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Children’s Health Insurance Program Focus of Subcommittee Hearing

On February 26, the House Energy and Commerce Subcommittee on Health held a hearing, “Covering Uninsured Kids: Reversing Progress Already Made.” It was the second in a series of hearings (see The Source, 2/1/08) examining recent changes to the State Children’s Health Program (SCHIP). SCHIP 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; the program’s current authorization (P.L. 110-173) expires March 31, 2009.

The hearing focused on a directive issued by the Centers for Medicare and Medicaid Services (CMS) on August 17, 2007. The directive requires that states enroll at least 95 percent of eligible children with family incomes at or below 200 percent of the federal poverty line (FPL) ($42,400 for a family of four in 2008) in either SCHIP or Medicaid before enrolling children from families with incomes above 250 percent of the FPL in SCHIP. It also requires that states show that private insurance coverage for children with family incomes at or below 200 percent of the FPL has not decreased by more than two percentage points over the prior five-year period. The stated goal of the directive is to reduce “crowd-out.” Crowd-out is said to occur when families drop private health insurance coverage for their children, opting instead to enroll in government-subsidized programs, such as SCHIP.

Chair Frank Pallone (D-NJ) said, “Last year should have been a landmark year for children’s health. Within reach was the opportunity to build upon the success of the previous 10 years, in which millions of low-income children were provided access to health care through SCHIP. We sought to exceed that achievement by providing states with the resources they needed to maintain current enrollment, as well as expand enrollment by four million additional children who are presently eligible but don’t participate. In spite of our efforts to develop bipartisan, bicameral legislation, that opportunity was lost, in my opinion, to petty politics and ideological warfare waged by a president who continually ignored the needs of hardworking American families. Instead of working with Congress to develop a compromise that would build SCHIP up for future generations, he set out to tear it down.” Rep. Pallone went on to criticize the August 17 directive issued by the CMS for its inflexibility. He also questioned CMS’ ability to evaluate states’ progress in implementing the directive since the agency has not issued guidance on acceptable quantitative evaluation techniques.

Ranking Member Nathan Deal (R-GA) said, “At this point, I think we all know that SCHIP was created to allow the states to cover targeted, low-income children with federal matching funds with a capped allotment. Moreover, SCHIP was remarkably successful at achieving its goals. Unfortunately, like any new program, there have been some abuses. Some states have covered more adults than children; others have focused on covering children up the income scale while leaving truly needy children from low-income families behind. Still others have failed to discourage families from dropping their private insurance coverage and replacing it with a government program. It is these abuses [that] led to the August 17 guidance from CMS. I understand that many governors are worried about the impact this guidance will have on their SCHIP programs and I’m certainly willing to work with governors and my friends on the other side of the aisle to address this August 17 letter. But before we do so, we must ensure that the abuses within SCHIP are addressed so that poor children do come first.”

Massachusetts Gov. Deval Patrick discussed his state’s plan for health care reform to achieve universal coverage by requiring all residents to purchase insurance. The cost of purchasing insurance is tied to a family’s income. Families with incomes at or below the FPL pay no premiums; as income rises, so too does a family’s share of the cost. Gov. Patrick noted that CMS agreed to permit Massachusetts to cover children with family incomes at or below 300 percent of the FPL ($63,600 for a family of four in 2008); he called this “a crucial part of the success we are experiencing today. And I am happy to add that we have achieved that success without having residents use SCHIP to substitute for private coverage. The so-called ’anti-crowd-out’ provisions are working.” He warned that the August 17 directive “imposes new enrollment, administrative, and procedural requirements that impair the commonwealth’s Medicaid and SCHIP programs…Specifically, the August 17th directive may prevent us from covering eligible children who are not yet enrolled…Indeed, as a practical matter in Massachusetts, this directive would leave thousands of children between 250 and 300 percent of the federal poverty level uninsured while their parents are covered by other features of our federally-approved health care reform…Without continued federal support for, and flexibility within, the SCHIP program, health care reform in Massachusetts and elsewhere is in jeopardy. Given the benefits to children, to families, and to our economy, and the many salient lessons to be learned from Massachusetts and other states on solutions that could work nationally, it is hard for me to understand why we would seriously consider limiting or reducing the reach of either the commonwealth’s agreements with CMS or the SCHIP program as a whole.”

“For several years, the current [SCHIP] distribution formula has resulted in Mississippi being consistently shortchanged, “said Gov. Haley Barbour. He outlined the shortfall some $61 million in FY2008 and said that in years past, Mississippi has relied on redistributed funds from states that did not spend their entire SCHIP allotment. Over time, the pool of funds available for redistribution has shrunk as states have expanded SCHIP to cover children from families with higher incomes, pregnant women, and childless adults. Gov. Barbour said that Mississippi would face a shortfall, even with the additional SCHIP funds proposed by Congress in the bills vetoed by President Bush (see The Source, 1/25/08): “According to the U.S. Census Bureau 2006 survey, there are 71,851 children in Mississippi under 200 percent of the federal poverty level who are uninsured…In order to cover all children under 200 percent of the federal poverty level eligible for SCHIP, Mississippi would require a federal allotment of $232 million. But under the proposed new formula, Mississippi’s FY2008 allotment would have been $142 million.” Gov. Barbour said that he did not support the vetoed bills as they “would not have funded Mississippi’s SCHIP program at an amount adequate to cover all children at or below 200 percent of the federal poverty level, even though it would have allowed other states to expand coverage…To that end, I agree with the guidance issued by CMS on August 17, 2007, which will ensure that before states expand their SCHIP coverage beyond 250 percent of the federal poverty level, they should have enrolled at least 95 percent of the eligible children in their state below 200 percent of the federal poverty level in either Medicaid or SCHIP.” He closed, saying, “I urge you to enact an SCHIP reauthorization bill which will provide states like Mississippi with the federal support necessary for us to enroll all of our eligible kids.”

Christine Gregoire, governor of Washington, Ted Strickland, governor of Ohio, and Sonny Perdue, governor of Georgia, also testified.

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