to stand

Ron Pollack
Executive Director
Families USA

Medicaid rule changes put in place by the Bush Administration will cost California more than $10.8 billion in federal funds over the next five years. The cut in federal funding will, in fact, act like a giant anti-stimulus package. Those lost Medicaid funds will eliminate an estimated 46,700 jobs and an accompanying $1.9 billion in wages, and, even worse, cost the state an estimated $5.4 billion in lost business activity.

Virtually all that economic pain comes in the first year of implementation, when California would fail to receive approximately $2.2 billion in Medicaid payments, according to a report we released Friday by Titled “Bad Medicine.” The report analyzed the economic impact of seven new Medicaid regulations that were issued in 2007.

The devastation caused by the Administration’s cuts will affect millions of people who rely on Medicaid for their health lifeline. This will be tragic for their families.

Additionally, these cuts will harm state budgets at the worst possible time. These cuts in federal Medicaid payments will have a ripple effect through state economies that are already struggling during this economic downturn. This economic harm will increase the number of people who may need Medicaid, as tens of thousands of Californians see their paychecks being cut or their jobs being eliminated.

This lost business activity in California will hurt business and industry, and it will force governors and state legislators to make increasingly difficult choices about providing state services. This Bush Administration’s decision is ill-timed and ill-considered, and it should be reversed by Congress.

Stan Rosenstein, chief deputy director, California Department of Health Care Services has said: “The proposed changes to the Medicaid program would result in a significant and potentially devastating shift of costs to California taxpayers. Our state would be saddled with an estimated $12 billion financial burden resulting from such a drastic change in how the federal government supports the Medicaid program. The Governor strongly believes that such changes should undergo further evaluation and a full congressional review before being implemented.”

The seven regulation changes issued by the Bush Administration in 2007 – and imposed on states without congressional review or debate – restrict funding for a variety of Medicaid services, including rehabilitation services, school-based transportation, as well as Medicaid administrative services, such as outreach, enrollment, and case management. The seven rule changes are now either under a congressional moratorium or awaiting implementation.

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