States cutting healthcare, report shows

Beds lie empty in the emergency room of Tulane University Hospital in New Orleans February 14, 2006.

WASHINGTON (Reuters) - Several U.S. states are cutting their health insurance coverage for residents, including the Medicaid program for the poor, because of budget deficits, according to a report released on Thursday.

The Families USA report found that 19 states have enacted or proposed cuts in Medicaid, the state-federal health insurance plan for the poor, and the State Children's Health Insurance Program, known as SCHIP, for fiscal years 2009 or 2010.

More than 1 million people could lose all health coverage, and many more could have their benefits reduced -- including having to pay more out of their own pockets for care and losing dental or vision benefits, the report said.

It calls on Congress to raise the amount the federal government contributes to Medicaid, which covers 59 million people with low incomes and also many in long-term care facilities, and to quickly renew SCHIP.

President-elect Barack Obama named former U.S. Sen. Tom Daschle to be Health and Human Services Secretary on Wednesday -- a job to include the new role of director of White House Office of Health Reform. The report suggests Daschle will be fighting an even bigger crisis than when Obama made healthcare reform a major plank in his election campaign platform.

Already, 46 Americans have no health insurance, meaning they pay for healthcare out of their own pockets. Medicare, the federal health insurance system for the elderly, covers 44 million people, while states chip in with the federal government for Medicaid and SCHIP, which covered 7 million children in 2007.

The report by the non-profit Families USA finds that states are cutting Medicaid and SCHIP by either reducing eligibility, cutting benefits, raising costs for members or lowering payments to healthcare providers.

The report, available on the Internet here, noted that rising unemployment rates are costing states money.

Jobless claims were the highest they have been in 26 years last week -- 573,000 -- and the unemployment rate is now 6.7 percent.

"A one percentage point increase in the unemployment rate causes state general fund revenues to drop by 3 to 4 percent," the report reads.

"The National Governors Association and the National Conference of State Legislatures estimate that, for the budgets for fiscal years 2009 and 2010, states face a cumulative deficit of more than $140 billion."

Because Medicaid and SCHIP are such a large part of many state budgets, they look like an obvious place to save -- especially since most states are required by their constitutions to balance their budgets.

But that strategy is counterproductive, the report says.

"For every dollar a state cuts from its Medicaid or SCHIP program, it saves only between 17 and 50 cents in state funding, but it loses between 50 and 83 cents in federal funding and the economic stimulus that results from those federal funds," the report reads.

(Editing by Will Dunham and Bill Trott)