The Department of Human Services is setting up a new health insurance program that is expected to save the state $15 million a year while extending coverage to low-income noncitizens who have lived in Hawaii legally for less than five years.

About 7,500 people, mostly from Pacific island nations, will be transferred from comprehensive state-funded medical assistance to Basic Health Hawaii, a more limited benefit program, starting Sept. 1, the department said.

Low-income pregnant women and children who are not U.S. citizens will continue to receive comprehensive, free Medicaid insurance under the Children's Health Insurance Program Reauthorization Act, which President Barack Obama signed in February.

With the state's huge budget shortfall, the Department of Human Services can no longer afford to provide free and comprehensive health care benefits for noncitizen adults, said Human Services Director Lillian Koller.

“;What's so astonishing,”; she said, “;is the state has been spending all state money to provide expansive Medicaid-like benefits for noncitizens in the Compacts of Free Association. We are still able to save by creating a new decent package of benefits with better pharmacy benefits than we are currently giving to U.S. citizens in QUEST-ACE and QUEST-Net programs.”;

The new program will have the same annual benefits as QUEST-ACE and QUEST-Net: 12 outpatient doctor visits, 10 hospital days, six mental health visits, three procedures and emergency medical and dental care.

Only limited antibiotics and contraceptives are now covered under the QUEST programs, but starting Sept. 1 the department will pay for up to five generic prescriptions a month, as well as diabetes supplies and contraceptive care.

Koller said the department must reduce medical assistance costs by $42 million for the next two years, and it expects to save $30 million with the new program. Work is still under way to identify the remaining $12 million in savings, she said.

People who are not American citizens but have legally resided in the United States for more than five years may enroll in Medicaid, for which the state claims matching federal dollars. But the federal government does not provide any health funding insurance for noncitizens living in the U.S. less than five years.

“;It's a true gap group of adults,”; Koller said, adding that “;it's just not fair”; that “;basically indigent nonpregnant adults lawfully in the U.S. under five years are getting no benefits from us while other noncitizens are getting full coverage from a comprehensive program supported by federal funds.”;

Estimates of those who might qualify for the new health insurance program range from 750, based on noncitizens receiving state financial assistance, to about 2,000, Koller said.

Many noncitizens covered by the new plan are from the Federated States of Micronesia, the Republic of the Marshall Islands and the Republic of Palau, parties to the Compacts of Free Association with the U.S. government. People in those nations are allowed to travel freely, live, work and attend school in the United States.

The state spends more than $90 million each year on health care, education and other services for people from those nations, but the federal government gives the state less than $11 million toward the costs, Koller said.