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Economic Impact of Low Income Health Program Spending on Select California Counties

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  • California recently received federal approval for a Section 1115 Medicaid Demonstration Waiver which includes the Low Income Health Program (LIHP). County-based LIHPs will offer comprehensive benefits to low-income adults who are currently ineligible for Medi-Cal coverage. County spending on LIHPs will improve access to health services for low-income adults and help maintain the sa fety network of providers.

    The LIHP will also have broader economic benefits in each county where the program operates. County health spending supports economic output and jobs in hospitals, clinics and other health care settings, at medical supply companies and other health care suppliers, and also at the grocery stores, retail stores and other local businesses in which health care workers shop. The federal matching dollars brought in as a result of the county investment also serves as a stimulus to the local economies.

    The projected economic impact of the LIHP in nine select counties was analyzed using IMPLAN 3.0, an industry-standard input-output modeling software package. IMPLAN allows computation of not just the direct impact of health care spending, but also the indirect impact on suppliers, and the induced effect resulting from changes in household income and resulting spending patterns. IMPLAN estimates not only the first round of effects, but also the subsequent rounds of effects as the dollars cycle through the economy , continuing until a ll of the money is leaked from the county .

    Our analysis found that for every dollar spent by counties on LIHPs, economic output would increase by $2.50 to $3.54, including the federal ma tching dollars, as shown in Table 1. For example, in Los Angeles County, $150 million in county spending on LIHPs would yield $150 million in federal matching dollars and a total of $485 million in economic output. County spending on LIHPs would also resu lt in state and local tax re venue. For example, in Los Angeles County, $150 million in county spending on LIHPs would yield $22 million in state and local tax revenue.

    Our analysis found that LIHP spending by counties would also have a significant employment impact, as shown in Table 2. For example, in Los Angeles County, $150 million in county expenditures would yield 3,200 jobs in the county, including 2,100 direct j obs in health care, 400 indirect jobs among suppliers and 700 induced jobs among the local businesses where health care workers shop.

    Table 1: Economic Impact of County LIHP Spending, Fiscal Year 2011-2012

    Table 2: Employment Impact of County LIHP Spending, Fiscal Year 2011-2012

    Methodology/Sources

    The LIHP spending was modeled as flowing to a set of IMPLAN industry sectors using the default IMPLAN 432-industry sector system. The total spending amount, including the federal match, was distributed across five health care related IMPLAN sectors. The distribution of these funds was weighted across these five sectors according to the relative sh are of economic output in 2008. The IMPLAN National Trade Flows me thod was used for a ll counties except San Bernardino. The Econometric RPC method was used for San Bernardino County because it is a geographically large but relatively sparse county that abuts an economically large county, Los Angeles, and the Econometric RPC met hod is recommended in these instances.

    Projected county expenditures are based on county LIHP applications to the California Department of Health Services. Expenditures reflect projections for Fiscal Year 2011 to 2012. 1

    Endnotes

    1.  California Department of Health Ca re Services, “Submitted Applications and Letters of Initial Approval of Applications,” http://www.dhcs.ca.gov/provgovp art/Pages/Applications.asp


  • Press Coverage

    The Success of Low-Income Health Programs
    California Progress Report, February 16, 2012