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Kids and Health Care: Effects of State Budget Cuts

The early 2000s have been tough for many state governments. Budget pressures starting from the federal level have made various hard financial choices necessary. And there's been some cutting back of state-funded health care programs for children.

Most of the kids who lost state-funded health coverage live in low-income working families with incomes too high to qualify for Medicaid and the group of benefits programs loosely known as welfare. Some examples:

  • In California, several proposals were submitted to eliminate Medicaid coverage for nearly 300,000 low-income families with incomes between 61 percent and 100 percent of the poverty line ($9,160 to $15,000 for a family of three) and close to 200,000 parents with even lower incomes.
  • Changes were implemented in Tennessee's Medicaid program, too. Its TennCare program eliminated health care coverage for between 160,000 and 250,000 adults and children. Here, too, those affected overwhelmingly are people in working families.
  • Deep cuts in Oklahoma's health care programs were also approved, including near-elimination of the state's CHIP program.

Other states that made cutbacks affecting lower income families included: Connecticut, Nebraska, New Jersey, Missouri, Montana, Massachusetts, Oklahoma, Tennessee and Washington.

These losses point to an upward trend in the number of people who are uninsured. From 2000 to 2001, the number of individuals lacking health insurance rose by 1.4 million, mainly because millions of individuals lost their private health insurance in the economic downturn.

Growth in the number of people enrolled in Medicaid and CHIP helped to offset some of these losses. Far fewer people became uninsured than would have, if the public programs weren't able to pick up many of the low-income unemployed. But these people are the ones most susceptible to being thrown out of state programs because of budget cuts.

In December 2002, the National Conference of State Legislatures released a survey of state legislators and legislative staff that found that, in 2003 and 2004, 44 states expect to consider proposals to limit Medicaid eligibility, cut the health services that Medicaid covers, and/or freeze or cut back payments to health care providers. The findings were similar to those of a survey of state Medicaid directors conducted the previous summer, which reported that most states had already adopted Medicaid reductions -- and had plans for more.

The following state actions and governors' proposals are examples of the types of proposals that states make when faced with budget issues:

  • Connecticut. In December 2003, Governor John G. Rowland proposed a deficit reduction plan that would eliminate health care coverage for thousands of parents and children in low-income working families. The plan also proposed to freeze enrollment in the state's CHIP program and eliminate presumptive eligibility and continuous eligibility, which enabled uninsured children and families to gain and maintain health care coverage. The plan aimed to reduce the Medicaid income limit for parents and other eligible adults from 150 percent of the poverty line to no more than 100 percent of the poverty line, and possibly to a lower level than that.
  • Massachusetts. In the fall of 2002, the Massachusetts legislature voted to eliminate Medicaid for about 50,000 unemployed adults with very low incomes. In October 2002, its governor also took administrative actions to eliminate coverage for health services such as dentures and prosthetic devices for about 600,000 low-income beneficiaries.
  • Missouri. In the summer of 2002, Missouri legislature passed a large package of Medicaid cuts. The changes reduced coverage for low-income parents from 100 percent of the poverty line ($15,020 for a family of three) to 77 percent of the poverty line ($11,565 for a family of three), curtailed coverage for about 160,000 new mothers and eliminated dental coverage for about 300,000.

A Kaiser Commission survey found that in fiscal year 2002, some 40 states imposed cost controls on prescription drugs, 22 states froze or reduced provider payment rates and nine states reduced the scope of Medicaid benefits for fiscal year 2003. The survey found states planned much more extensive Medicaid cuts in fiscal year 2003. Some 40 states reported they would impose drug benefit cost controls in 2003, while 29 states said they would reduce provider reimbursements, and 15 states said they would require Medicaid beneficiaries to pay more out of pocket.

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