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Benefit of LTC Funding on State Economies

A document has been prepared for each state that can be utilized to discuss the economic benefit of a financial investment in Medicaid nursing facility services. The document enclosed illustrates an investment of $1,000,000, the federal match available for these funds, and the total funds available for payment to nursing facilities for Medicaid services. The potential total economic impact, increase in wages, and increase in jobs are also projected. The tax revenue associated with this increase in economic activity is also illustrated. A second document illustrates the same information in a different format.

The October 1, 2009 federal match is based on the increases available through The American Recovery and Reinvestment Act of 2009, as disclosed in the February 2, 2010 Federal Register. The economic impact analysis was prepared using Impact Analysis for Planning (IMPLAN) software from Minnesota IMPLAN Group, Inc., 2007 data (see below for discussion of IMPLAN model).

An increase in investment by the state from $1,000,000 to $2,000,000, would result in a doubling of the numbers in the enclosed document. The percentage change in investment (from $1,000,000 to any other number) will result in the same percentage change in the other numbers. We hope that this information will be of benefit to you in discussions with your Medicaid payment agency(ies).

All states are included in the file named “all states fmap benefit fy2010 q1”. Individual state files are also provided.

If there are questions regarding these documents, please call Bill Hartung at 202-898-2841, for assistance.

Discussion of IMPLAN Model

Excerpt below from Wikipedia

Social Accounting- IMPLAN's Social Accounting System describes transactions that occur between producers, and intermediate and final consumers using a Social Accounting Matrix. One of the important aspects of Social Accounts is that they also examine non-market transactions, such as transfer payments between institutions. Other examples of these types of transactions would include: government to household transfers as unemployment benefits, or household to government transfers in the form of taxes. Because Social Accounting Systems examine all the aspects of a local economy, they provide a more complete and accurate “snapshot” of the economy and its spending patterns.

Multipliers - "Multipliers are a numeric way of describing the impact of a change. An employment multiplier of 1.8 would suggest that for every 10 employees hired in the given industry, 18 total jobs (in all sectors) would be added to the given economic region."

The Multiplier Model is derived mathematically using the input-output model and Social Accounting formats. The Social Accounting System provides the framework for the predictive Multiplier Model used in economic impact studies. Purchases for final use drive the model. Industries that produce goods and services for consumer consumption must purchase products, raw materials, and services from other companies to create their product. These vendors must also procure goods and services. This cycle continues until all the money is leaked from the region’s economy. There are three types of effects measured with a multiplier: the direct, the indirect, and the induced effects.   The direct effect is the known or predicted change in the local economy that is to be studied. The indirect effect is the business to business transactions required to satisfy the direct effect. Finally, the induced effect is derived from local spending on goods and services by people working to satisfy the direct and indirect effects.

  1. Direct effects take place only in the industry immediately affected:  if DEMCO lays-off 39 employees, the manufacturing industry loses 39 employees.
  2. Indirect effects concern inter-industry transactions: because DEMCO is closing, they will no longer have a demand for locally produced materials needed to produce their product. This will affect all of their suppliers.
  3. Induced effects measure the effects of the changes in household income: employees laid-off by DEMCO may reduce their expenditures in restaurants and shops since they are no longer employed. These changes effect the related industries.
  4. Impacts are the total changes to the original economy as the result of a defined event.

Once there is a clear picture of the economy through the Social Accounting Matrix (SAM) and Multipliers, its behavior can be predicted for a defined event: if DEMCO spent 20% of its earnings on bananas in 2006, then received an additional $1,000,000 of income from a new project in 2007, the banana industry could expect to make approximately $200,000 more that year. If 5% of the banana grower’s industry is spent on fertilizer, the fertilizer industry could expect $10,000 more; and so on.

However at each of these steps, each company will source some products out of the region of the economy of study. These are the losses that occur and eventually drive the cycle to zero. The total increase in economic activity from that million dollar project is the economic impact of the project; $1,000,000 spent became at least $1,210,000 of economic activity giving the DEMCO a multiplier of 1.21 - Every dollar spent on DEMCO creates 1.21 dollars of economic activity.

  
  
  
  
collapse Article Date : 2/2/2010 ‎(52)
Benefit of State Investment All States.pdfBenefit of State Investment All States2/2/2010
Benefit of State Investment Alabama.pdfBenefit of State Investment Alabama2/2/2010Alabama
Benefit of State Investment Alaska.pdfBenefit of State Investment Alaska2/2/2010Alaska
Benefit of State Investment Arizona.pdfBenefit of State Investment Arizona2/2/2010Arizona
Benefit of State Investment Arkansas.pdfBenefit of State Investment Arkansas2/2/2010Arkansas
Benefit of State Investment California.pdfBenefit of State Investment California2/2/2010California
Benefit of State Investment Colorado.pdfBenefit of State Investment Colorado2/2/2010Colorado
Benefit of State Investment Connecticut.pdfBenefit of State Investment Connecticut2/2/2010Connecticut
Benefit of State Investment Delaware.pdfBenefit of State Investment Delaware2/2/2010Delaware
Benefit of State Investment District of Columbia.pdfBenefit of State Investment District of Columbia2/2/2010District of Columbia
Benefit of State Investment Florida.pdfBenefit of State Investment Florida2/2/2010Florida
Benefit of State Investment Georgia.pdfBenefit of State Investment Georgia2/2/2010Georgia
Benefit of State Investment Hawaii.pdfBenefit of State Investment Hawaii2/2/2010Hawaii
Benefit of State Investment Idaho.pdfBenefit of State Investment Idaho2/2/2010Idaho
Benefit of State Investment Illinois.pdfBenefit of State Investment Illinois2/2/2010Illinois
Benefit of State Investment Indiana.pdfBenefit of State Investment Indiana2/2/2010Indiana
Benefit of State Investment Iowa.pdfBenefit of State Investment Iowa2/2/2010Iowa
Benefit of State Investment Kansas.pdfBenefit of State Investment Kansas2/2/2010Kansas
Benefit of State Investment Kentucky.pdfBenefit of State Investment Kentucky2/2/2010Kentucky
Benefit of State Investment Louisiana.pdfBenefit of State Investment Louisiana2/2/2010Louisiana
Benefit of State Investment Maine.pdfBenefit of State Investment Maine2/2/2010Maine
Benefit of State Investment Maryland.pdfBenefit of State Investment Maryland2/2/2010Maryland
Benefit of State Investment Massachusetts.pdfBenefit of State Investment Massachusetts2/2/2010Massachusetts
Benefit of State Investment Michigan.pdfBenefit of State Investment Michigan2/2/2010Michigan
Benefit of State Investment Minnesota.pdfBenefit of State Investment Minnesota2/2/2010Minnesota
Benefit of State Investment Mississippi.pdfBenefit of State Investment Mississippi2/2/2010Mississippi
Benefit of State Investment Missouri.pdfBenefit of State Investment Missouri2/2/2010Missouri
Benefit of State Investment Montana.pdfBenefit of State Investment Montana2/2/2010Montana
Benefit of State Investment Nebraska.pdfBenefit of State Investment Nebraska2/2/2010Nebraska
Benefit of State Investment Nevada.pdfBenefit of State Investment Nevada2/2/2010Nevada
Benefit of State Investment New Hampshire.pdfBenefit of State Investment New Hampshire2/2/2010New Hampshire
Benefit of State Investment New Jersey.pdfBenefit of State Investment New Jersey2/2/2010New Jersey
Benefit of State Investment New Mexico.pdfBenefit of State Investment New Mexico2/2/2010New Mexico
Benefit of State Investment New York.pdfBenefit of State Investment New York2/2/2010New York
Benefit of State Investment North Carolina.pdfBenefit of State Investment North Carolina2/2/2010North Carolina
Benefit of State Investment North Dakota.pdfBenefit of State Investment North Dakota2/2/2010North Dakota
Benefit of State Investment Ohio.pdfBenefit of State Investment Ohio2/2/2010Ohio
Benefit of State Investment Oklahoma.pdfBenefit of State Investment Oklahoma2/2/2010Oklahoma
Benefit of State Investment Oregon.pdfBenefit of State Investment Oregon2/2/2010Oregon
Benefit of State Investment Pennsylvania.pdfBenefit of State Investment Pennsylvania2/2/2010Pennsylvania
Benefit of State Investment Rhode Island.pdfBenefit of State Investment Rhode Island2/2/2010Rhode Island
Benefit of State Investment South Carolina.pdfBenefit of State Investment South Carolina2/2/2010South Carolina
Benefit of State Investment South Dakota.pdfBenefit of State Investment South Dakota2/2/2010South Dakota
Benefit of State Investment Tennessee.pdfBenefit of State Investment Tennessee2/2/2010Tennessee
Benefit of State Investment Texas.pdfBenefit of State Investment Texas2/2/2010Texas
Benefit of State Investment Utah.pdfBenefit of State Investment Utah2/2/2010Utah
Benefit of State Investment Vermont.pdfBenefit of State Investment Vermont2/2/2010Vermont
Benefit of State Investment Virginia.pdfBenefit of State Investment Virginia2/2/2010Virginia
Benefit of State Investment Washington.pdfBenefit of State Investment Washington2/2/2010Washington
Benefit of State Investment West Virginia.pdfBenefit of State Investment West Virginia2/2/2010West Virginia
Benefit of State Investment Wisconsin.pdfBenefit of State Investment Wisconsin2/2/2010Wisconsin
Benefit of State Investment Wyoming.pdfBenefit of State Investment Wyoming2/2/2010Wyoming
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