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States Preparing for SCHIP Reauthorization

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Featured Profile: States Preparing for SCHIP Reauthorization

The debate over federal reauthorization of the State Children's Health Insurance Program (SCHIP) is in high gear, with a number of reauthorization bills already introduced in the House and Senate.[1] SCHIP has been instrumental in reducing the rate of low-income uninsured children by one-third since its inception in 1997, and it's likely that the program will be reauthorized (or at least temporarily extended) by the time current funding runs out on September 30, 2007 (see figure). The critical unresolved issues—and what states are anxiously awaiting—are the level of funding and new eligibility rules, particularly regarding the extent to which states will be able to use SCHIP funds to cover adults and children with income above 200 percent of the federal poverty level (FPL). The president's proposed budget would continue the $5 billion annual baseline funding that has been in place since the program began, as well as an additional $4.8 billion for states experiencing shortfalls. It is estimated that this funding level would leave states with a $13.4 billion shortfall, assuming they maintain current enrollment and benefit levels. In contrast, federal policymakers approved a budget resolution that would add $50 billion to the SCHIP allocation, rather than $4.8 billion.[2]

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Issues related to SCHIP funding and eligibility rules are particularly pressing given that, as of April 2007, 29 states and the District of Columbia either have adopted or are seriously considering proposals aimed at improving children's coverage; 16 of the proposals would expand SCHIP income eligibility levels (see chart).[3] This is in spite of the fact that 14 states are scheduled to face SCHIP funding shortfalls. (Policymakers attached a $650 million emergency SCHIP funding amendment onto a supplemental appropriations bill, H.R. 2206, that was signed into law by President Bush on May 25.)[4] A small but growing number of states is implementing or considering strategies to provide access to health coverage for all children. Proposals in a few states, including Illinois, Pennsylvania, and California, use children's coverage as a stepping stone toward universal coverage for all state residents. These expansions mark a "coming of age" for SCHIP and stand in contrast to past years, when several states cut back on outreach, retention, and reenrollment efforts in response to budget constraints.

State Proposals to Expand SCHIP Eligibility as of April 15, 2007
Current SCHIP Eligibility Level SCHIP Eligibility Under Expansion Proposal
Alaska [a] 154%175%
District of Columbia200%300%
Minnesota [b]275%300%
New York [c] 250%400%
North Dakota 140%150%
Ohio 200%300%
Rhode Island250%300%
South Carolina 150%200%
Washington [d]250%300%
Wisconsin 185%300%
Notes: [a] Alaska's current eligibility level is frozen at 175% of the 2003 FPL, which is equal to 154% of the 2007 FPL; [b] Minnesota currently covers infants up to 280% of the FPL; [c] New York recently approved a budget that reflected expanded eligibility levels listed above; [d] Washington has recently approved legislation approving expanded eligibility.

Going into the reauthorization process, SCHIP directors and others have raised several issues they believe merit consideration at the federal level. At the top of the list is the level of SCHIP funding and the formula used to allocate it across states. As noted by Linda Nablos, SCHIP director for the Commonwealth of Virginia, at a National Academy for State Health Policy (NASHP) conference in March, the funding formula does not take into account current enrollment numbers, given that the original formula was conceived before the program was established.[5] In addition, the formula relies on Current Population Survey data, which many consider to be an inaccurate accounting of the number of uninsured. Other concerns center on how the formula calculates states' health care costs and allocates funding across the states.[6]

Additional reauthorization issues include:

  • who can be covered (parents, adults, children in families with incomes higher than current program limits);
  • whether efforts to simplify enrollment and strengthen outreach are supported at the federal level;
  • what level and types of coverage would be provided (e.g., whether states are allowed to provide supplemental—or carved-out—benefits for children who have private insurance that does not cover services such as dental care); and
  • the extent that efforts are made to promote quality of care and program performance levels through the establishment of best practices, evidence-based research, and other strategies specific to the SCHIP population.
As governors, policymakers, and SCHIP administrators across the country await the outcome of the federal reauthorization process, many are working with state legislators to pass bills that expand children's coverage, in order to be ready for implementation if increased federal funding is approved. Others, as noted above, are using children's coverage as a stepping stone toward universal coverage for residents of all ages. Seven of 10 uninsured children are eligible for public coverage, and several states plan to use any new funding above baseline levels to reach out to this population for SCHIP enrollment.

If the SCHIP reauthorization does not provide adequate funds for the proposed coverage expansions, some states will likely forgo such initiatives. Others will try to move ahead using state-only funds, either by reallocating money from other programs or raising dollars through tobacco taxes. Clearly, such sources are more limited and less stable than federal funding streams. According to Cindy Mann of the Center for Children and Families, "Whatever happens with the SCHIP reauthorization will have a direct impact on what kinds of opportunities states have to pursue coverage expansions."

To illustrate the breadth of activity occurring at the state level, below we summarize health system reforms—both approved and proposed—in New York, Illinois, and Pennsylvania that aim to build on already-implemented children's coverage expansions.

New York
In January 2007, newly elected Governor Elliot Spitzer announced a proposal to provide universal coverage for children, as well as expand coverage for low-income adults. The proposal was part of the governor's budget bill, which was passed in April. The new program will establish subsidized coverage for families up to 400 percent of the FPL through an expansion of the Child Health Plus (CHP) program. The governor estimates this will provide access to care to almost all of the 400,000 uninsured children in the state under the age of 19. In addition, it will simplify the Medicaid enrollment process to make it easier for eligible adults and children to receive coverage, and institute a number of care and disease management initiatives in an effort to reduce costs and improve outcomes for those with complex health care needs. The 2007–2008 budget bill includes $165 million over two years for the CHP expansion.

According to Claudia Hutton, director of public affairs for the New York State Department of Health, "our goal in New York is universal coverage for children, and SCHIP reauthorization is included in our strategy."

Currently, New York's CHP program covers children with family income up to 160 percent of the FPL at no cost, and up to 250 percent of the FPL with minimal cost-sharing. Families with income over 250 percent of the FPL may "buy into" CHP by paying the full premiums. The state also has a Medicaid Section 1115 waiver to operate the Family Health Plus program, which provides a comprehensive set of benefits to individuals between the ages of 19 and 64 who are not income-eligible for Medicaid. Within this population, childless adults up to 100 percent of the FPL are covered, as are parents of children up to age 21 with family income at or below 150 percent of the FPL.

On July 1, 2006, Illinois became the first state to take a "universal coverage" approach to children through its All Kids initiative. The state's Medicaid and KidCare program (SCHIP) were incorporated into All Kids and access to comprehensive coverage was extended to all uninsured children, regardless of their family income, immigration status, or preexisting conditions. Premiums and copayments are based on a sliding scale tied to family income. In addition, All Kids provides wraparound coverage to lower-income children whose families have private insurance but lack dental, vision, or hospital coverage. The state also established the FamilyCare initiative, offering coverage or premium assistance to parents or guardians of children age 18 or younger, with income below 185 percent of the FPL.[7]

On March 4, 2007, less than a year after All Kids was implemented, Governor Rod Blagojevich announced the Illinois Covered plan, which would expand access to health coverage for 1.4 million uninsured residents, including poor childless adults. The proposal would extend eligibility for the state's FamilyCare program to parents with income up to 400 percent of the FPL (and to individuals with disabilities up to 350 percent of the FPL); premiums would be set on a sliding scale. It also would expand Medicaid to cover childless adults, offer state-administered low-cost private insurance plans for individuals and businesses, and provide premium assistance to lower-income individuals already enrolled in employer-sponsored coverage. The plan would enable individuals up to age 29 to be covered as dependents under their parents' insurance (the current limit is through age 18). In addition, the proposal includes a number of quality improvement, wellness, patient safety, care management, and health information technology initiatives.

Many are in favor of the Illinois Covered model of making coverage accessible through various means. Yet, the plan has come under fire due to its financing structure. To fund these expansions, the state proposed creating a new tax—ranging from .08 percent to 1.95 percent—on gross receipts of businesses earning more than $2 million per year.[8] The business community was vehemently opposed to the governor's plan, and ultimately the state House voted to reject the gross receipts tax proposal in a resolution. The state is now looking at other financing options, including closing corporate tax loopholes and using gaming and/or lottery funds.[9] These options, however, are also encountering opposition. The insurance and business community attempted to secure support for a scaled-down coverage model, but that, too, appears to be stalled. The legislative session is scheduled to adjourn at the end of May.

In October 2006, the Pennsylvania legislature approved a proposal initiated by Governor Ed Rendell called Cover All Kids, which provides health coverage to all children whose parents cannot afford private insurance for them. Children with family income up to 200 percent of the FPL are eligible for free coverage, while families of those between 200 and 300 percent of the FPL are charged a sliding-scale premium based on income. Monthly premiums in this income range will be anywhere from $36 to $57 a month, per child. Families earning over 300 percent of the FPL can purchase coverage at the state's cost, as long as they can show they were either denied private coverage due to a preexisting condition, the cost of private coverage would be more than 10 percent of the family's annual income, or the cost would be 150 percent more than the state's cost for Cover All Kids.[10] There is also a premium assistance component to the program, whereby the state will assist eligible families in paying the premium for private employer-sponsored coverage if the cost of private coverage is lower than that for Cover All Kids.

In April of this year, Governor Rendell announced the Prescription for Pennsylvania plan, which would build on the momentum generated by the Cover All Kids initiative, with far-reaching initiatives targeting health care quality, access, and cost containment. The plan includes a Covering all Pennsylvanians (CAP) component, which the state estimates would provide coverage to 767,000 low-income adults. CAP incorporates a "pay or play" model that would require businesses with 50 or fewer employees to provide insurance through a state program, or contribute 3 percent of their payroll to fund coverage. Workers earning up to $42,000 annually would be eligible to enroll, paying monthly premiums on a sliding scale ranging from $10 to $70. The CAP could be defined as a "three-share" model, whereby the employer, employee, and the government (both federal and state) contribute to the cost of the premium. A subsidized version of CAP also would be available to individuals and the self-employed earning less than 300 percent of the FPL, while those earning above 300 percent could buy into CAP at the full premium price of $280 per month.

George Hoover, deputy insurance commissioner for Cover All Kids, remarked that, given that the state recently received approval from CMS to expand SCHIP coverage to families earning 235 percent of the FPL, "the president's budget has become a potential stumbling block, which could ultimately result in our having to rescind our promise of protection to Pennsylvania families." He went on to note that if SCHIP were reauthorized at the level indicated in the president's budget, the state would have to scale back eligibility to 200 percent of the FPL. Given that the Cover All Kids expansion is seen by the governor as a launching pad for the greater coverage expansion, the state is watching the reauthorization process very closely.

Federal policymakers are cognizant of the flurry of coverage expansion activity taking place at the state level, and it is informing their actions as they continue to craft SCHIP reauthorization language. At the recent NASHP conference, Alice Weiss, council to Senator Max Baucus (D-Mont.), chair of the Senate Finance Committee, remarked "we certainly are aware of the fact that many states are moving forward with their efforts of expanding access to coverage, and that they are using SCHIP as a cornerstone for coverage expansion efforts more broadly." She noted that "we want to ensure that whatever we do supports those efforts and doesn't undermine them."[11] At this time, the bipartisan Rockefeller-Snow Bill (S 1224) pledges $50 billion over five years to fund SCHIP and enhance Medicaid; depending upon how this is distributed, it may or may not cover current enrollment levels, let alone SCHIP expansions.[12]

Over the coming months, the House and Senate will continue to wrangle over the funding issue, with some trying to come up with additional cost offsets to meet the projected spending levels, and others trying to limit SCHIP "crowding out" private insurance and/or limit eligibility to low-income children. Many state officials are hopeful that they will be able to continue to use this groundbreaking program to ensure coverage for all children, and to form the cornerstone of an improved health care system for their residents. While it is clear that states are not waiting for the outcome of the reauthorization debate to take action, without a clear view of what will happen to SCHIP, many states are in limbo. Cindy Mann explains that "it will be very difficult for states to go into their legislative sessions, not knowing what their SCHIP funding levels will be. For those that are planning on expanding coverage, the reauthorization could potentially provide them with a broader range of programmatic options, depending on the final funding level."

[1] House and Senate bills that have been introduced related to SCHIP reauthorization include: H.R. 1535, H.R. 2055, H.R. 1111; and S.95, S. 1224, S. 464, and S. 895.
[2] Health Care Opinion Leaders' Views on Priorities for the State Children's Health Insurance Program Reauthorization, K. K. Shea, K. Davis, A. Gauthier, R. Nuzum, B. Scholl, and E. L. Schor, The Commonwealth Fund, April 2007
[3] "Children's Health Coverage: States Moving Forward, Implications for SCHIP Reauthorization," Georgetown University Health Policy Institute Center for Children and Families, May 2007.
[4] The House and Senate approved a supplemental appropriations bill (H.R. 2206) to fund military operations in Iraq and Afghanistan, as well as some domestic spending including $650 million for the 14 states facing SCHIP shortfalls. An earlier version of the bill, which was vetoed by President Bush, included $735 million for SCHIP.
[5] "SCHIP Comes to Washington: SCHIP Reauthorization, Key Issues and Prospects," Transcript, National Academy for State Health Policy meeting, March 23, 2007.
[6] SCHIP Reauthorization, National Association of State Budget Officers Issue Brief, Jan. 30, 2007.
[7] The Kid Care and Family Care program is composed of five plans; see
[8] Retailers, wholesalers, and service businesses would be affected, but retail food and medicine sales would be exempt.
[9] Rich Miller, The Capitol Fax Blog, May 24, 2007.
[10] Governor Rendell Signs Historic 'Cover All Kids' Legislation, Press Release, Nov. 2, 2006,
[11] NASHP transcript, March 23, 2007, page 30, available at
[12 There are several aspects of Medicaid that would be funded out of this $50 billion allotment. For example, S. 1224 proposes an enhanced match for Medicaid enrollees to be funded by the allotment to account for increased Medicaid enrollment that stems from SCHIP outreach efforts.

For More Information on SCHIP Reauthorization
See: The State Children's Health Insurance Program: Past, Present and Future, J. M. Lambrew, The Commonwealth Fund, Feb. 2007.
Children's Health Coverage: States Moving Forward, Implications for SCHIP Reauthorization, Georgetown University Health Policy Institute, Center for Children and Families, May 2007
Health Care Opinion Leaders' Views on Priorities for SCHIP Reauthorization, The Commonwealth Fund, Apr. 2007.
NASHP SCHIP information website

Contact: Cindy Mann, Executive Director, Center for Children and Families, Georgetown University Health Policy Institute, [email protected].

For more information on the expansion programs described in this article go to:

New York:
Child Health Plus
Family Health Plus
Patients First proposal

All Kids
Illinois Covered

All Kids
Prescription for Pennsylvania

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