Cast a skeptical eye on Medicaid economic impact predictions

labThis is the third of three blog posts discussing the findings of a recent state-funded report on the impacts of Utah’s pending decision on Medicaid expansion. See the other two posts here and here.

A recent state-funded analysis projected that expanding Medicaid under the provisions of Obamacare will create hundreds of millions of dollars in new economic activity and tens of millions of dollars in new tax revenues over a decade, presumably leading to thousands of new jobs in Utah. The key question about these projections is: Can they really be trusted?

As an economics major in college, I remember one of the introductory lessons in Econ 101 (or Econ 110, as it is numbered at BYU) talked about past attempts to project future economic outcomes. How did they do? Terrible. They couldn’t predict the economy very many months ahead, let alone years.

Why? Because mathematical models do not accurately or reliably describe the behavior of unpredictable human beings. Because statistical models cannot capture responses to unforeseen, economically harmful events which change individual and group economic reasoning and behavior. In short, because human intelligence and understanding of naturally unpredictable human behavior has limits which preclude broad comprehension and prediction, human attempts at boiling that complexity down to a mathematical/statistical formula have failed miserably.

So what does the projection that Medicaid expansion will generate hundreds of millions of dollars in new economic activity over 10 years really mean? Probably not much … except perhaps that an economist somewhere just got a fat, taxpayer-funded paycheck.

This entry was posted in Budget and tagged , , . Bookmark the permalink.