States targeting health care in cuts

Only a few states are considering tax increases.

SACRAMENTO, Calif. (AP) — Financially strapped states are looking to take away government health insurance and benefits from millions of Americans already struggling with a souring economy.

An Associated Press review of the budgets in all 50 states reveals coverage would be eliminated for hundreds of thousands of poor children, disabled and the elderly. More than 10 million people would lose dental care, access to specialists, name-brand prescription drugs or other benefits. About 20 million could see their care jeopardized by further cuts to doctors’ reimbursements.

Health care is a choice target as governors and legislators confront the worst deficits they’ve faced in a decade or more, but that’s not their only target: They’re also considering cuts in aid to schools and universities, shrinking state work forces and even releasing prisoners before their sentences are completed.

Safety-net programs for the elderly, disabled and out-of-work also could be cut, even as the demand for those services is on the rise.

Despite the dire conditions, only a handful of states are seriously considering general tax increases or even modest hikes on the wealthy to close the gaps. Lawmakers say they fear such actions would only further stress the economy.

Instead, states are looking to increase lottery ticket sales, promote Indian gambling or further raise taxes on cigarettes and alcohol. Those taxes disproportionately hit the pocketbooks of the same poor and working-class that would be hurt by the spending cuts, studies show.

Nearly two dozen states are grappling with deep cuts and tax proposals to close shortfalls totaling more than $34 billion. That includes California, where lawmakers have made emergency cuts and authorized billions in bond sales to halve a deficit once projected at $16 billion through June 2009. Another dozen states are bracing for falling revenue.

In California alone, lawmakers already have cut more than $1 billion in payments to physicians caring for 6.5 million people who rely on the state for health care. The move will push untold numbers from doctors’ offices to overcrowded clinics and emergency rooms.

Gov. Arnold Schwarzenegger also has proposed cutting dental care for 3 million adults on Medicaid and benefits such as foot checkups for diabetes patients to detect infections that can lead to amputations.

“We’re at the edge. If the same economic news continues, we’re going to see cuts as deep as in the last recession, or worse,” said Cindy Mann, executive director of the Center for Children and Families at Georgetown University.

“The juxtaposition is that every presidential candidate will now tell you that addressing health care coverage is first and foremost on people’s minds. But the first line of defense has to be not letting us go backwards.”

Unlike the federal government, which can spend more than the revenue it takes in, almost all states are bound by their constitutions to maintain balanced budgets.

Residents of Sun Belt states that had enjoyed a boom in housing construction and rising real estate prices will be particularly hard hit. The same is true for residents in states with significant financial-service industries. Those states face their largest deficits since the recession following 2001. Some are in their worst fiscal shape in decades.

Arizona must cut about $1.2 billion, or 11 percent of state spending. Florida already has cut $1 billion and is looking to shave an additional $2 billion from its $70-billion budget.

Wall Street firms, once geysers of tax revenue for New York, are slumping from tight credit and the subprime mortgage crisis — contributing to the state’s $4.1 billion shortfall. Nearly $1 billion from Medicaid and other health-care programs could be cut to help close the gap.

The budget pain is not spread equally from state to state, or even region to region.

Some states — especially Alaska, New Mexico, Wyoming and others rich in oil and gas reserves — are booming. In Wyoming, for example, a state savings fund from tax revenue from energy production will overflow with a projected $4 billion by 2010.

Farm states, by and large, also are doing well. Growing worldwide demand for grains and an expected ethanol boom have pushed corn and soybean prices to record highs, prompting a buying spree by farmers in South Dakota, Nebraska, Kansas and Iowa.