Iowa jobs threatened by Congress’ inaction on Medicaid

A temporary increase in federal Medicaid payments created or saved 2,354 Iowa jobs in 2009, and will create or save 4,026 jobs in 2010.

But that job creation is threatened by the Senate’s failure to extend the increased in Federal Medical Assistance Percentage (FMAP) rates — the portion of Medicaid paid for by the federal government.

The American Recovery and Reinvestment Act of 2009 injected billions of dollars into Iowa’s economy, including $363 million to date in the increased FMAP rate. The Iowa Fiscal Partnership has illustrated the dramatic effects the Recovery Act has had on the state economy.

Just What the Doctor Ordered, An IFP analysis, described how the Recovery Act’s increased FMAP created and saved thousands of Iowa jobs:

Because Medicaid recipients save money on their health care bills, they are able to spend most of their incomes on meeting necessities through local payments for housing costs and through purchases from Iowa retail stores and service providers. In turn, these retailers and service providers are better able to keep their workers employed and have more income to spend purchasing from other businesses or residents in the state.

Without an extension of the increased FMAP, the state budget faces serious consequences, too. The Recovery Act’s increased FMAP rate is set to end at the close of this year — right in the middle of the state’s fiscal year.

As we have noted, in their Fiscal Year 2011 budget, Iowa lawmakers assumed that the increased FMAP would be extended through June 2011. Without an extension of the increased FMAP, there is a $120 million hole in the state budget. If Congress fails to extend the increased FMAP, Iowa’s lawmakers will be forced to cut spending in other critical state services to fill the Medicaid deficit or drastically cut Medicaid spending when the General Assembly reconvenes in January.

Iowa’s recovery from the recession has been slow, but it does appear to be ongoing. Failing to extend FMAP would undo much of the progress hat has been made, and hurt thousands of Iowa’s working families.

Posted by Andrew Cannon, Research Associate

Author: iowapolicypoints

The Iowa Policy Project is a nonprofit, nonpartisan organization that provides research and analysis to engage Iowans in state policy decisions. We focus on tax and busget issues, the Iowa economy, and energy and environmental policy. By providing a foundation of fact-based, objective research and engaging the public in an informed discussion of policy alternatives, IPP advances effective, accountable and fair government.

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