Arizona Kills SCHIP, Puts Medicaid on a Diet

On the eve of the possible passage of a health care bill, Arizona has provided a glimpse of our possible future by shutting down its SCHIP program and booting a bunch of people out of Medicaid:

The Arizona budget is a vivid reflection of how the fiscal crisis afflicting state governments is cutting deeply into health care. The state also will roll back Medicaid coverage for childless adults in a move that is expected to eventually drop 310,000 people from the rolls.

The reason this is so troubling, of course, is that the new proposed health care plan gets about half of its coverage expansion through adding people to Medicaid.  The state side of this expense doesn't show up on the books as a government expenditure (neatly enabling the bill to get a lower CBO score), but someone in America has to be taxed to pay for it, and there is a big problem when tax revenues fall short of the required expenditure.

There are two frightening possibilities, for people who support this bill (and the rest of us, as well . . . but we've been frightened for a while)

1)  States pull out, and coverage drops

2)  States don't pull out, and they go bankrupt.

The third, and to me the most likely scenario, is that the Federal government basically bails out the states, perhaps taking over Medicaid.  But that's its own problem, because taking over the Medicaid obligations is not going to come attached to any revenue stream to pay for it.  Where are we going to get the money?

Of course, that's what I want to know about the whole thing.  But this makes the problem much more vivid.