SCHIP: August Round-Up
September 6th, 2007
by
Sarah Dine
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While the last two weeks in August used to be a rather somnolent period in Washington, it seems like the participants in the SCHIP debate missed the vacation memo. The events of those weeks, the new CMS guidance on current SCHIP implementation and the release of the Census Bureau Report on Income, Poverty, and Health Insurance Coverage in the United States: 2006 have added fuel to an already hot fire.
The Bush administration reiterated its commitment to targeting and limiting the SCHIP program to 200% of the federal poverty level (FPL) and below. On Friday night August 17th at 7:30 PM CMS released a letter to state SCHIP administrators clarifying the states’ responsibilities vis a vis crowd-out. CMS decided that “reasonable procedures” for reducing the potential crowd-out of private insurance at the income levels of 250% FPL and higher meant that individuals wishing to enroll had to be uninsured for the past 12 months and cost sharing for families under state plans had to compare favorably to private plans.
The CMS letter also imposed some fairly onerous enrollment, reporting and verification requirements. States have to monitor and verify information from noncustodial parents; they have to assure the federal government that they have enrolled 95% of all the Medicaid- and SCHIP-eligible children in their state whose family income is under 200% of the FPL. They have to monitor and seemingly control the offers of private employer-sponsored insurance (ESI) in their state by assuring CMS that the number of children in the target population insured through private insurance has not decreased by more than 2% in the previous five years. Finally, they have to assure CMS that the state is current with all SCHIP and Medicaid reporting requirements and report monthly data on crowd-out.
Dennis Smith wrote: “We expect affected States to amend the SCHIP state plan (or 1115 demonstration) in accordance with this review strategy within 12 months, or CMS may pursue corrective action.”
The CMS regulations delivered in this somewhat stealth manner directly affect 23 jurisdictions (22 states and the District of Columbia) who have set or are in the process of expanding eligibility to 250% of the FPL or higher. It is true that many of these states are high income states including the three states that have topped the Census Bureau’s ranking recently, Maryland, New Jersey and Connecticut, but they also include some conservative and traditionally Republican states like Oklahoma, Indiana, and North Carolina. The new CMS directives would also seriously inhibit state-wide reforms in Massachusetts and projected reforms in other states like California.
One interesting point about the new CMS regulations is that they are silent on the issue of covering adults on SCHIP. Unlike the contentious debate on the proposed bills in the Senate and the House, the regulations do not remove the waiver option of covering adults. Indeed Wisconsin received a renewal of its waiver to continue covering adults under SCHIP this past June.
Crowd-Out: An Overstated Worry
For SCHIP?
The stated intent of the clarifications was to limit the larger potential “crowd-out” in SCHIP; crowd-out is a dreaded condition the administration wished to target. Crowd out is a term measuring the potential of public insurance to take the place of — thus crowd out from the market – private insurance. Surveys done at the time of enrollment in a public program can only measure who has dropped or been dropped by a private program and is enrolling in the public one. Crowd-out, however, is usually measured in econometric studies that also try to account for or model the numbers of persons who are currently enrolled in a public program but would have enrolled in employer-provided or other private insurance if offered. Thus the studies of crowd-out have varied widely.
The oft-cited study by Jonathan Gruber and Kosali Simon from January, 2007, found a high magnitude of crowd-out of about 60% in public insurance expansions but only when you model it as a family phenomenon, not an individual one. These researchers also found that recent anti-crowd-out provisions in public expansions may have had the opposite effect, lowering take-up by the uninsured faster than they lower crowd-out of private insurance. This leads one to wonder whether the administration truly wanted to address crowd-out by enforcing onerous anti-crowd-out rules and insisting on very strict waiting periods but not addressing the issue of parents.
The real issue about crowd-out however, is not whether covering parents is a good thing, but do we as a society tolerate catching the parents with the children as we round up the uninsured (or catching the dolphins with the tuna in an analogy used by Jon Gruber). The government insurance expansion that probably has the highest degree of crowd-out is TRICARE, the medical insurance for active and retired members of the military and their dependents. Not only does having government insurance crowd out the private insurance for those enrolled, but when government insurance exists in regions with low wages and small employers, it also crowds out the offers of private insurance, an issue of great concern to the private insurers.
Even the 60% crowd out figure is somewhat suspect especially for SCHIP. Gruber, in a March 2007 letter to John Dingell, chairman of the House Energy and Commerce Committee, clarified some of the findings from his January paper. He wrote: “When we attempt to estimate the particular crowd-out estimates of SCHIP, our estimates are much less reliable. In fact in our most general specifications (the bottom panels of Tables 6 and 7) we find no evidence of crowd-out in SCHIP per se,” (italics supplied by author)
This has been the considered view of many state SCHIP coordinators who have found little evidence of crowd-out as they work to enroll their state residents. A detailed study of ten states combining both econometric estimates or crowd-out with state surveys found rates of 14%.
Critics on the right and the left both agree that waiting periods do little for crowd-out. New Jersey which has operated the highest eligibility for SCHIP at 350% of the FPL, found that one half of one percent of its SCHIP applicants had insurance during the three month mandatory wait period, and a grand total of 1820 applicants of 3.2% of the total application pool had health insurance at the time of application. It is at the higher end of the income eligibility one would expect to find the highest incidence of crowd-out. New Jersey’s experience demonstrates the difference between the potential and the reality, even in the state with the highest income eligibility.
Enforcing a mandatory waiting period for 12 months without exceptions on children who had lost health insurance would seem to have little effect on crowd out but would seem to have the most impact on the increasing numbers of uninsured children. The Census Bureau figures released on August 28 reveal that despite the gains children have made in getting insurance coverage since SCHIP began in 1998; the shortfalls in the program have finally caught up with the secular trend of fewer Americans having health insurance. In 2004 10.5% of the nation’s children were uninsured – the lowest point since SCHIP began. The number went up to 10.9% in 2005 and to 11.7% in the latest 2006 figures, which means nearly one million children who had insurance in 2004 lost it by 2006.
The large jump in 2006 can be partially explained by the requirement instituted by CMS off the Deficit Reduction Act that parents enrolling or reenrolling their children in Medicaid have to produce original citizenship documents. Under current rules, persons who seek to enroll in Medicaid and who do not supply citizenship documentation have as little as ten days to round up the original documents. It’s not hard to envision that this requirement has led to a decline in enrollment of children in public health insurance as parents who have moved from one jurisdiction to another seek to locate original birth documents. It has also led to confusion for SCHIP enrollees, who are not currently subjected to this requirement, but often find that because of joint enrollment procedures they are asked for these documents as well.
The impact of the DRA on enrollment is captured in reporting from Virginia, which reported a decrease of over 11,000 children enrolled in Medicaid in the first nine months since the DRA reporting rule took effect.
Less than a week after the CMS clarifications were published, and a few days before the Census Bureau reported its findings, the Robert Wood Johnson Foundation on August 23rd released its latest polling showing widespread support for SCHIP and its reauthorization and expansion among voters of all political stripes. Stay tuned as Congress, returning from its August recess, takes up SCHIP reauthorization and possibly the new CMS regulations.
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