In a letter to the debt ceiling negotiators, the National Governors’ Association (NGA) [...] argu[es] that the proposed federal reductions for Medicaid “will result in a direct cost shift to states, which will result in reduced Medicaid expenditures, in increased state taxes or reductions in K-12 education, transportation, and public safety funding.” “If Medicaid spending is reduced, the most likely (if not only permissible) source of savings would be additional reductions in payments to doctors and hospitals, potentially running afoul of the proposed requirements regarding access,” the group wrote. The economic impact of Medicaid cuts could also be significant. As Families USA noted in one recent report, “Every federal Medicaid dollar that flows into a state stimulates business activity and generates jobs. The loss of federal funding means there will be fewer dollars circulating through each state’s economy, as well as fewer dollars passing from one person to another in successive rounds of spending that drive economic growth.” It’s generally estimated that “every $1 million in federal funds generates $1.7 million in business activity on average, 17.1 new jobs, and $600,000 in wages and salaries.”

Igor Volsky at Think Progress reports on the reaction in the states to the indications from debt ceiling negotiators that some $340 billion in Medicare and Medicaid cuts are on the negotiating table.

Here's what that could mean for just one state: Colorado.

Adela Flores-Brennan, an attorney with the Colorado Center on Law and Policy (CCLP), says a 5 percent reduction just to Colorado's federal Medicaid funding would cost the state more than 2,500 jobs. "Federal cuts to Medicaid will merely shift costs to the states that continue to struggle to balance their own budgets. We simply cannot afford to support severe cuts to health care to the most vulnerable while protecting tax cuts for the wealthiest." Programs such as Medicaid have what's known as a multiplier effect, she says, benefiting not only recipients and doctors but also associated businesses in a community as well. The Obama administration proposal to cut Medicaid spending by $100 billion over 10 years could translate into a loss of $250 million in business activity in Colorado annually.]...] [P]ediatrician Steve Federico, president of the Colorado AAP chapter, says that while the cuts may help with federal spending issues, they'll do nothing to change the needs of the children who rely on this care. "It is a shortsighted solution in that we know that if we care for children and provide preventive care on the front end, the long-term benefits far outweigh the short-term costs." Any cuts, Federico says, fail to address the elephant in the room: the growing cost of health care overall.

That's just the potential impact on one state. Families USA estimates national total loss of $13.75 billion in health care spending, and massive losses in business activity for all states. It highlights these 10: "New York ($3.8 billion), California ($3.7 billion), Texas ($2.1 billion), Pennsylvania ($1.5 billion), Florida ($1.2 billion), Ohio ($1.2 billion), Illinois ($1.2 billion), Massachusetts ($1.0 billion), North Carolina ($942.1 million), and Michigan ($861.9 million)."

When Federal Reserve Chairman Ben Bernanke and the CBO warn against the economic effects of doing too much deficit reduction too soon, this is part of what they're talking about. The nation's economy is too fragile right now to sustain these kinds of cuts.