Report Says State's Budget Deficits to Strip One Million of Health Coverage

By Marc Morano | July 7, 2008 | 8:29 PM EDT

( - A public policy group has issued two new studies warning that one million people currently covered by health insurance might lose all coverage because of the looming state budget deficits. The group is calling on the federal government to intervene and offer fiscal relief to the states. But a critic of the reports calls them a "premature call to action."

The Center on Budget and Policy Priorities (CBPP), a left of center public policy organization, issued two separate reports warning that one million people currently covered by federal Medicaid and the State Children's Health Insurance Program "will be forced into the ranks of the uninsured if the [state budget] cuts are fully instituted." The group estimates that the collective state budget deficits in 2004 may be the largest in half a century, topping out at $85 billion.

"Only the provision of substantial fiscal relief to states by the federal government, a step that would also be more effective in stimulating the economy than most tax cuts under consideration, can forestall such an outcome," Robert Greenstein, CBPP's executive director stated.

Iris Lav, deputy director for CBPP, said the budget deficits facing the state for fiscal year 2004 are at least twice as large as the deficits the states faced during the recession of the early 1990s.

"When the governors release their budget for 2004 [in January] and state legislatures convene, states will be faced with closing both the newly and emerging gaps for the 2003 budget year and the massive new deficits for 2004," Lav stated.

"The choices states face will be stark," she added.

Lav believes the state budget deficits will not be easy to overcome.

"The deficits will be as much as a quarter of [some states'] budgets, even sharp cuts will not be sufficient to close the gap," Lav said in a teleconference briefing with reporters on Monday.

"Without a substantial federal fiscal relief package, the choices will be extremely stark at the state level and will bode ill for those who depend on state services, she added.

But William Beach, the director of the Center for Data Analysis at the free market Heritage Foundation, called the reports by the CBPP "a premature call to action."

"Once again, the CBPP has put the cart before the horse, and said we are facing a national emergency and therefore let's spend more," Beach told

Beach said the new reports encourage the state governments to "all of a sudden say we can't spend [state funds] on everything we want to, therefore the federal government should bail us out," Beach said.

Beach acknowledged that the fiscal situation for many states is bleak at the moment, but believes an economic recovery has begun and will alleviate the budget shortfalls.

"I want to be vary cautious before we react and do things that might slow the economy down," Beach said.

If the state fiscal situation does not improve, Beach believes the issues can be dealt with at that time.

"If it looks like there will be people who suffer because of lost health care, then we should have a good debate in Congress about what should be done," Beach explained.

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