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Bush Administration's SCHIP Decision Takes Heat From Two Hill Agencies

By Alex Wayne, CQ Staff

May 15, 2008 -- Two separate nonpartisan congressional advisory agencies said Thursday the Bush administration improperly issued a directive last year limiting state expansions of children's health insurance programs.

The opinions, by the Government Accountability Office and the Congressional Research Service, lend weight to Democrats' efforts to nullify the directive, something they have promised to do since it was issued in August. But Democrats seek to kill the directive through stand-alone legislation, a route that will be troublesome, especially because Republicans are not on their side.

GAO and CRS provided their opinions on the directive—issued as a letter to state health officials Aug. 17—during a hearing by the Energy and Commerce Subcommittee on Health. The subcommittee's chairman, Frank Pallone Jr., D-N.J., is the sponsor of legislation to nullify the directive (HR 5998).

"The Aug. 17 directive would impose strict new requirements on states and beneficiaries that are not only impossible to achieve but make little, if any, sense," Pallone said.

The letter was issued in the heat of a debate between Congress and President Bush over expanding the State Children's Health Insurance Program, or SCHIP. States were told they would have to meet new standards before the government would allow them to expand coverage under the program to children from families making more than 2.5 times the federal poverty level—or $53,000 for a family of four.

States complained that it would be impossible for them to meet one of the standards: a requirement for them to show they already were covering 95 percent of all children from families making less than twice the poverty level. Soon after issuing the letter, the administration cited it when rejecting a proposal by New York to expand SCHIP to cover children from families making up to four times the poverty level. New York and other states are suing over the decision.

Administration officials said the directive was intended to prevent families from dropping private insurance to enroll their children in SCHIP—a phenomenon known as "crowd-out."

Morton Rosenberg, a legal specialist for CRS, and Dayna K. Shah, managing associate general counsel for GAO, both said the Aug. 17 letter amounted to a regulation and should have been issued like any other administrative rule, using a process that would have allowed Congress to easily disapprove the measure. Rosenberg said Congress could probably still pass a disapproval resolution to nullify the letter, if it wanted. Disapproval resolutions cannot be filibustered in the Senate and so are easier to pass than standard bills.

But Pallone said he would rather pass his bill because it would also require the Centers for Medicare and Medicaid Services to reconsider New York's proposal to expand its children's health insurance program.

A House Democratic aide said CMS officials were invited to testify at Thursday's hearing but told the committee's staff they would only participate if the hearing were held behind closed doors. A CMS spokesman, Jeff Nelligan, said he did not know that the agency had been invited to testify.

Many Republicans support the principle behind the Aug. 17 letter, so Pallone's bill stands little chance of passing the Senate, where it could be filibustered. "The concern about government [insurance] coverage crowding out private insurance is a legitimate one," said Rep. Nathan Deal of Georgia, the senior Republican on the subcommittee.

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