Medicaid enrollment naturally increases during an economic downturn as people make less money, or lose their jobs altogether, and qualify for this publicly funded health insurance. States, at the same time, have to tailor their budgets to shrinking revenues amid increasing demand for services.
But Medicaid is one of the most effective and efficient forms of economic stimulus. Every dollar spent generates new dollars that pass from one person to another in successive rounds of spending. This multiplier effect means that Medicaid spending provides a greater boost to the state economy than the value of the services purchased directly by the Medicaid program. The magnitude of the multiplier effect varies from state to state, depending on how the dollars are spent initially and the economic situation in the state.
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