We asked Leif Wellington Haase, director of New America's California Program, and Micah Weinberg, a research fellow in the California program, to fill us in on the latest developments on health care in California, particularly the possible cuts to funding the state’s Healthy Family Program for low income kids.

This blog has documented the flurry of activity in health reform in Washington in recent weeks. Senator Max Baucus has floated major new proposal to overhaul the delivery and funding of care and Sen. Edward Kennedy is working on a related initiative. Former Senate Majority Leader Bill Frist has urged Republicans to work with Obama to make helping the uninsured an “immediate” priority.

But will immediately be soon enough?

In California, the state faces a staggering budget deficit estimated at between $25 and $30 billion over the course of the next 20 months. In the fourth “extraordinary budget session” of the year, Governor Schwarzenegger has proposed drastic cuts to state health care funding. These cuts include freezing enrollment in the California’s “Healthy Families Program” which provides medical, dental, and vision care to children from families that earn too much to qualify for Medi-Cal (the state’s Medicaid program) but not enough to purchase their own insurance. Other states around the nation have likewise curtailed their health care spending. Hawaii, for instance, recently ended a program to cover uninsured children.

These cuts come exactly when families experiencing layoffs or salary reductions most need the protection of the public safety net and when the country can least afford to have health care pullbacks drive struggling families into debt. As New America Foundation President Steve Coll warns that, “The accumulating failures in the country's health-care system are a cause of profound weakness in the American economy; unaddressed, this weakness will exacerbate the coming recession and crimp its aftermath.”

Against this backdrop, California’s state lawmakers are putting on a brave face. Incoming President Pro Tem of the California Senate, Darrell Steinberg said that “despite the state budget crisis, children’s health care should be a top priority” and noted that “Barack Obama has ... signaled he wants to increase spending for the State Children’s Health Insurance Program.”

Arguments this time will probably turn on the limited resources of a federal government that is still conducting two wars and funding hundreds of billions of dollars in industry bailouts. This series of bailouts may eventually include billions for the states, much of which may in turn go towards continuing funding for health care. These proposals, however, are still in their nascent phases.

In the meantime, decisions are being made at the state level that will affect hundreds of thousands of children and their families. California’s Managed Risk Medical Insurance Board meets on December 17 to vote on whether to freeze enrollments to the Healthy Families program. As the state’s unemployment continues to spike, policy advocates estimate that 162,000 children may be denied coverage in the first six months of next year if these changes to the program take effect.

Lawmakers at the state level will have to make tough choices to protect health care funding in their state budgets. And they will need help. To come to the states’ assistance, the federal government could raise the Medicaid match rate (FMAP) and do so immediately as a part of the bailout. These federal funds should come with requirements that the states must use these funds to expand coverage to assist those families at risk of falling into poverty. The disadvantage of such immediate approaches is that the government may not have time to put in place sensible conditions for the use of these funds. Further, immediate authorization of additional billions of dollars may exacerbate the rising health care costs that contribute to states’ budget crunches.

Alternately, the federal government could wait until next year to address health care funding in a comprehensive manner. Renewing SCHIP is a priority of the incoming Obama Administration. This reauthorization could allow states to cover all children in need of insurance helping to shore up programs such as Healthy Families in California. However, by the time that these decisions are made, many hundreds of thousands of children may have been denied health care.

Whichever strategy they pursue, governments must act boldly. Rather than slashing health care funding for poor and working families—or merely holding the line—states must expand coverage and access. The economic costs of the failure to do so are as high as are the human costs.