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IN THE STATES: Mind the Gap? Fix Health Care

Fall is a season of tweeds, wool sweaters, knit caps and "a neutral palette with pops of purple," that is, if you ask the Gap. If you ask state lawmakers, who are staring at an altogether different kind of gap, the kind in their budgets, the trends are much more austere.

Forced to find savings to compensate for shrinking state revenues, many staet lawmakers are eying cuts in Medicaid, which, on average, accounts for close 17 percent of a state's annual budget. USA Today's Julie Appleby takes a look at the implication of such cuts, focusing on the experiences of four states during this economic downturn:

  • Hawaii ended a seven-month program designed to cover the state's uninsured children
  • South Carolina is debating a budget that would include an 8.1 percent cut to Medicaid and a 10.8 percent cut to the Department of Mental Health
  • California cut Medicaid payments to hospitals by 10 percent in July and Gov. Schwarzenegger has called an emergency legislative session after the election to deal with the budget shortfalls
  • Massachusetts cut $293 million from its Medicaid budget, including more than $100 million in reduced payments to two of Boston's safety net hospitals

Our nation's capital is also feeling the strain. Last March, local D.C. council member David Catania introduced Healthy DC, a proposal to cover all of the District's uninsured. The plan had the support of Mayor Adrian Fenty, and even drew a favorable review from the Heritage Foundation's Bob Moffit. But that was before the economic meltdown, and now, Catania has asked to put the proposal on hold, reserving the program's funding for an anticipated surge in people who seek care from D.C.'s existing safety net services.

The unfortunate irony of these cuts is that they come just at a time when these programs are most needed. Growing unemployment leads more individuals to seek coverage under programs like Medicaid. At the same time, a weak economy reduces the tax revenues that states have available to fund such programs. A recent study by the Kaiser Family Foundation's Kaiser Commission on Medicaid and the Uninsured quantified this relationship, finding that a 1 percent increase in unemployment resulted in 1 million more people enrolling in Medicaid and SCHIP and another 1.1 million more people uninsured.

On Monday, the National Association of Governors asked Congress to include increased Medicaid funding as part of any proposed stimulus package. New York Gov. David Paterson echoed that request in his testimony before the House Committee on Ways and Means during today's hearing on Economic Recovery, Job Creation and Investment In America. Yet strain on state budgets created by Medicaid illustrates the need for broader reforms. As the Center for American Progress's Jeanne Lambrew told the committee:

High and rising health costs are one of many factors contributing to the current economic crisis. ...[T]he current crisis has forced a critical review of the fundamental problems in the economy as well as comprehensive solutions. No doubt, enacting health reform in the context of economic reform will be hard. But it is not as hard as turning a blind eye while our nation's health and economic prospects fade due to problems that may be prevented by policy.