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The Economic Impact of Arizona Healthcare Budget Cuts Will Touch All of Us

I wrote a couple of weeks ago about the fact that the news gives me heartburn.  But Arizona’s fiscal crisis gives me heartburn and a bad headache.  The bad keeps getting worse, it seems.  Yesterday’s headline at read: “Proposed state health-care cuts could cost billions, opponents say.”  The AP headline was “Ariz. hospitals rip plans for health program cuts.”


But those aren’t really fair assessments – nay, they’re completely unfair assessments. 

The statement that the Governor’s proposed budget cuts to Arizona’s healthcare system (primarily, to Arizona’s Medicaid system, the Arizona Healthcare Cost Containment System, or AHCCCS) will cost the state billions is backed by hard numbers from a study produced by the L. William Seidman Research Institute at Arizona State University.  Yes, the study was done for the Arizona Hospital and Healthcare Association, but having worked with the Seidman folks on a number of projects, I know firsthand that their integrity is impeccable – they’re no shills.


Those hard numbers, which reflect the far-reaching economic impacts of proposed cuts to healthcare are the reason why there is broad business community opposition to the cuts – the Arizona Hospital and Healthcare Association as well as the Arizona Chamber of Commerce and Industry, and the Children’s Action Alliance have come out against them. 


The state’s cuts would total $1.15 billion, but because of federal matching for Arizona’s expenditures, the actual reduction in public healthcare spending would be $2.7 billion.  310,500 low-income adults and 47,000 children would no longer have access to state healthcare coverage.  That is incredibly disturbing in and of itself.


But the total economic impact would be even greater.


Statewide negative impact


Here’s what the ASU report (available here) says about the impact of the Governor’s proposed healthcare budget cuts on Arizona’s economy:

  • “For every state-funded dollar spent via the AHCCCS program there is a match by the federal government (often in the ratio 1:2 or 1:3 state to federal). Thus the total impact on the Arizona economy is far greater than the state-determined reduction alone would indicate following any state cut.”
  • “In 2011, the first full year that reduced funding might occur, Arizona employment would be approximately 42,000 lower relative to the baseline. Real Gross State Product (GSP) would be lower relative to the baseline by approximately $3.3 billion (2010$) and real disposable income would be lower relative to the baseline by approximately $1.74 billion (2010$).”
  • The aggregate economic impact of reduced healthcare funding over the 2011-2030 study period is a loss of more than 808,000 job years (a job year is the equivalent of one person having a job for exactly a year), a loss of $77.7 billion in real Gross State Product, and a loss of $47.6 billion in real disposable personal income.


It’s not just healthcare


Those 42,000 jobs lost in the first year of reduced funding alone would not all be healthcare jobs.  ASU estimates that 19,556 private healthcare industry employees in the state would lose their jobs in 2011.  Those job losses would trickle down to other industries – leading to 2,918 jobs lost in retail, 2,426 in administrative and waste services, 2,187 in construction . . . and the list goes on.  In other words: all of Arizona’s employment sectors would be affected by the proposed reductions in healthcare spending.


I can hear you asking, “Okay, Gary, so show me a better way to cut $1 billion out of the state’s $2.6 billion deficit.”  To that I don’t have a nicely packaged, ready-to-ship answer.  I do have some ideas, but not enough space here.  So you’ll have to wait for my Tuesday 3/2 post for ideas on pulling ourselves out of this giant fiscal mess without such far-reaching negative economic consequences.


To be continued. . .

Written on Thursday, 25 February 2010 12:21 by Gary Yaquinto

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