Harming Health, Harming Economic Health

Friday, August 15th, 2008


*Study Reveals Over $2 Billion in Lost Business Activity, Shows County Breakdown of Lost Federal Matching Funds, Lost Wages, and Lost Jobs As Result of Budget Cuts

* As Legislators Weigh Budget Choices, Study Shows Health Cuts Would Have Three Times Economic Impact as Compared to Upper-Income Tax Increase

*Study Shows $290 Increase in Private Insurance Premiums Due to Health Cuts

Click for What’s New on the Health Access WeBlog: More on Budget Negotiations; Spending Cap Proposals; Pending Health Legislation in Sacramento; The Health Reform Discussion

SACRAMENTO–On the day the California Employment Development Department released jobless statistics showing unemployment rates reaching 7.3%, with 15,000 Californians losing their jobs in July alone, two new Health Access reports exhaustively detail the significant economic impact of proposed health care cuts.

As California lawmakers debate budget cuts, taxes, and the economy, the two studies shows the proposed $850 million in health care cuts would lead to over $2 billion in lost business activity and 16,500 jobs lost as a result of budget cuts — three times the economic impact of an equivalent increase in upper-income taxes — and families facing a $290 increase in private insurance premiums to make up for the lost revenue in the health care system. The reports are available at: www.health-access.org.

One report utilizes standard economic tools to show the significant economic impacts of the proposed health services budget cuts, of jobs, lost wages, and lost business activity on a county-by-county basis. Another report includes new data by researcher Peter Harbage that shows that costs for insured families will rise due the need to make up for the lost revenue in the health care system as a whole.

The reports suggests that if policymakers are concerned about the economy, the worst choice would be to approve these health care cuts, which would force California to lose hundreds of millions of dollars in federal matching funds–which then has ripple effects throughout the economy, impacting jobs, wages, and even health insurance costs.

Key findings of the report include:

· More Than a $2.1 Billion Economic Loss Statewide in the First Year, including 16,500 Lost Jobs: By cutting nearly over $800 million billion in health care spending, California will lose its dollar-to dollar federal matching funds. The loss of these dollars in circulation had additional economic consequences of more than $2 billion, in lost commerce, lost wages and lost jobs.

· Severe Reverberations in Both Urban & Rural Counties: Fifteen counties in California are expected to see losses in economic activity in excess of $30 million. Areas severely impacted by the proposed cuts include the Central Valley, with Kern, Fresno, and San Joaquin counties losing an estimated total of $183 million in business activity and $64.8 million in wages.

· Increased Health insurance Premiums Rise by $290: The budget cuts propose to deny coverage to around one million more Californians, leading to a cost shift from medical providers will end up treating more patients who cannot pay for services.

This paper also shows how, due to federal tax deductions and matching Medicaid dollars, preserving California’s health care budget would have three times the positive economic impact as preventing an equivalent amount of increased taxes for upper income Californians.

Additionally, the report “Significant Side Effects: The Economic Impacts of Health Care Cuts in California Communities,” by Hanh Kim Quach and Anthony Wright, also describes other economic impacts from the cuts and from the additional uninsured, including lost productivity, lapses in school attendance and education funding, and increased instability of family finances.

The other report, “Adverse Reaction: Proposed Health Care Budget Cuts Would Lead to Increased Health Insurance Premiums,” was written by Harbage Consulting. Both studies were commissioned by Health Access Foundation, the statewide health care consumer advocacy organization. Earlier this year, Health Access had released a report detailing the coverage impacts of the health care budget cuts, which would deny over one million Californians coverage when the cuts were fully implemented.

To view this data online:

For the report, Significant Side Effects: The Economic Impacts of Health Care Cuts in California Communities, please visit:

For the report, Adverse Reaction: Proposed Health Care Budget Cuts Would Lead to Increased Health Insurance Premiums, please visit:

Health Access California promotes quality, affordable health care for all Californians.

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