that is occurring from rising unemployment and the consequent growth in the number of uninsured and Medicaid and State Children’s Health Insurance Program (SCHIP) patients.

Hoffman noted that the monthly unemployment rate grew from an average of 4.6 percent in 2007 to 8.9 percent in April 2009. She said analysts expect that this high unemployment rate is going to persist well into the period of economic recovery, which is expected to be sluggish(Holahan and Garrett, 2009). This degree of job loss creates a marked drop in employer-sponsored insurance. In addition, as family incomes drop, more patients will become eligible for Medicaid and SCHIP.

Evidence shows that the uninsured do not disproportionately use emergency departments (EDs) for care. But even if their ED use rate stays the same, more uninsured patients will be coming to the ED because there will simply be more of them. In contrast, Medicaid patients, many of whom have one or more chronic conditions, do disproportionately visit emergency departments. Studies indicate that adult Medicaid beneficiaries who are frequent emergency department users do not use the ED as a substitute for primary care. Rather, they are a less healthy group who needs more of other kinds of out-patient services as well.

Rising unemployment decreases state tax revenue and affects the state’s ability to pay for programs, including Medicaid and SCHIP. For this reason, public health insurance programs could face large funding cuts this year. Moreover, because the federal government matches state dollars spent on Medicaid, every Medicaid dollar cut actually means a decrease in Medicaid spending that is twice as large. To ease the states’ budget challenges, the federal stimulus package provided approximately $87 billion in increased Medicaid spending over 2 years through a temporary increase in the federal matching payment rates.

Even so, states are likely to work hard to control their Medicaid budgets. In the last recession, all 50 states adopted measures to reduce provider payments and prescription drug spending, which had an immediate effect on Medicaid spending. As a last resort, some states made changes in their enrollment procedures that they knew would decrease the number of beneficiaries. The practical effect was to push people off the state Medicaid rolls and into the ranks of the uninsured.

Provider payments from public plans remain low relative to other health care payors. In addition, utilization and cost controls that were put in place to limit state prescription drug expenditures are largely still in place. With these policy options already employed, states have less latitude to lower program costs, knowing that further reductions could deeply jeopardize access to care.

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