January 30, 2016

Revised Report - FINAL

Economic Impacts of Medicaid and the Proposed Medicaid Expansion in Idaho
Supported by Federal Government Funding

By Steven Petersoni
Clinical Assistant Professor Economics
University of Idaho
January 30, 2016
Overview
This is an updated economic impact assessment of the federal portion of the FY 2014 Medicaid
expenditures in Idaho and the proposed Medicaid expansion based on Option 3.5 (Healthy Idaho Plan)
as outlined in the Governor’s Workgroup on Medicaid Expansion. It was sponsored by the Idaho
Hospital Association and completed in January, 2016.
Methodology
The focus of this analysis was to estimate the short-run and near-term economic impacts of Medicaid
expansion in Idaho supported by federal dollars. Total Medicaid spending in Idaho in FY 2015 was $2.03
billion (not including the proposed expansion). Approximately, 76% was supported by federal dollars ($1.54
billion) and the balance of $0.53 billion was paid by Idaho. This does not include indirect and implicit
support of Medicaid from hospitals and other health care providers by their acceptance of reduced
reimbursements associated with the Medicaid programs.




Total federal expenditures for Option 3.5 were evaluated based on data supplied in December,
2015.
This January 2016 report is an ongoing and updated analysis of the Governor’s Workgroup on
Medicaid Expansion and reflects updated numbers from the Milliman report. We analyzed only a
single scenario, Option 3.5, in contrast to earlier reports which included several scenarios.
The economic impacts were estimated using a 2011 IMPLAN economic input/output model of the
State of Idaho. The expenditures were adjusted to constant 2015 dollars (for the model inputs) but
reported in current year’s dollars for the model outputs. The Medicaid expenditures were entered
into the economic model to the appropriate health care sector within the model.

Results
Total Economic Impacts of Option 3.5 (Figure 1): The direct expenditures were entered into the
economic model to estimate the total economic impacts including the multiplier effects from the
backward linkages of health care expenditures circulating throughout the economy. The total gross
economic activity in 2017 was $0.98 billion, which in turn supported $574 million in GSP, $439 million
in total compensation, and 11,787 jobs, including the multiplier effects.
Tax revenues created from this economic activity includes $16.2 million in sales/excise taxes, $8.7
million in property taxes, $12.4 million in personal/corporate income taxes, for a grand total of $37.3
million. These include the multiplier effects (direct, indirect, and induced effects). These taxes were
adjusted to account for the tax exempt status of many Idaho hospitals.ii
The economic impacts were calculated for each year from 2017 to 2026 and reported in Figure 1.

 January 30, 2016

Revised Report - FINAL

Assumptions of the Analysis
Federal dollars represent new monies coming into Idaho’s economy. In the short-run and near term, they
are mostly non-substitutable. A one dollar reduction in federal Medicaid expenditure will result in a one
dollar reduction in economic activity in Idaho. In the absence of the federal dollars, these health care
expenditures will be pulled from elsewhere in Idaho’s economy displacing private spending, and reducing
economic activity elsewhere in the state. For example there will be greater cost shifting from Medicaid to
employers and individuals with private health care plans, increasing their premiums which, in turn, reduces
consumer spending throughout Idaho’s economy.
Over time, the displacement may decrease if there is a corresponding reduction in federal tax payments
leaving Idaho. However, there can be very long lags to this process, perhaps decades. Further the
relationship between federal dollars entering Idaho versus federal dollars leaving Idaho is very complex and
it is possible there may be no adjustment, creating a long-term dollar-for-dollar displacement for federal
Medicaid dollars.
Terms: The following economic model outputs are reported:
1) Gross economic activity: Reflects the total transactions from all sources in dollars by direct, indirect, and
induced economic activity (i.e. including the multiplier effects). The technical term for gross economic
activity is sales or output.
2) Gross state product (GSP or value added): A subset of transactions. It is a measure of the net increase in
the economy resulting from an increase in expenditures. It includes, wage and salary earnings (payroll),
proprietors’ income, other property income, and indirect business taxes.
3) Total Compensation (payroll): A subset of gross domestic product and includes wage, salary, and other
proprietors’ income payments and includes fringe benefits to workers.
4) Employment: Represents the total employment resulting from economic activity.
5) Indirect business taxes: Includes all taxes except personal income taxes and corporate income taxes.

i

These are the results and conclusions solely of the author, and do not necessarily represent those of the University of
Idaho or any other individuals or organizations.
ii
Note that is analysis is not a formalized tax forecast model and thus should be interpreted carefully. The tax
economic impacts are proportional to the economic activity created by the federal Medicaid dollars coming into the
state in long-term equilibrium.

 January 30, 2016

Revised Report - FINAL

Figure 1: Projected Economic Impact of Healthy Idaho Plan (Medicaid Expansion Option 3.5)
FY
2017 $
2018 $
2019 $
2020 $
2021 $
2022 $
2023 $
2024 $
2025 $

Nominal
Federal
577,200,000
602,200,000
635,800,000
664,300,000
698,100,000
745,900,000
797,500,000
853,100,000
913,100,000
977,900,000

Sales
Transactions
$ 979,502,039
$ 1,021,926,763
$ 1,078,945,593
$ 1,127,309,779
$ 1,184,668,007
$ 1,265,784,080
$ 1,353,348,711
$ 1,447,701,298
$ 1,549,520,637
$ 1,659,485,523

$
$
$
$
$
$
$
$
$
$

GSP
574,087,443
598,952,631
632,371,442
660,717,756
694,335,489
741,877,727
793,199,473
848,499,650
908,176,099
972,626,665

Total
Compensation
$ 438,985,884
$ 457,999,479
$ 483,553,751
$ 505,229,249
$ 530,935,630
$ 567,289,623
$ 606,533,684
$ 648,819,919
$ 694,452,547
$ 743,735,786

2026 $
total $ 7,465,100,000 $ 12,668,192,430 $ 7,424,844,374 $ 5,677,535,551

* Jobs are reported on an annual basis only

Jobs
11,787
12,057
12,453
12,708
13,049
13,626
14,240
14,887
15,622
16,403
*

Sales/Excise
$ 16,223,115
$ 16,925,780
$ 17,870,160
$ 18,671,198
$ 19,621,200
$ 20,964,694
$ 22,414,994
$ 23,977,719
$ 25,664,114
$ 27,485,420
$209,818,394

Idaho Taxes
Property
Income
$ 8,689,169 $ 12,349,800
$ 9,065,519 $ 12,884,701
$ 9,571,334 $ 13,603,609
$ 10,000,373 $ 14,213,396
$ 10,509,198 $ 14,936,583
$ 11,228,779 $ 15,959,314
$ 12,005,566 $ 17,063,350
$ 12,842,568 $ 18,252,970
$ 13,745,808 $ 19,536,733
$ 14,721,307 $ 20,923,197
$112,379,622 $159,723,653

$
$
$
$
$
$
$
$
$
$

Total
37,262,085
38,876,000
41,045,103
42,884,967
45,066,981
48,152,787
51,483,909
55,073,258
58,946,655
63,129,925

$ 481,921,669