By Martha Heberlein

Facing a $2.6 billion budget shortfall in fiscal year 2011, Arizona has resorted to $1.1 billion in cuts. In doing so, the state made the unprecedented move of repealing the state’s Children’s Health Insurance program, KidsCare. Estimates are that 47,000 low-income children will lose coverage as a result and another 13,000 children will be impacted by cuts to the state’s Medicaid program. No state has ever eliminated its CHIP program. In fact, only one state has ever rolled back CHIP eligibility. (In 2004, Alaska reduced eligibility from 200% to 175% of the FPL.)

There have been instances where states have capped enrollment due to budget constraints, but they have always re-opened the programs once additional funding was secured (this recently happened in both Tennessee and California). However, by voting, not only to defund the program, but to repeal the statutory language authorizing its existence, reopening the program when the budget improves will be a much, much heavier lift.

Also in the state’s budget are cuts to its Medicaid program (AHCCCS) – specifically, the state did not fund its Prop 204 expansion population, limiting spending to what the state has in tobacco settlement funds. (Prop 204, passed by a voter referendum in 2000, expanded Medicaid to all uninsured residents below 100% of the FPL.) It is not yet clear how the state will scale back AHCCCS to meet these funding restrictions. Estimates suggest that more than 300,000 people could lose coverage.

These cuts are likely to leave many uninsured, driving them to seek care in the emergency room or to simply go without necessary treatment.

There may be some hope for the low-income children and families who rely on the coverage they get through KidsCare and AHCCCS. Congress is working on extending the enhanced FMAP to states through the end of the fiscal year 2011 and this influx of federal dollars could be tapped to restore the devastating cuts in the state budget.

Arizona is the only state to ever make such a drastic and shortsighted cut to its CHIP program and it will be dealing with the fallout from this decision long after the state’s budget situation improves.