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Medicaid Expansion to Have Positive Impact on Economy and State Revenues

The recent expansion of Medicaid in North Carolina will be economic and societal benefits, which will have a positive impact on state and local government revenues.

RALEIGH – Last week North Carolina began enrolling newly eligible North Carolinians in Medicaid following the December 1 expansion of the program. In addition to providing health care coverage to more than 600,000 people in our state, the Office of State Budget and Management (OSBM) is anticipating the expansion will result in a positive impact on the state’s economy.

“North Carolina can expect economic and societal benefits from the expansion of Medicaid,” said State Budget Director Kristin Walker. “Expansion spurs North Carolina to become a stronger, thriving state thanks to improved health and productivity.”

The increased funds flowing into the medical sector is expected to increase stability for the healthcare workforce. This in turn results in stronger participation in the economy. A 2019 study by the Center for Health Policy Research at George Washington University estimated the additional infusion to North Carolina’s economy will create 37,200 jobs and increase Gross State Product by $2.9 billion.1

In addition, most of the North Carolinians eligible due to expansion are working adults. One-third are parents. According to the U.S. Census, many of those eligible under Medicaid expansion work in critical service industry jobs just as child care or food services. Increased access to health care will lessen barriers to work and improve financial stability for these key workers.

The state should expect to see increased state and local government revenues from increased economic activity. State tax revenues are estimated to increase by $200 million annually, while county tax revenues are estimated to increase by $43 million annually.2 This is in addition to the $1.67 billion of additional federal Medicaid expansion incentive funds flowing to the state this biennium.

OSBM estimates Medicaid expansion will also generate between $60 million and $80 million in General Fund savings accruing to North Carolina state agencies comprised of the Division of Health Benefits, Division of Mental Health, Division of State Operated Health Care Facilities, and the Department of Public Safety.

Source: OSBM