Medicaid & Biomedical Research in our “ailing economy”

Should we invest in Medicaid and Biomedical research in a stimulus package for our down turning economy? The House Committee on Energy and Commerce held a hearing today to discuss “Treatments for an Ailing Economy: Protecting Health Care Coverage and Investing in Biomedical Research.”

In her testimony, Arizona Governor Janet Napolitano (D-Ariz.) stated, “one of the wisest and most effective things Congress can do now to speed a national recovery is to invest in the federal-state programs that Americans rely on during a downturn.” Napolitano continued, “one of the most effective ways to aid in a national economic recovery is temporarily to increase the Federal medical Assistance Percentage (FMAP), or the share of the Medicaid program paid for by the federal government.”

A recent survey of state fiscal conditions found that more than 30 states are currently projecting budget shortfalls in fiscal year 2009, totaling $26 billion. Napolitano said the federal government should “invest in existing programs where it partners with the states.”

The committee discussed how Medicaid is continuously an issue in times of economic struggle, and “congress should make a counter-cyclical stimulus a permanent part of the Medicaid statute” as Gov. Napolitano stated in her testimony.

Alan D. Viard, American Enterprise Institute, agreed that the stimulus package can increase aggregate demand by increasing consumer demand, but it cannot permanently increase the level of jobs. Viard said, “counter-cycical increases in Medicaid matching rates would function poorly as a stimulus tool…Financial transfers from the federal government to the states do not directly boost aggregate demand because they do not directly increase consumer spending, business or residential investment, government purchases, or net exports.”

In regard to the inclusion of BioMedical Research, Families USA Executive Director Ronald F. Pollack expressed support for the National Institute of Health “in order to stimulate the economy.” Pollack said, “if the sum of all NIH awards to the states were to increase by 6.6 percent, the national economic benefit would add up to $3.1 billion worth of new business activity, 9,185 additional jobs, and $1.1 billion in new wages.”