A proposal from the state's two budget chairman laying out $3 billion in budget cuts over the next 18 months would eliminate state-run health care for more than 64,000 Arizona children.

The budget proposal presented to the Legislature Jan. 15 by John Kavanagh and Russell Pearce, chairmen of the House and Senate Appropriations Committees respectively, identifies a budget savings of $18.3 million this year and $35.6 million next year by removing state funding for KidsCare.  

The removal of the program from the state's ledger -announced days after the Governor Janet Napolitano called for increased access to the program -is intended to help the deficit-laden state out of the red, but Dana Wolfe Naimark, president and CEO of the Children's Action Alliance, said the cuts would do more harm than good.

"If we are pushing families away, we are just doubling and tripling the bad effects of the poor economic times," Naimark said.

The 1998 implementation of KidsCare – also known as the State Children's Health Insurance Program (SCHIP) – resulted from the federal government's decision to provide grants to states willing to offer health care coverage exceeding what Medicaid provides to children.

Arizona children from households earning less than twice the federal poverty limit, or approximately $46,000 annually for a family of four, qualify to receive coverage for wellness care, vaccination and vision under KidsCare.  

More than 300 children enrolled in KidsCare in November, bringing the overall enrollment total to 64,377 children at the end of that month.

Meanwhile, the U.S. House of Representatives voted Jan. 14 to expand SCHIP through fiscal 2013 to include an additional 4.1 million children nationwide.

The House bill – HR 2 – is similar to a package vetoed by President Bush in 2007, and would expand access to the state programs by allowing children from families earning three times the federal poverty limit annually to qualify for coverage.

The estimated $33 billion cost would be funded with a 61-cents-per-pack increase in the federal tobacco tax.

A key Senate committee also voted last week to expand the program to cover an additional 4 million uninsured children. The vote came a day after the House measure passed.

The legislation to increase spending on the State Children's Health Insurance Program passed easily, 12-7, despite losing support from some Republicans who had worked closely with Democrats on the issue in 2007.

Sen. Charles Grassley, R-Iowa, said he objected to giving states the option of covering children of legal immigrants through Medicaid and SCHIP. He also said the legislation failed to include provisions from two years ago designed to keep higher-income families out of the program.

All the Democratic lawmakers on the Senate Finance Committee voted for the bill, which was sponsored by the committee's Democratic chairman, Max Baucus. They were joined by Sen. Olympia Snowe, R-Maine.

Baucus's bill increases spending on SCHIP by $31.5 billion. The bill did not include a provision to cover legal immigrants, but such an amendment offered by Sen. Jay Rockefeller, D-W.V., was approved by a 12-7 vote.

Current law requires a five-year waiting period before legal immigrants become eligible for coverage under Medicaid and SCHIP.

And watchers of Capitol Hill are also anticipating legislation that would increase the level of matching funds the state receives from the federal government to fund KidsCare programs.

As of October 2008, KidsCare receives $3 from the federal government for every $1 provided by the state, but the expected revision to the formula would increase federal contributions but as much as 12 percentage points, making the federal contribution more than $7 for every $1 the state invests. 

-The Associated Press contributed to this report.