Massachusetts universities generated $57.4 billion in economic output and supported 407,000 jobs in 2025, while hospitals added another $72.9 billion and 298,000 jobs, according to a new report from Pioneer Institute. But recent federal funding cuts threaten the state's "eds and meds" economy, which has become the Commonwealth's defining economic engine. The report warns that Massachusetts' reliance on education, healthcare, and biotechnology sectors makes it uniquely vulnerable to the shift in federal priorities.
The state ranks first nationally in NIH funding per capita, receiving approximately $5.2 billion in grants in 2023, and leads all states in patent production at 15.5 patents per 10,000 residents. Education, healthcare, and scientific and professional services account for a larger share of employment in Massachusetts than in nearly every other state, ranking between 3rd and 5th nationally for all three sectors in 2024. However, growth has slowed since the pandemic, with the private sector contracting 1.1% overall. The scientific and professional sector has been hit hardest, declining 5.3% after peaking in 2022.
The report finds that some research institutions lost between $47 million and $100 million in critical funding in fiscal year 2025, triggering what some call the "flight of the scientists." NIH Director Jay Bhattacharya has argued that cuts will spread successes "more evenly across the country" and help infrastructure "better reflect the country's health problems" by diversifying funding to places like Alabama and Iowa. The report estimates that up to 300,000 Massachusetts residents could lose their health insurance coverage over the next two to three years as Medicaid cuts take effect.
Research institutions have delayed hiring because of the funding cuts, and there's increased uncertainty surrounding graduate student and postdoctoral opportunities, the report says. Those who remain in the field have been forced to shift their research priorities to compete for the funds that are still available. While expanding research capacity nationwide is a worthwhile objective, the report notes it would have meaningful economic consequences for states like Massachusetts that have become so reliant on specific industries. The changes brought on by the One Big Beautiful Bill Act affect both the industries themselves and those they seek to serve.
The shift in federal priorities will be a true test of the Commonwealth's economic strength and adaptability, the report concludes. Massachusetts built one of the strongest economies in the country through investment in higher education, healthcare, and biotech, but that specialization now poses a risk. With the scientific and professional sector already weakened and federal support declining, the state faces a challenge to its long-standing dominance in research and innovation.