Anthony Wright is executive director of Health Access California, the statewide health care consumer advocacy coalition. He blogs daily at the Health Access Weblog and is a regular contributor to the Treatment.

While there are several benefits from health reform that kick in this year, the common understanding is that the core coverage expansions will not take place until 2014. However, starting this month, April 2010, states have the option of expanding Medicaid to low-income individuals early--and getting at least 50 percent matching funds from the federal government.

Most states are in deep budget crises, and probably won't consider expansion. They were already mulling cuts instead. Here in California, with the particularly tough economic downturn, Governor Schwarzenegger has actually proposed taking more than 1.5 million people off Medicaid and eliminating our version of the Children's Health Insurance Program, Healthy Families, which covers another million children. These cuts have thankfully been prevented by the "maintenance of effort" requirements in first the stimulus act and now the new health reform law. (Cuts to Medicaid benefits and other health and human service programs are still pending.)

As I wrote earlier, this is a turnaround for Governor Schwarzenegger, who had his own state-based health reform a few years ago which, like the new federal health reform, would have expanded Medicaid to 133 percent of the poverty level and brought in poor adults without children at home. Back then, he extolled the virtues of expanding Medicaid and bringing in those federal matching funds to our state's health system, money that otherwise would be "left on the table" in D.C.

In fact, there's a powerful argument that states should expand, not cut, public insurance programs right now--despite the recession and budget deficits. The most obvious case is that there is greater need--the whole point of a social safety net is to be there during tough economic times, when people are less likely to have private, employer based coverage. But expanding coverage can also speed economic recovery. Too many elected leaders see Medicaid merely as a budget burden, rather than as a way to bring federal funds into their state economies and thus spur economic growth.

In fact, nothing else a state can do can have such a positive economic impact. Medicaid spending provides more “bang for the buck” economic impact than other state fiscal decisions, according to a recent University of California-Berkeley report. Put another way, spending (or cutting) a billion dollars in Medicaid will create (or eliminate) over 35,000 jobs. In comparison, an upper-income tax increase (or cut) has a much smaller 6,400 “jobs per billion” impact, and an oil severance tax even less.

Spending more on health and human services gives the economy a bigger boost not just because of the federal matching funds coming into the state, but also because of the “multiplier effect” it has on local economies. Health services, by definition, can’t be outsourced out-of-state. Also, the benefit goes to low-income patients and middle-income health workers. Both tend to spend the money immediately, recycling it into the economy.

Governors should not see Medicaid as a spending item that they want the “flexibility” to cut, or even just as a core safety-net program that it especially necessary during these tough times, but as the center of an economic recovery strategy. Hopefully health reform, through matching dollars or maintenance of effort requirements, will help not just expand Medicaid, but transform the thinking of state leaders in realizing the program's potential.