As policy makers in Washington DC work to reduce the federal budget deficit, we should all be watching carefully where the budget ax swings, especially when it nears our children. Luckily, California is raising the red flag when proposed federal cuts result in more state costs and less health care services for children. Governor Jerry Brown sent a letter last week to President Obama objecting to a proposal to shift federal Medicaid costs to the states. The proposal at issue is referred to as the “blended FMAP rate.” On its face, the proposal seems like an efficiency: combining three federal matching rate formulas into one rate for all Medicaid programs and the Children’s Health Insurance Program (CHIP). Simple is better, right? Maybe, if the new formula will result in states getting at least the same amount of federal funding for their Medicaid and CHIP programs. But it does not. In fact, that is the catch: the proposal is part of the federal budget deficit negotiations because the matching formula can be dialed up or down depending on how much federal spending they want to take out of Medicaid and CHIP.

The “blended rate” formula is complicated and difficult to calculate its impact on each state, as a recent analysis notes. Other blog posts have outlined the specifics (to the extent there are any) of how the formula would work, but the bottom line is that if the blended rate results in federal savings, it means more costs to states. Governor Brown called it a “blatant cost shift to states.” Truth be told, this proposal really should be called the “health care cost shift” plan.

So, what does this mean for children and their families? Shifting significant Medicaid and CHIP costs to the states will mean states will either need to find additional state revenue to continue even existing Medicaid and CHIP coverage or drastically cut services and provider payments. Children make up half of the Medicaid population (41% in California) so they may be bearing the brunt of the impact. All told, there are 4.5 million California children covered by Medicaid and CHIP who stand to be affected by any reduction in federal funding.

For those of you following the implementation of the Patient Protection and Affordable Care Act (ACA), you might ask, “Won’t children’s coverage be protected by the Maintenance of Effort (MOE) requirements in ACA?” Maybe not for long: if the federal government pulls back on its share of Medicaid and CHIP, the states might push back, calling to end the MOE’s stability protections. Also, if the enhanced CHIP match originally promised to states is reduced, the states’ incentive to continue enrolling these children may also diminish.

The American public is clear that they do not want to shift more of Medicaid’s responsibilities to the states if it means eliminating insurance coverage for children. Now we need Congress to make similar decisions to protect and preserve funding for children’s health insurance coverage.

Instead of drastic cuts that will disrupt health care coverage for millions of children in California and across the country, Congress should seek more cost-effective ways to address the national deficit. Keeping children healthy is not just the right thing to do, a healthy and productive population is essential for our nation to be prepared to meet the challenges of the future. Our nation cannot afford to shortchange the health of our most vulnerable children. Congressional representatives who are serious about children’s health should heed Governor Brown’s concerns and insist that budget negotiators take this dangerous idea off the table and find a way to balance the federal budget without more harm being done to children.

Kristen Golden Testa, The Children’s Partnership and 100% Campaign