Number of uninsured U.S. residents projected to rise by 1.1 million for each percentage point increase in unemployment rate

For every one point rise in the U.S. unemployment rate, the number of uninsured is projected to increase by 1.1 million people, according to a Kaiser Family Foundation Commission on Medicaid and the Uninsured analysis released Tuesday, the New York Times reports (Sack, New York Times, 4/29).

The report, conducted by researchers at the Urban Institute's Health Policy Center, also examined the effect that a one-percentage-point rise in the national unemployment rate would have on state Medicaid and SCHIP programs (Francis, "Health Blog," Wall Street Journal, 4/28). In addition to the increase in the number of uninsured, the analysis projects that for every percentage-point increase in unemployment:

• Medicaid and SCHIP enrollment would increase by 600,000 children and by 400,000 nonelderly adults;
• Enrollment jumps in Medicaid and SCHIP would cost an additional $3.4 billion, of which $1.4 billion states would be required to pay; and
• State general fund revenues would drop by 3% to 4%, likely leading to budget cuts.

According to the researchers, "Because of state balanced-budget requirements, Medicaid and other assistance is most likely to be cut when state residents have the greatest need for help." According to the New York Times, 27 states and Washington, D.C., are forecasting budget deficits for fiscal year 2009, and cuts to Medicaid or SCHIP programs have been proposed in 13 states.

Meanwhile, the unemployment rate has increased by seven-tenths of 1% since March 2007. According to Urban Institute Director of Health Policy John Holahan, job losses often accelerate late in a recessionary cycle, meaning the "heaviest hit is still likely to come." Holahan said the projections would be in addition to the enrollment growth normally expected from increasing health insurance costs and the erosion of employer-sponsored coverage. Researchers also said that the impact of the current economic downturn might be worsened by its proximity to the recession in 2001. "You could have more people at the tipping point so we could be underestimating things a little bit," Holahan said. "This is emerging as a pocketbook issue, and not just as an issue of moral principle or access to care," Drew Altman, president and CEO of the Foundation, said (New York Times, 4/29).

Researchers said the federal government could increase all Medicaid funds temporarily; target federal spending increases to specific states based on need; or allocate funds discriminatingly to states meeting certain criteria, either for a limited time or with a formula that would be implemented during future economic downturns ("Health Blog," Wall Street Journal, 4/28).

The report is available online.

Issue Brief

KCMU also released an accompanying issue brief that analyzes results from its annual 50-state budget surveys of Medicaid directors from 2003 to 2007. The analysis describes how states adopted a variety of Medicaid cost containment strategies during the last economic downturn and how the federal government provided assistance to prevent deeper Medicaid budget cuts (Kaiser Family Foundation release, 4/29). During this period, the federal government provided $20 billion to states, some of which was given on the condition that they not tighten Medicaid eligibility rules and that they use several techniques to reduce costs.

According to KCMU, with "another economic downturn coming so quickly after the last one, states may have fewer policy options to control spending this time" ("Health Blog," Wall Street Journal, 4/28).

The issue brief is available online.

A kaisernetwork.org webcast of an interview by Kaiser Family Foundation Vice President Jackie Judd with Barbara Edwards, interim director of the National Association of State Medicaid Directors, about the impact of the economic downturn and the Bush administration's proposed new Medicaid rules on programs across the country is available online.