Congress is considering major cuts to Medicaid. This is the second in a series of blog posts designed to share resources to help understand what’s at stake.
Medicaid provides millions of people with crucial health care coverage – and it also provides significant economic benefits.
Medicaid’s benefits are felt by those who are covered by the program, the providers who treat them, and communities and states as a whole.
Research has shown that Medicaid has a significant return on investment. Several studies show that investing in Medicaid for children yields long-term benefits. Children covered by Medicaid are more likely to grow up to have better outcomes in many areas that help offset the cost of the original investment in their health.
For members, Medicaid can offer protection from the financial strain of medical debts and out-of-pocket costs. Having fewer medical costs can also help improve people’s finances by allowing them to catch up on other bills and necessities. Some studies indicate there is even more that could be done to reduce financial hardships for low-income residents, through policy change outlined in the first resource below.
Medicaid also reduces health care costs by ensuring people can receive preventive care and early treatment. That can lead to fewer expensive emergency room visits and delayed cancer diagnoses. It can also improve population health overall and allow people to be healthy enough to work.
Want to learn more? Here are a few more resources on the economic outcomes of Medicaid:
Improving the financial stability of those covered by Medicaid
How Medicaid protects beneficiaries from financial stress – and how it could do more, The Commonwealth Fund, 2024
- This article summarizes research findings on how Medicaid can protect people’s financial health. It notes that policymakers can do more to reduce financial hardships for low-income residents.
Long-term economic impacts
Medicaid has a huge return on investment, Healthcare Triage, 2016
- In this video from Healthcare Triage, Dr. Aaron E. Carroll describes the findings from research on the health and economic effects of Medicaid, including improved health outcomes and financial security.
Long-term impacts of childhood Medicaid expansions on outcomes in adulthood, The Review of Economic Studies, 2020
- Research has linked Medicaid coverage in childhood to increased likelihood of attending college, lower rates of teen parenthood, higher wages, paying more taxes, and lower use of government assistance.
- From ages 19 to 28, “the federal government recoups 58 cents on the dollar of its ‘investment’ in childhood Medicaid.”
Exploring the effects of Medicaid during childhood on the economy and the budget, Congressional Budget Office, 2023
- This working paper focuses on the short-term and long-term fiscal effects of Medicaid spending on children.
- Past research has found that Medicaid enrollment in childhood increases earnings in adulthood – which leads to higher tax revenues and less money paid in federal benefits.
- This working paper estimates that “long-term fiscal effects of Medicaid spending on children could be offset by half or more of the program’s initial outlays.”
- Additional analysis of this paper from Georgetown Center for Children and Families.
Medicaid’s impact on state economies
How does Medicaid benefit states? The Commonwealth Fund, 2025
- States’ investment in Medicaid is shown to have a “multiplier effect,” meaning that every dollar spent generates more than a dollar in economic activity.
- Medicaid helps drive employment in states’ health care sectors and generates state and local tax revenue.
Medicaid expansion
The impact of Medicaid expansion on state’s budgets, The Commonwealth Fund, 2020
- This report found that expanding eligibility allows states to cut spending in other parts of their Medicaid programs as well as state-funded health services for those who are uninsured.
- Research has found that Medicaid expansion generates significant economic impacts, helping to boost employment and income.
The benefits of Medicaid expansion, JAMA Health Forum, 2020
- In states that expanded Medicaid, unemployed workers experienced large gains in coverage. Those gains improved access to medical care and reduced skipped medical care, improving physical health which improved economic well-being.
- Expanding Medicaid reduced hospitals’ uncompensated care.