A controversial state-funded health plan for about 7,500 U.S.-affiliated Pacific island migrants will go into effect July 1 with revisions to resolve earlier concerns about reduced benefits.

However, Dr. Neal Palafox, chairman of family medicine and community health at the University of Hawaii John A. Burns School of Medicine, sees it as "minimum improvement."

"In the long run … it’s going to cost more money by cutting people off from essential services. They are going to flood the hospitals, and at late stages of illness, outcomes are going to be worse."

Facing a critical revenue shortage, the state Department of Human Services proposed last September transferring noncitizens with less than five years’ residency from comprehensive state-funded medical assistance to a plan with reduced benefits.

Proposed reductions in the initial Basic Health Hawaii plan caused an uproar, especially because lifesaving dialysis and chemotherapy were not covered. Lawyers for Equal Justice sought a temporary restraining order that was granted Sept. 1 and later extended pending completion of the rule-making process.

Chemotherapy is provided as part of the drug benefits in the revised plan, and dialysis will be covered as a federally funded emergency service.

The Basic Health Hawaii plan mostly affects Compact of Free Association migrants. People are allowed to travel freely and live in the U.S. under the 1986 federal compact from the Federated States of Micronesia, the Republic of the Marshall Islands and Republic of Palau.

Many come to Hawaii for medical care because of lack of services in their region. Many more are expected because chronic diseases have reached an "epidemic" level in those islands.

All migrants receiving free medical assistance now will be grandfathered into the new plan, which has a cap of 7,000, said state Human Services Director Lillian Koller. All QUEST plans have caps, but rules were amended for the Basic Health Plan to allow 1,100 more who would have no coverage, she said.

Med-QUEST Administrator Kenneth Fink said about 40 people receiving long-term care services will be grandfathered into the plan, and 400 or 500 migrants in the QUEST-ACE plan will get better benefits in Basic Health Hawaii.

Legal adult aliens from noncompact nations who have lived in the U.S. less than five years also will be eligible for the plan.

The federal government stopped Medicaid for compact citizens in 1996 but restored benefits to pregnant women and children in February 2009 through the Children’s Health Insurance Program Reauthorization Act.

After the federal government "washed its hands" of compact migrants, Hawaii continued to give them comprehensive health benefits at a cost of more than $120 million a year, Koller said. The state receives only about $11 million annually in federal funding.

"It’s a national responsibility, and we can’t get more than 10 cents on a dollar," she said. "It’s shameful."

The national health care reform act did not even address the migrant population, although the U.S. used the compact nations for nuclear tests in the 1940s and 1950s, Koller pointed out.

Beth Giesting, Hawaii Primary Care Association executive director, agreed that "the federal government needs to come to the fore and pick up responsibility" for compact migrants. "In the meantime I think it’s immoral for the state to shrug this off," she said.

Giesting said the Basic Health Hawaii plan "is pretty decent" for most average people but is not enough for those with extraordinary needs. It will be "a real burden" on community health centers and "economically devastating for providers who serve a lot of people from the Pacific" because they provide extensive services and will receive lower reimbursements, she said.