On November 16, the Senate Finance Subcommittee on Health held a hearing on the State Child Health Insurance Program (SCHIP or CHIP). CHIP was created by the Balanced Budget Act of 1997 (P.L. 105-33) and provides health insurance to low-income children who are ineligible for Medicaid but unable to obtain private health insurance coverage. CHIP is jointly financed by the federal and state governments; each state determines eligibility group, benefits, and operating procedures.
Nina Owcharenko, senior health care policy analyst at The Heritage Foundation, explained the characteristics of CHIP: “First, it is not an entitlement program, as Medicaid is, but a capped spending program. Second, unlike Medicaid, which provides health care services to a very broad and diverse population with multiple eligibility standards, SCHIP has a simpler, more targeted purpose: to address the needs of uninsured children whose families earn too much to qualify for Medicaid but not enough to purchase private health care coverage on their own.” She continued, saying, “Each state receives an annual fixed federal contribution that is based on a variety of factors, such as the number of uninsured children in the state. States have three years to spend their allocation. At the end of three years, any unused federal allotments are subject to a reallocation process. The process divides states into two categories: states that have exhausted their original allocations (referred to as ‘redistribution’ states) or states that have not done so (referred to as ‘retention’ states), and unused funds are distributed to the states based on these categories.”
Ms. Owcharenko recommended that the subcommittee consider three key policy areas in CHIP’s reauthorization. “Federal policymakers should restructure the reallocation process to ensure that it is focused on meeting certain federal goals and objectives,” she said. “Specifically, priority should be given to states facing funding shortfalls that have not yet reached federally established benchmarks [such as the percentage of eligible children covered]. The reallocation process should not be based on whether a state has outspent its federal allotment.” She further recommended that the reauthorization focus on low-income children rather than moderate income children and their parents.
Lisa Dubay, a scientist at Johns Hopkins Bloomberg School of Public Health, said, “The vast majority of states now find themselves facing the prospect of running out of federal SCHIP funding in the years ahead, with some 17 states slated to run short of funds as early as this year (FY2007). Administration estimates suggest that these budget challenges, if left unaddressed, will translate into some 1.9 million children losing SCHIP coverage by 2016. To address this issue, federal matching funds in excess of the amount set aside for SCHIP under congressional budget rules — $5 billion a year — will be needed. The state and federal financial partnership behind SCHIP has been a critical component of its success and there is little doubt that children will lose coverage and the country will be unable to make further progress unless the federal government provides the funds necessary to continue playing a full role in this partnership.”
Dr. Dubay said the reauthorization must “support and strengthen state interests in reaching eligible uninsured children, such as by offering performance-based assistance with coverage costs to states that successfully cover more uninsured children; provide families with information about their children’s eligibility for coverage and assistance in applying for and retaining coverage, such as through community-based outreach efforts; give states the flexibility and tools needed to reduce the paperwork burden associated with enrolling and keeping children in coverage, including, to decide the best way to ascertain a child’s citizenship status.” She also recommended the reauthorization not focus solely on covering eligible children since family-based coverage is associated with a “14 percentage point increase in participation of children in health insurance programs and with greater use of preventive care visits among children.”
The director of Utah’s Bureau of Access, Nathan Checketts, testified that CHIP has been very successful in enrolling children without health insurance. He said that CHIP has been successful because “CHIP does not feel like a welfare program…Because of the public perception of CHIP, eligibility staff repeatedly get requests from families to enroll children in CHIP rather than Medicaid despite the fact that Medicaid has a greater range of benefits.” Mr. Checketts told the subcommittee that the success of CHIP has created problems too: “Despite great strides in enrollment, the number of uninsured children in Utah continues to grow…In 2001, 11.9 percent of Utah children under 200 percent of the FPL [federal poverty line] were uninsured. By 2005, this percentage increased to 16.8 percent, or 52,400 children. If the state enrolled all uninsured children thought to be eligible for CHIP (24,600 children), the percentage of children under 200 percent of the FPL who are uninsured would drop to 8.9 percent. Yet, this increase in enrollment would require $8.3 million in state funds and an additional $30.8 million in federal funds.”
Sharon Carte, executive director of the West Virginia Children’s Health Insurance Agency, testified that her state also is seeing a rise in expenditures. “Over the course of the past eight years, expenditure growth has come from a level of $11.8 million in total expenditures in FY2000 to $41.6 million in 2006, an increase of 253 percent. During this same period, the annualized cost per child has increased from approximately $924 to $1,605 between fiscal years 2000 and 2006, an increase of 26 percent,” she said. She continued saying, “To assure our continued success, WVCHIP’s foremost challenge is to have stabilized funding. Many things were unknowns at the enactment of this program — how many children were really uninsured; could we find and enroll them, once enrolled will they have access and can we make a difference in their health status? We have come a long way to answer most if not all of these questions. Fortunately, West Virginia is not one of the states with insufficient federal funding this year, but in two or three more, we will also join their ranks if the funding mechanism stays as it is presently.”
Tobi Drabczyk testified about her family’s experience as CHIP enrollees. She told the subcommittee that although her husband worked and received health insurance through his employer, the $500 per month needed to obtain coverage for their four children was prohibitively costly. She said, “Thanks to MCHP [Maryland Children’s Health Program], our babies have been able to get their vaccinations and when the older ones have had ear infections — which are so painful — we’ve been able to get the antibiotics the doctor prescribes. On $36,000 a year, we often find ourselves living paycheck to paycheck. There are times when we are short on the gas money my husband needs to drive to work and there are times when money for food is tight. But, we have never had to choose between those things and our children’s health. Because of MCHP, I can get the medicine the children need when they need it as opposed to when I can figure out how to budget for it.”
Also testifying was Ann Clemency Kohler, director of the New Jersey Division of Medical Assistance and Health Services.
