Hawai'i is dropping the only state universal child healthcare program in the country.

Gov. Linda Lingle's administration has eliminated funding for the program after it launched seven months ago. She cited budget shortfalls and other available healthcare options.

State officials said yesterday they will stop giving health coverage to the 2,000 children enrolled by Nov. 1, but private partner Hawaii Medical Service Association will pay to extend coverage through the end of the year without government support.

"We're very disappointed in the state's decision, and it came as a complete surprise to us," said Jennifer Diesman, a spokeswoman for HMSA, the state's largest healthcare provider. "We believe the program is working, and given Hawai'i's economic uncertainty, we don't think now is the time to cut all funding for this kind of program."

Hawai'i lawmakers approved the health plan this year as a way to ensure every child can get basic medical help. The Keiki Care program aimed to cover every child from birth to 18 years old who didn't already have health insurance — mostly immigrants and members of lower-income families.

It costs the state about $50,000 per month, or $25.50 per child — an amount that was more than matched by HMSA.

State health officials argued that most of the children enrolled in the universal childcare program previously had private health insurance, indicating that it was helping those who didn't need it.

"People who were already able to afford healthcare began to stop paying for it so they could get it for free," said Dr. Kenny Fink, the administrator for Med-Quest at the Department of Human Services. "I don't believe that was the intent of the program."

But Diesman said those claims are meritless because both the state and the healthcare system had agreed from the start to switch those signed up with its Children's Plan to the state-subsidized universal care.

Lingle signed Keiki Care into law in 2007, but it and many other government services are facing cuts as the state deals with a projected $900 million general fund shortfall by 2011.

While it's difficult to determine how many children lack health coverage in the Islands, estimates range from 3,500 to 16,000 in a state of about 1.3 million people. All were eligible for the program.