A recently published report from The Kaiser Commission on Medicaid and the Uninsured, titled Medicaid, SCHIP and Economic Downturn: Policy Challenges and Policy Responses, found that a downturn in the U.S. economy has a direct relationship with an increase in the number of uninsured individuals, as well as an increase in Medicaid and State Children’s Health Insurance Program (SCHIP) enrollment and costs. Based on studies of past recessions/economic downturns and estimates from currently available data, the report shows that as unemployment increases in a weakened economy, many people lose employer-sponsored coverage, which not only increases the uninsured population, but also increases the number of people eligible for Medicaid and SCHIP. The study estimates that a 1% increase in the national unemployment rate would cause 2.5 million people to lose employer-sponsored coverage (700,000 children; 1.7 million adults); 1 million people to enroll in Medicaid and/or SCHIP programs (600,000 children; 400,000 adults); 1.1 million adults to go uninsured; and 400,000 adults to obtain non-group coverage. As a result of increased enrollment, spending in Medicaid and SCHIP would increase by $3.4 billion ($1.4 billion for children; $2 billion for adults). State shares were estimated to total $1.4 billion. 

Looking at the other side of the equation, the report notes that an economic downturn also leads to state revenue declines, and since states must maintain balanced budgets, a slowing economy is likely to result in cuts to Medicaid, SCHIP, and other public programs. The Kaiser Commission estimates that for each 1% increase in the unemployment rate, state general fund revenue decreases by 3%–4% on average, which could cause a 3%–4% decrease in Medicaid and SCHIP spending if states cut spending evenly across all programs to account for the lost revenue. Accordingly, Medicaid and SCHIP cuts have recently been proposed in 13 states, as 28 states anticipate an aggregate budget deficit of $39 billion for the coming fiscal year. The report points out that in past economic downturns, Congress has provided relief to states in the form of Federal Medicaid matching rate increases, which have helped states avoid slashing Medicaid budgets. Accordingly, a bill was introduced in the House by Congressmen Frank Pallone (D-NJ) and Peter King (R-NY) on February 7 that would provide a temporary 2.95% across-the-board increase in the Federal Medicaid matching rate for five calendar quarters. Similar legislation also has been introduced in the Senate.