Health Affairs

Many of Washington policymakers and health policy experts are returning from August vacations to find that the month was not as quiet as expected. On Friday evening, August 17th, the Administration issued a major new directive on children’s health coverage that effectively eliminates SCHIP for children above 250 percent of the federal poverty level (FPL), or $42,925 for a family of three in 2007.

The directive, which came in the form of a letter to state officials, already has provoked a firestorm. Numerous opinion leaders and state officials have decried the policy as moving in exactly the wrong direction on children’s coverage. At least one Governor already has threatened legal action. Adding to the backlash, the U.S. Census Bureau announced just 10 days after release of the directive that the number of uninsured children rose by more than 600,000 in 2006 to 8.7 million, the highest number since the turn of the century.

The Administration described its directive as a “clarification,” but it, in fact, represents a major reversal of long-standing SCHIP policy, which has always allowed states to determine the income eligibility level for their SCHIP programs within the limitations of available financing. As recently as July 31st, Secretary Leavitt wrote to key members of Congress that it lacked legal authority to impose a federal income cap in SCHIP.

Indeed, relying on this long-standing policy, some 23 states already have opted to provide coverage to children with income above 250 percent of the FPL or have enacted plans to do so. If the directive remains in place these states will need to cut back their existing child health coverage initiatives or cancel or scale back their expansion plans. (The states with already approved plans will have 12 months to comply with the new directive. If they do not come into compliance they will not be able to enroll additional, eligible children with the benefit of federal matching funds.)

The new CMS directive attempts to shut down SCHIP-funded coverage for children above 250% of the FPL through the back door by imposing a series of onerous and, in some instances, impossible-to-meet conditions on states.

Participation rate requirements. A state must show that it has enrolled at least 95 percent of the low-income children in the state who are eligible for SCHIP or Medicaid before it can cover children above 250 percent of the FPL. Perhaps in response to the firestorm unleashed by the directive, the Administration has since announced that it has data showing that most states meet this requirement; as of this date it is not clear what data the Administration is relying on. Readers may recall that earlier this year as justification for its anemic SCHIP budget proposal Secretary Leavitt released an analysis showing that there were only five million uninsured children, including just over one million children who were eligible for SCHIP but not enrolled. The CBO and others have questioned these numbers.

Requirement to prevent employers from dropping coverage. The directive also requires states to “assure” that employer-based coverage of children has not decreased by more than two percentage points over the prior five years (it is not clear if this applies to all or a subset of children). Implicit are the assumptions that state expansions of public programs have caused the decline and that states have significant control over these trends. In fact, states have little control except to adopt public program coverage expansions to help fill the gaps, an option that is sharply curtailed by the guidance.If a state were somehow able to meet these criteria, it would face new constraints on the coverage that it provides to children. The new directive requires states to impose a yearlong uninsured waiting period for children (apparently without exceptions), and it establishes new rules that would likely result in sharp increases in the premiums families above 250 percent of the FPL would have to pay to enroll their children.

Although many expect that the policy will ultimately be deemed illegal, quick congressional action may be needed. The directive is already is having a negative effect on state coverage efforts. Earlier this week, Louisiana announced that it is likely to cancel plans to expand coverage to 8,000 more uninsured children. This, apparently, is exactly the goal, at least for some of the more conservative think tanks that recently have been engaged in the recent SCHIP debate.

The battle lines, however, are not so much between the right and the left as they are between a small group of ideologues and those trying to find some solutions. Children’s coverage efforts are moving forward in a diverse array of “red” as well as “blue” states bolstered by very strong public support. And, as health policy experts know well, every state that has adopted a broader health coverage initiative or that is contemplating such an initiative relies heavily on federal funding through SCHIP and Medicaid to help get the job done. The question that will likely be answered over the next few weeks or months as the SCHIP debate resumes is whether Congress will allow these innovative coverage efforts to be shut down or, instead, will help keep them—and the hope for further coverage improvements—alive.

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This entry was posted on Friday, September 7th, 2007 at 10:11 am and is filed under All Categories, Children, Coverage, Politics, States. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.