Insanity: Paul Ryan's Assault on Medicaid Would Cost the Private Sector 2 Million Jobs

According to an analysis released today by the Economic Policy Institute (EPI), one provision of the budget proposal unveiled this week by Rep Paul Ryan, R-Wisconsin, would kill 2.1 million jobs over the next 5 years, the overwhelming majority of them in the private sector.

The issue at hand relates to Medicaid, a pubic health program for not only the poor, but also the disabled and elderly. The federal government currently splits the cost of this care with the states, but under Ryan's plan Washington would instead send fixed block-grants to the states. But value of the block-grants will increase more slowly than health-care costs, which means that over time, the federal government's contributions to these programs would decrease significantly.

There would be a human price for this “savings” – many Medicaid beneficiaries are basically impossible to insure in the private market. And it's important to note that the government's savings would be offset by major tax breaks for corporations and high-earners.

That it will also cost us millions of jobs makes it all the more obscene in this labor market. Ethan Pollack, a policy analyst at EPI, explains the causal relationship, assuming that states will respond by cutting benefits:

Over the next five years (during which time CBO projects that the economy will still be below potential), Chairman Ryan’s Medicaid proposal would cut the program by $207 billion, which includes both eliminating the Medicaid expansion under the Affordable Care Act and even deeper cuts to the Medicaid program.  Using a standard macroeconomic model that is consistent with private- and public-sector forecasters, we find that a $207 billion cut would result in a loss of 2.1 million jobs over the next five years, or 2.9 million full-time equivalent jobs.[3]  These figures are in job-years, which refer to a job held for a single year, meaning that five jobs lost in a single year is the equivalent to one job lost over five years.

Furthermore, the job loss would overwhelmingly be in the private economy.  Medicaid has very low overhead, as about 96% of the program’s funds go toward benefits which are spent in the private sector.  Assuming the 96% ratio is relatively constant across states (or at least not systematically biased in one direction), Medicaid cuts of this magnitude would result in the loss of just under 2 million private-sector jobs, or 2.8 million full-time equivalent jobs.

Pollack adds that this is probably a conservative estimate because the cuts will hurt the poorest among us, people who tend to spend all of their money, increasing demand.

Moody's chief economist Mark Zandi had previously estimated that the GOP cuts to other programs would cost the economy 700,000 jobs. This is a shining example of privileging ideology over good governance, brought to you by the party that ran last Fall on a platform of 'jobs, jobs, jobs.'

AlterNet / By Joshua Holland

Posted at April 7, 2011, 8:34am