Ten years of progress on children's health care coverage is threatened by increasing unemployment, declining state revenues, and a growing affordability gap between family income and the cost of healthcare coverage. This report estimates that over the past year, 4.1 million people have lost their employer-based coverage, including 1.2 million children. It offers options to address the crisis, including temporarily increasing federal support for Medicaid and promptly reauthorizing SCHIP to soften the impact of the economic downturn on uninsured children.

New gaps have opened up in the budgets of at least 15 states and the District of Columbia just two months after they struggled to close the largest budget shortfalls seen since the recession of 2001. These 15 states make up more than half of the 29 states that have already moved to cut spending, use reserves, or raise revenues in order to adopt a balanced budget for the current fiscal year, which started July 1 in most states. Now, their budgets have fallen out of balance yet again.

Continuing economic problems have created budget problems in many states, leading some 22 states to reduce services to their residents, including some of their most vulnerable families and individuals. At least 14 states have implemented or are considering cuts that will affect low-income children’s or families’ eligibility for health insurance or reduce their access to health care services.

The economic downturn is forcing working families across the United States to make tough financial choices, often involving sacrificing needed health care and health insurance. This report examines the status of health insurance for adults and the implications for family finances and access to health care. Insurance coverage deteriorated over the past six years, with declines in coverage most severe for moderate-income families. As result, more families are experiencing medical bill problems or cost-related delays in getting needed care. In 2007, nearly two-thirds of U.S. adults, or an estimated 116 million people, struggled to pay medical bills, went without needed care because of cost, were uninsured for a time, or were underinsured.

A July/August poll finds that one in four Americans continues to struggle with paying for health care. Health care ranks as a "serious problem" above paying for food, problems with debt, and paying the rent or mortgage; it ranks below paying for gas or getting a good paying job or raise in pay. Among the 24 percent that find paying for health care or health insurance a serious problem, those in the poorest health and those with the most need disproportionately report difficulties.

When considering Medicaid’s impact on state budgets and other state spending priorities, it is important to distinguish between total spending and spending with state funds. In some states with more favorable federal Medicaid matching rates, the differences between the two can result in dramatically different stories, as federal funds may account for as much as two-thirds to three-quarters of state Medicaid spending. This series of issue briefs examines Medicaid’s role in state budgets and provides details on how much each state spends on Medicaid.

This report examines the implications of a downturn for health coverage and state programs. The authors project that a one percentage point rise in the national unemployment rate would increase Medicaid and SCHIP enrollment by 1 million and the number of uninsured by 1.1 million. The analysis also documents how federal fiscal relief during the last economic downturn of 2003-2004 helped to stabilize Medicaid eligibility and let states avoid deeper budget cuts.

During an economic downturn, demand for Medicaid rises as more people fall into poverty or lose their employer sponsored coverage and become uninsured.  At the same time, state revenues decline, affecting states’ ability to balance their budgets and to fund programs such as Medicaid.  This brief analyzes results from its annual 50-state budget surveys of Medicaid directors from 2003 to 2007 and describes how states adopted a wide array of Medicaid cost containment strategies during the last economic downturn and were assisted by the federal government to avoid deeper Medicaid cuts.

From 2000 to 2004, during a period of economic recession, the number of uninsured Americans increased by 6.0 million. The number increased by 3.4 million between 2004 and 2006, despite improving economic conditions during that time. The dominant factor in both periods was a decline in employer-sponsored insurance coverage. Although the recent decline was less than that experienced from 2000 to 2004, growth in public coverage was small, and the number of uninsured people increased by 1.0 million children and 2.4 million adults. Employer coverage declined most for self-employed or small-firm workers, in the South, and among noncitizens.

Maintaining Medicaid coverage during downturns in the economic cycle is a significant policy challenge for states. In recessions, states struggle to finance the cost of Medicaid coverage, which increases as people lose jobs and the health coverage that comes with them, becoming eligible for Medicaid. At the same time, state revenues, mirror¬ing the weak economy, generally become stagnant or decline. This issue brief paper offers four alternative approaches that the federal government could take to strengthen state Medicaid financing programs during periods of economic challenge.

Updated with information from the recent survey of state Medicaid directors regarding fiscal year 2007 and 2008 actions, this fact sheet summarizes the relationship of Medicaid with state budgets, the current fiscal situation in the states, and how this climate is affecting Medicaid programs.