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CMS Retreat on Kids' Coverage Directive Leaves Critics Fuming

August 15, 2008 -- The Bush administration's decision to take no action "at this time" to enforce a directive limiting states' ability to expand coverage of uninsured children drew tepid praise from critics Friday, with two Democratic senators calling on the Centers for Medicare and Medicaid Services (CMS) to go farther and stop blocking expansion efforts.

"Maybe CMS is beginning to get it," said Senate Finance Committee Chairman Max Baucus, D-Mont. "This statement seems to show that CMS is finally making the connection between its misguided ... directive and the real kids it could hurt."

But Democratic Sen. John D. Rockefeller IV of West Virginia said "the reality is the Bush administration should not be applauded because nothing has changed. Through this directive they are still committed to denying children's access to health care." Rockefeller added that "the only appropriate response is for CMS to formally rescind the August 17th directive."

Issued almost a year ago, the directive requires states to meet certain standards before they can get federal matching funds for expanding coverage under the State Children's Health Insurance Program (SCHIP). But officials who run SCHIP programs slammed the directive, saying the standards were impossible to meet.

The directive applies to states that either expanded or planned to expand their programs to enroll uninsured children in families with yearly incomes above 250 percent of the federal poverty level. It says that 95 percent of the state's children in families with incomes less than 200 percent of the federal poverty level who are eligible for either SCHIP or Medicaid must be enrolled in those programs before expansion can occur above the 250 percent mark.

CMS said in the directive that it expected affected states to comply within the directive by Aug. 18, 2008 and said it "may pursue corrective action" if states didn't meet the deadline. California officials said this week that they would not be able to comply. CMS spokesman Jeff Nelligan responded Wednesday with a statement saying that federal officials "continue to work" with states affected by the directive to help them achieve compliance but that "at this time we are not taking compliance action."

Ann Clemency Kohler, executive director of the National Association of State Medicaid Directors, said that state officials she talked to Friday say that they have been left in limbo. States that shelved expansion plans this year because of the directive feel they are being treated differently than states that already expanded above 250 percent and now face no penalty, Kohler said.

Cindy Mann, the executive director of the Georgetown University Center for Children and Families, said states that already expanded their SCHIP programs also are left in limbo because of a failure by CMS to formally notify all states what the compliance policy now is and to clarify the statement that compliance action will not be taken "at this time."

Mann asked: "Does that mean they have another week? Another month?" Thousands of children have been denied coverage because the directive already has been enforced to keep planned expansions during the past year from going forward, she added.

Mann added that states that shelved plans should be able now to proceed with those plans.

Nelligan declined to comment when asked whether CMS would formally notify the states what the compliance policy now is under the directive.

Mann said the agency appears unlikely to do so because it has been hit by lawsuits filed by some states saying that the directive, which took the form of a letter sent to state officials, was in effect a regulation that was issued illegally because CMS didn't first publish it and seek public comment.

A letter now to all states modifying the Aug. 17 directive would reignite arguments that CMS was again taking regulatory action, she said. Mann said she expects CMS instead to talk "one by one" to the affected states.

"Most states believe that if CMS wants to make a change they should issue regulations or seek legislation," Kohler said.

But with the fall election fast approaching, some observers doubt that the administration will call further attention to a policy that limits plans to cover uninsured children. Democrats, meanwhile, hope to put that policy in the spotlight by forcing another vote on a measure (HR 3963) sharply increasing SCHIP enrollment above current levels. But the Congressional Budget Office has increased somewhat its estimate of the cost of that legislation, complicating Democratic efforts to bring up the bill again.

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