The current recession has driven the unemployment rate to levels not seen since 1993, and it is likely to continue climbing for much of 2009. As Americans lose their jobs and their incomes shrink, too often, they also face the loss of their family’s health insurance. Without health insurance, people must make tough choices about when and if to seek health care. Paying for food, transportation, housing, and other necessities may leave no room in the family budget for a child’s trip to the doctor or mom’s mammogram. A medical crisis can quickly turn into a financial crisis (or worsen existing financial problems).
More than ever, low-income families need the health care safety net that is provided by Medicaid and the State Children’s Health Insurance Program (CHIP) to get them through these tough times. However, another unfortunate effect of the economic crisis is the decline in state revenues and the resulting growth in state budget deficits across the country. As of November 2008, at least 43 states have faced or are facing budget deficits for the current 2009 fiscal year and/or the coming 2010 fiscal year that, taken together, total $140 billion. In response to this extreme fiscal pressure, states are forced to cut their Medicaid and CHIP budgets. This report documents this real impact of the recession. By looking at a 2008 snapshot of the first round of these cuts and the harm they have caused, our report offers a preview of the even greater harm that lies ahead if states do not receive help from the federal government.
Including financial help for states in a federal economic recovery package will help them preserve the Medicaid and CHIP health care safety net. This assistance is vital to prevent program cuts that will cause people to lose health coverage altogether or to lose access to critical health care services. Not only would this federal assistance help provide economic security to the families who depend on these programs, but a federal investment in Medicaid and CHIP would provide an immediate stimulus to state economies, increasing business activity, jobs, and wages.
There are two important components to how the federal government can provide this financial help. First, an increase in the share of the cost of the Medicaid program paid by the federal government (called the Federal Medical Assistance Percentage or FMAP) should be part of any economic recovery legislative package. This report quantifies, on a state-by-state basis, the potential magnitude of the financial stimulus that would be gained from the most recent Senate proposal to increase the federal investment in Medicaid.
Second, states must be reassured that the CHIP program will be adequately funded. Although Congress passed legislation—with broad bipartisan support—to reauthorize CHIP on two occasions in 2007, President Bush vetoed those bills. Congress, therefore, temporarily extended the program through March 2009, a deadline for congressional action that is fast approaching. The new Congress should act quickly to reassure states that extending and expanding CHIP as part of an economic recovery package will be accomplished in a timely manner, thereby providing both relief to families and a boost to the economy.