October 26, 2011 / 9:25 PM / 6 years ago

States may lose big in jobs, funds if Medicaid cut

(Reuters) - Cutting Medicaid by 5 percent would cost U.S. states $14 billion and trigger job losses in the tens of thousands by depressing spending by states, hospitals, nursing homes, drug companies and others, a study said on Wednesday.

"Such a drastic reduction would stifle business activity and job creation in states already struggling through the recession," said the National Association of Public Hospitals and Health Systems, a Washington, D.C.-based industry group.

Economists say spending by Medicaid, the state-federal health plan for the poor, disabled and elderly, buoys local economies because it not only flows to health care providers -- and their employees -- but pulls in new federal dollars because the U.S. government matches how much a state spends.

Cuts in healthcare and a host of other federal programs look likely. Congress set up a "super committee" that has until November 23 to reduce the U.S. deficit.

California has the most to lose from a 5 percent cut in Medicaid with its loss pegged at $3.7 billion, the hospital and health systems group said. Texas ranked next with a $2.1 billion loss, followed by Ohio at $1.2 billion, Massachusetts at $1 billion and Michigan at $862 million.

The group said its members contributed about $120 billion to state economies last year.

The United States spent more than $366 billion on Medicaid in the same year, caring for around 55 million people, according to The Kaiser Family Foundation, a Menlo Park, California-based healthcare policy research group. That is the latest data available for the total cost of the program.

In terms of job cuts, California could lose 28,440 positions, Texas 18,160 jobs, and Pennsylvania 12,230 jobs.

Ohio stands to see employers ax 11,270 workers, while both Michigan and Massachusetts would lose around 7,600 jobs.

Medicaid can consume around one-third of a state's budget, though how much the federal government matches out of each dollar a state spends ranges from a high of nearly 75 percent for Mississippi to a low of 50 percent for 14 states, including California, Illinois, Massachusetts and New York, according to The Kaiser Family Foundation.

Reporting by Joan Gralla; Editing by Kenneth Barry

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