Rounds Consulting and the Arizona Chamber Foundation published a new report last week analyzing and highlighting the economic impact in Arizona if the Congress and the President follow through with their threat to make states pay more of the share of Medicaid costs for the ‘childless adult’ population from 90% to 65%.
ARIZONA POLICY BRIEF: Federal Medicaid Cuts & Arizona’s Economy
Arizona is in a particularly vulnerable position as we’re a “trigger statute” under the Affordable Care Act, meaning if the feds drop their contribution for childless adult coverage below 80% the fees the hospitals pay AHCCCS to pay the state portion for Medicaid coverage for childless adults goes away – and Medicaid coverage for more than 550,000 adults would evaporate.
The report focuses on the economic realities of losing that coverage rather than the public health impact – and the results are profound.
Here’s a summary of the potential impacts:
- Funding Loss: A decrease in the enhanced FMAP rates would lead to a $1.9 billion funding loss for the state, which could double the financial strain that Arizona already faces due to changes in Medicaid funding.
- Medicaid Expansion Discontinuation: If Arizona were to completely end Medicaid coverage for the expansion population, it would result in a significant $7.5 billion reduction in Medicaid spending.
- Impact on Healthcare Providers: As healthcare providers try to compensate for these funding losses, they may shift some of the costs onto private insurers. This would drive up insurance premiums for both businesses and individuals.
- Challenges for Small Businesses: Since many Arizona businesses are small, the rising premiums could push employers to cut back or drop their insurance offerings, creating a cascade of negative economic effects.
- More uninsured individuals will lose access to healthcare coverage.
- Higher uncompensated care costs, as uninsured individuals may still seek medical care, but providers won’t be reimbursed.
- Financial strain on hospitals, which may face more unpaid bills.
- Increased private insurance premiums, further escalating the cost for businesses and individuals.
The economic consequences are severe, with the potential to lose over 36,000 jobs, a contraction of $3.7 billion in economic activity, and a $138 million drop in state tax revenues.
From the Report:
All Arizonans, regardless of their insurance status, would feel the effects of overcrowded emergency rooms, healthcare facility closures, longer wait times for care, fewer medical professionals, a rise in uninsured populations, and increasing health insurance premiums for individuals and employers.
These policy decisions carry significant economic and social consequences. Cuts to Medicaid could destabilize Arizona’s healthcare industry, increase the burden on emergency services, and reduce the overall quality of care for residents.
The healthcare sector, a $38 billion contributor to Arizona’s economy, would suffer greatly, with rural areas facing the most risk due to higher dependence on Medicaid reimbursements. This complex issue could result in long-term damage to both public health and the state’s financial stability.
Perhaps this excerpt from the report says it best:
The primary conclusion from this research is that the economic consequences of federal spending reductions at the scale that are being considered will be significant.
For context, the economic impact on the state of Arizona will fall somewhere between a significant recession and the Great Recession that caused massive fiscal trauma for multiple years.
ARIZONA POLICY BRIEF: Federal Medicaid Cuts & Arizona’s Economy
