WASHINGTON – Thousands of people with serious medical problems are in danger of losing coverage under President Barack Obama’s health care overhaul because of cost overruns, state officials say.

At risk is the Pre-Existing Condition Insurance Plan, a transition program that’s become a lifeline for the so-called “uninsurables” – people with serious medical conditions who can’t get coverage elsewhere. The program helps bridge the gap for those patients until next year, when under the new law insurance companies will be required to accept people regardless of their medical problems.

In a letter this week to Health and Human Services Secretary Kathleen Sebelius, state officials said they were “blindsided” and “very disappointed” by a federal proposal they contend would shift the risk for cost overruns to states in the waning days of the program. About 100,000 people are currently covered.

“We are concerned about what will become of our high risk members’ access to this decent and affordable coverage,” wrote Michael Keough, chairman of the National Association of State Comprehensive Health Insurance Plans. States and local nonprofits administer the program in 27 states, and the federal government runs the remaining plans.

“We fear … catastrophic disruption of coverage for these vulnerable individuals,” added Keough, who runs North Carolina’s program. He warned of “large-scale enrollee terminations at this critical transition time.”

The crisis is surfacing at a politically awkward time for the Obama administration, which is trying to persuade states to embrace a major expansion of Medicaid under the health care law. One of the main arguments proponents of the expansion are making is that Washington is a reliable financial partner.

The root of the problem is that the federal health care law capped spending on the program at $5 billion, and the money is running out because the beneficiaries turned out to be costlier to care for than expected. Advanced heart disease and cancer are common diagnoses for the group. 

Obama did not ask for any additional funding for the program in his latest budget, and a Republican bid to keep the program going by tapping other funds in the health care law failed to win support in the House last week.

Brian Cook, a spokesman for the HHS agency overseeing the health care law, took issue with idea that thousands of people could lose coverage, though he did not elaborate.

“These actions are part of our careful management of the program to ensure that there is a seamless transition…for enrollees, and that funding is spent appropriately,” he said in a written statement.