Cuts to Health Care, Other Programs by States Trying To Address Budget Shortfalls Might Disproportionately Hurt Low-Income Populations

At least half of U.S. states are facing budgetary shortfalls, forcing lawmakers to consider "often painful" cuts in funding for health care and other programs to reduce spending and eliminate deficits, the Washington Post reports. Almost all states are required by their own laws or constitutions to balance their budgets. With lawmakers hesitant to raise taxes because of falling housing values and a weak economy, most instead have proposed spending cuts, according to the Post. Some budget experts expect a situation similar to that of the 2001 economic recession, in which states typically cut funding for health care services and medical benefits before other programs because those "costs are often rising more rapidly than others" and because "the savings tend to be immediate."

According to some analysts, those spending cuts are often "felt disproportionately by the most needy," the Post reports. Iris Lav, deputy director of the Center on Budget and Policy Priorities, said, "It's disappointing, the extent they tend to focus their cuts on the most vulnerable," adding, "It does appear to disproportionately affect low-income people."

California Gov. Arnold Schwarzenegger (R) -- whose state is "facing the worst budget crisis, with a $16 billion shortfall" -- has proposed $650 million in spending cuts to Healthy Families, the state's version of SCHIP, and Medi-Cal, the state's Medicaid program. The proposed spending cuts would affect more than seven million seniors, disabled residents and children in the state could lose health insurance if the cuts take effect. In addition, adults in Medi-Cal could lose dental benefits and optometry and psychology services. Schwarzenegger also has proposed an $11 million spending cut to AIDS services through the state Department of Public Health.

However, California and many other states are still considering their budgets, so "some targeted programs could still be saved" in upcoming negotiations, according to the Post (Richburg/Surdin, Washington Post, 3/31).

Related Coverage
Summaries of recent news about state budget proposals appear below.

• Florida: Budget proposals introduced in the Florida House and Senate on Thursday contain cuts to the state's human services budget -- including several cuts in health care services -- that are intended to help close the state's $3 billion budget gap, the Orlando Sentinel reports. The House bill contains $1.1 billion in spending cuts and the Senate proposal contains $803 million in cuts (Kennedy, Orlando Sentinel, 3/28). The House proposal would eliminate hospice coverage for 8,000 terminally ill beneficiaries, coverage of hospitalization costs for 20,000 transplant recipients, and diagnosis and care for 2,300 children with cleft lips or cleft palates. The House measure also would eliminate coverage of dental and vision care, as well as hearing aids, for 146,000 seniors to save $32 million. In addition, the budget proposal would reduce funding for the Medically Needy program by $170 million. The program pays medical bills for residents who need transplants or experience catastrophic illnesses but do not qualify for Medicaid (Bousquet, St. Petersburg Times, 3/27). Nursing homes would face a 10% payment cut, totaling about $350 million, and would have a two-year exemption from minimum staffing requirements to adjust their operations. The Area Health Education Centers program, which provides medical care in low-income neighborhoods, would face a $7 million cut -- about two-thirds of its total budget. In addition, hospitals would face a 10% cut in payments for both outpatient and inpatient care (Royse, AP/Daytona Beach News-Journal, 3/27). The House proposal also would close A.J. Holley Hospital, the state's only tuberculosis hospital (St. Petersburg Times, 3/27).
  
  
• Missouri: The Missouri House on Thursday approved a $22.5 billion budget that would increase funding for the state's Medicaid program, the AP/St. Louis Post-Dispatch reports. The budget includes additional funding for nursing homes; a women's health care initiative; payment rate increases for physicians and dentists who treat Medicaid beneficiaries; and an expansion of a pilot program that allows children to receive treatment while their Medicaid applications are pending. Missouri's Medicaid expenses would increase by more than $300 million to more than $6.7 billion, making up about 30% of the state's total budget, according to state House Budget Committee Chair Allen Icet. According to AP/Post-Dispatch, about 170,000 fewer people are enrolled in Medicaid than in 2005 due to restrictions in eligibility (Lieb, AP/St. Louis Post-Dispatch, 3/27). The proposal now moves to the state Senate (Wagar, Kansas City Star, 3/27).