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This is MORNING EDITION, from NPR News. Good morning. I'm Renee Montagne.

LINDA WERTHEIMER, host:

And I'm Linda Wertheimer.

States are hurting for cash and rethinking how much health care they can afford for their neediest residents. New Jersey Governor Chris Christie wants to cut half a billion dollars in Medicaid spending, and he wants to accomplish this by squeezing more than 20,000 state residents out of the program. Critics say the cuts would hurt those who can least afford it.

NPR's Joel Rose has our report.

JOEL ROSE: For years, New Jersey expanded health care coverage for low-income residents, people like Deborah Shupenko of Passaic. But last month, after 10 years of state-funded health insurance, Shupenko got a letter in the mail.

Ms. DEBORAH SHUPENKO: It is expected that my last day of New Jersey family coverage will be July 31st, 2011.

ROSE: Did you have any idea this was coming?

Ms. SHUPENKO: I was shocked. I was absolutely floored.

ROSE: Shupenko suffers from a number of medical conditions, including asthma and osteoarthritis. She's unemployed. And at 56, she's too young for Medicare, but too sick to find affordable insurance on her own.

Ms. SHUPENKO: The worst scenario is something catastrophic happens to me, I could lose everything. A large hospital bill, or maybe a large doctor's or surgical bill, I could be out in the street. I could basically be homeless.

ROSE: Shupenko is one of about 1,400 New Jersey residents who are losing their state-funded insurance coverage this year. And Governor Chris Christie, a rising star in the Republican Party, says New Jersey has no choice but to make even deeper cuts in health care spending.

Governor CHRIS CHRISTIE (Republican, New Jersey): Medicaid's growth is out of control. We must manage it better. Spending in Medicaid will grow by nearly $1 billion over last year. That is the definition of an out-of-control program.

ROSE: That was Christie during his budget address in February. A few weeks ago, his administration released more details about how it intends to manage health care costs. The most controversial part of New Jersey's plan would block access to Medicaid for an estimated 23,000 people next year, and it would do that basically by disqualifying any adult who makes more than $6,000 dollars a year. Democrats - including State Senator Joe Vitale - are vowing to fight the cuts.

State Senator JOE VITALE (Democrat, New Jersey): We've seen a steady march backward over the last two years, huge leaps in slashing access to affordable health care for hundreds of thousands of New Jerseyans. And it's reprehensible.

ROSE: The federal government is slated to pick up the tab for a major expansion of Medicaid, but not until 2014. In the meantime, states have to apply for a special waiver from Washington if they want to make big changes to Medicaid eligibility.

And compared to other states - notably Arizona - the changes New Jersey is seeking are modest. That's according to Jeffrey Brenner, director of the Camden Coalition of Healthcare Providers.

Mr. JEFFREY BRENNER (Director, Camden Coalition of Healthcare Providers): To Governor Christie's credit, he has chosen to innovate and to try and make Medicaid deliver better care at lower cost. So we need to put this in perspective.

ROSE: Even with the proposed cuts, Brenner says New Jersey's Medicaid program would still enroll roughly one million people. But that's little comfort to Crystal Snedden with New Jersey Citizen Action. She doubts the Christie administration's proposed Medicaid cuts will really save as much money as advertised.

Ms. CRYSTAL SNEDDEN (New Jersey Citizen Action): On paper, according to their budget, it will look like they've saved money. But we all know that over the long run, it's going to cost us more money in charity care. It's going to cost us more money in a sicker population.

ROSE: New Jersey's waiver application isn't officially due until the end of the month, but opponents are already urging the Obama administration to reject key parts of it.

Joel Rose, NPR News.

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