States with best history of covering children need more flexibility in spending
States with best history of covering children need more flexibility in spending CHIP funds
HCFA, NGA applaud enrollment of about 1 million, but rules penalize existing programs
No good deed goes unpunished. That’s the position of several states that want to ease the strict prohibition against using federal Children’s Health Insurance Program (CHIP) funds to boost existing efforts to insure children. But advocates for children worry that any chipping away at the new federal program opens the door for a significant compromise of the program’s mission.
"Before CHIP is modified, states need to take full advantage of how high the CHIP dollars can go," says Greg Haifley, deputy director of the Children’s Defense Fund’s health division. "It’s a little uncomfortable to talk about using new money to do what states already have promised to do."
As some state officials lobby Congress to amend Title XXI, a recent informal survey by the National Governors’ Association estimates that since October 1997, CHIP has insured just under 900,000 children who weren’t previously covered. That’s well off the pace necessary to cover the five million hoped to be insured in the first five years of the program. The Health Care Financing Admini stration announced a slightly higher estimate in late April, 982,000, and insisted the glass was half full.
"One million children in one year is an amazing achievement since states are at various stages of implementation," HCFA administrator Nancy-Ann DeParle said in announcing the enrollment figures.
Still, the NGA survey and a March 1998 Urban Institute analysis saying states would have a hard time spending their CHIP allotments have renewed questions about the number of uninsured children and the effectiveness of CHIP in reaching them. The problem shows up in greatest relief in states that already were covering children at or above the CHIP threshold of 200% of poverty when the program was implemented. Some say by targeting states with more uninsured children, CHIP penalizes those states that have had the greatest success to date in addressing the problem.
"Broad-coverage states are being doubly penalized by being leading health care innovators," says Frank Ullman, lead author of the Urban Institute study. "Not only do these states receive smaller allotments under CHIP, but the states have little ability to access the money because of their previous efforts to offer generous coverage. This, in my view, is a serious inequity."
For example, when the Balanced Budget Act took effect in October 1997, Minnesota, Washington, Hawaii, and Vermont already covered children above the CHIP ceiling of 200% of the federal poverty level. Each has had difficulties using available CHIP funding. It’s unlikely that a single set of reforms would please all four states, even if HCFA and Congress could be persuaded to consider changes in the program.
Minnesota filed a minimal plan for fiscal year 1998, designed only to assure that its CHIP allotment during the first three years would not be reallocated to other states. In the meantime, Minnesota went about working on strategies to draw down CHIP funds through its state program, MinnesotaCare, or subsidies of employer-based coverage.
Frustrated in these efforts, Minnesota officials now are lobbying Congress to amend Title XXI to allow more CHIP funds to flow into the state. The focus is expanding the allowable uses of the 10% allotment for special initiatives and the circumstances under which HCFA can grant Title XXI waivers.
"We were proud that we set up the program when people thought it couldn’t be done," says Minnesota Medicaid director Mary Kennedy. "Now we are sitting here with our legislators and taxpayers saying, This isn’t right.’"
MinnesotaCare, an outgrowth of a 1988 children’s insurance program, serves about 56,000 children under the age of 21, about 38,000 parents, and about 12,000 adults without children. Current legislative proposals for a waiver to subsidize employer-based CHIP coverage combine Medicaid and CHIP funding as well as an employee contribution toward the premium. If implemented, the current plan would cover about 6,000 to 7,000 people and draw down only about $3.3 million of the state’s 1999 allocation of just over $28 million.
"In essence, Minnesota’s taxpayers are subsidizing children’s coverage in neighboring states," observes Mr. Ullman.
Washington state has yet to even submit an initial plan. At press time, legislators were considering a variety of CHIP plans to extend coverage beyond the existing Medicaid threshold of 200% of poverty. The proposals, which would insure between 1,000 and 10,000 children, also serve as a bargaining chip in the state’s quest to push the envelope.
"The message has come back that if you want a fix to your current situation, you’re going to have to do some sort of CHIP expansion," says Roger Gantz, a health policy advisor within the state’s Department of Social and Health Services.
When CHIP was implemented, Vermont had both a generous Medicaid threshold—225% of poverty—and covered almost 20% of the state’s 590,000 residents through one or more health insurance programs. Through income disregards and other mechanisms, Vermont officials are using CHIP to cover previously uninsured children in families with incomes between 225% and 300% of the federal poverty limit.
The state CHIP plans call for the enrollment of 1,000 previously uninsured children; currently there are 849. Sometimes state officials wonder whether the enhanced CHIP match is worth the administrative cost of a separate program, particularly because the CHIP kids could be covered under the state’s section 1115 Medicaid waiver program.
"The cost of administration for 1,000 eligibles is the same as for 70,000 eligibles," says Ann Rugg, a managed care senior administrator in the state’s Department of Social Welfare. "At what point does the effort outweigh the reimbursement?"
Vermont officials have no plans to leave the program or to lobby Washington to give state officials a bigger crack at the state’s allotment, which in 1999 is about $3.5 million.
Hawaii isn’t actively pushing for a CHIP fix either, says Pearl Tsuji, a program specialist within the state’s Medicaid managed care program. When the Balanced Budget Act was approved in 1997, Hawaii provided Medicaid eligibility to residents at or below 300% of the federal poverty level, but required premiums from enrollees in certain age and income brackets. When revenue shortfalls forced the state to cut off eligibility completely to individuals paying premiums, Hawaii argued successfully that the move didn’t represent a reduction in effort.
"Our stance is that although we lowered our standards, federal Medicaid funds were not being spent on these individuals," Ms. Tsuji says.
Hawaii’s CHIP plan, approved Jan. 19, 1999, expands Medicaid coverage among children ages 1-5 from 133% to 185% of the federal poverty level. Legislators are discussing a gradual expansion of coverage for older children, which now is at 100% of the federal poverty level.
The Balanced Budget Act gave existing programs in three states—New York, Pennsylvania, and Florida—status as potential CHIP providers, but said such programs had to maintain their existing level of coverage. The requirement has not been a problem for Florida, whose Healthy Kids program was sizable but not yet statewide when CHIP was implemented. Pennsylvania, by comparison, already had a statewide program when CHIP was implemented in 1997. The state has used income disregards to expand the universe of 150,000 eligible children by about 24,000, says Pennsylvania’s CHIP executive director Pat Stromberg.
The author of the Urban Institute study counsels patience to those states frustrated by statutory and administrative hurdles in expanding CHIP to its fullest potential. "Even if states like Minnesota have trouble using CHIP funds at the outset, it’s likely, if history is any guide, that some changes in the program will be made to make sure the CHIP allotments are spent," says Mr. Ullman.
Contact Mr. Haifley at (202) 662-3541, Mr. Ullman at (202) 833-7200, Ms. Kennedy at (651) 297-5418, Ms. Tsuji at (808) 692-8080, and Mr. Gantz at (360) 586-6510.
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