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Administration Out of Bounds in Curbing Children's Health Plan Enrollment, GAO Says

By Drew Armstrong, CQ Staff

April 18, 2008 -- A new report by Congress's watchdog agency says the Bush administration overstepped its authority with a Aug. 17 letter meant to limit enrollment of children in the State Children's Health Insurance Program (SCHIP).

But Jeff Nelligan, a spokesman for the Centers for Medicare and Medicaid Services, said the Government Accountability Office (GAO) opinion would have no effect on the administration's position. "GAO's opinion does not change the department's conclusion that the [Aug. 17] letter is still in effect," Nelligan said via e-mail.

Congress last year twice passed bills to expand the SCHIP program to cover more children. But the measures (HR 976, HR 3963) were vetoed by President Bush and attempts at overrides failed.

According to the GAO legal opinion, issued Friday, the administration letter amounted to a "rule" because it was meant to implement or interpret law. As such, GAO said, it should have been put through the formal rule-making process, which includes submission to Congress and a public comment period. Since it was not, however, the GAO opinion argues that the letter is invalid.

The 2007 letter said if states wanted to expand eligibility for the SCHIP program to children in families with incomes more than 250 percent of the federal poverty level, they would have to prove that 95 percent of eligible children from families earning less than 200 percent of the poverty level were already enrolled in SCHIP or Medicaid. At the time, 17 states had expanded or were attempting to expand their SCHIP eligibility levels, and would have drawn on increased federal funds to do so.

Many states argued administration standards were impossible to meet, saying the 95 percent participation requirement was too high, since some children and families would not enroll or simply could not be located. But since then, CMS says, at least nine of the 17 states affected by the letter will eventually be in compliance with the requirements.

Sen. John D. Rockefeller IV, D-W.Va., who had asked for the GAO report, called on the administration to pull back the letter. "The directive is a bold-faced attempt to subvert the law and prevent states from implementing their plans to provide health insurance coverage to millions of uninsured children nationwide," Rockefeller said in a statement.

Other supporters of expanding SCHIP hailed the opinion, as well. "CHIP supporters knew that [the Centers for Medicare and Medicaid services] had overstepped its bounds by trying to tie states' hands when it came to covering kids in need, and now the GAO has issued a firm legal opinion saying the same," said Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee.

Several states have sued the federal government to stop the implementation of the letter's requirements. Nelligan said CMS would not comment further on the GAO opinion, because of the lawsuits.

While the GAO opinion will not have a binding legal effect, an aide to Rockefeller said states could use it to bolster their case against the federal government in suing to stop its implementation. "The anticipation is that the states will now have a much stronger hand when they go to court," said the aide.

An aide to Baucus said the GAO opinion elevated the argument to a legal battle, not a political one. "Chairman Baucus expects CMS and this administration to recognize the significance of the GAO legal opinion and act accordingly," said the aide.

If the administration voluntarily pulls back the letter, it could resubmit the directive as a formal rule. Such a process would have much deeper precedent for enforcement. It could, however, lead to a battle with Congress, which could use legislative procedures to stop implementation. "Clearly, we're not at that stage yet," said the Rockefeller aide.

John Reichard contributed to this report.

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