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Administration Denies New York's Request to Expand SCHIP Coverage

By Alex Wayne, CQ Staff

September 7, 2007 -- The Bush administration on Friday rejected a request by the state of New York to expand subsidized children's health insurance to middle-income families, further inflaming a fight with Congress over the program.

New York requested permission from the government in April to expand its State Children's Health Insurance Program (SCHIP) to cover children from families earning up to four times the poverty level, or $82,600 for a family of four. Eligibility for the program in New York is currently limited to families earning 2.5 times the poverty level or below, or $51,625 for a family of four.

The Bush administration has previously approved similar expansions in other states, allowing them to cover children from families earning up to 3.5 times the poverty level. But New York's has been the largest proposed expansion to date, and comes as congressional Democrats have passed bills that would renew and expand SCHIP, against opposition from Bush and some Republicans.

The administration has been pushing back against Democrats' SCHIP expansion plans in several ways. Bush has threatened to veto both the House (HR 3261) and Senate (HR 976) versions of the expansion. And on Aug. 17, the Centers for Medicare and Medicaid Services (CMS) sent state health officials a letter imposing new limitations on state attempts to expand SCHIP on their own.

Friday's rejection of New York's request is seen by Democrats as yet another attempt by Bush to stymie the program's expansion.

"It is clear the administration is spoiling for a fight and it's unfortunate he has chosen children's health care," Ways and Means Chairman Charles B. Rangel, D-N.Y., said in a statement Friday.

The acting CMS administrator, Kerry Weems, said in a letter to New York's Department of Health that its expansion request was being rejected based on the Aug. 17 letter to state health officials. Among other things, according to the letter, the administration will now require states to assure that they have covered 95 percent of children from families earning less than double the poverty level before they will be allowed to expand SCHIP to cover children from more affluent families. The state has "failed to provide" that assurance, Weems wrote.

"New York has not demonstrated that its program operates in an effective and efficient manner with respect to the core population of targeted low-income children," he wrote, meaning children under twice the poverty level.

The state has 60 days to ask CMS to reconsider its request. By then, Congress may have changed the legal landscape.

SCHIP will expire Sept. 30 without congressional action. Before the end of the month, Democrats hope to agree on a compromise SCHIP renewal that will expand the program by at least $35 billion over the next five years, to $60 billion, and that will explicitly increase eligibility to children from families earning up to three times the poverty level.

Democrats say they also will include language in the SCHIP renewal, in a temporary extension of the program, should it be necessary, or in other legislation that will nullify the Aug. 17 regulations that the administration issued. State health officials say many of the new requirements outlined in the Aug. 17 letter are impossible to meet, and some legal experts say the instructions are illegal.

The regulations in the letter were not subject to official notice or comment periods, which are required for formal administrative rulemaking. In an opinion provided to congressional Democrats, the chairwoman of George Washington University's health policy department, Sara Rosenbaum, said the administration's Aug. 17 letter appears to lack "the force and effect of law and should be set aside."

The letter's regulations violated both the original SCHIP law (PL 105-33) and the Administrative Procedures Act, which guides federal rulemaking, she said.

"We have an opportunity when we pass the conference report [on an SCHIP renewal] to basically negate" the Aug. 17 letter, said Rep. Frank Pallone Jr., D-N.J., who chairs the Energy and Commerce subcommittee on Health and helped write the House version of the renewal.

Jeff Nelligan, a spokesman for CMS, defended the letter and its use as justification for denying New York's request. "We are confident that we have the legal authority and acted appropriately in using it," he said.

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