SCHIP renewal expected, but funding remains the question

Congress is considering ensuring coverage for all eligible children -- a move that would cost billions.

By Doug Trapp — Posted Dec. 11, 2006

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Not only are lawmakers planning next year to reauthorize a state-federal health program for low-income children, some want to bolster it. But legislators have to work out the financing first.

Bipartisan support exists in Congress for reauthorizing the State Children's Health Insurance Program, which is set to expire Sept. 30, the end of fiscal year 2007.

SCHIP was created in 1997 as a way to cover the 10 million uninsured children in America at that time. Today it covers 6 million children. But because of the rapid growth in the uninsured, between 7.5 million and 10 million children remain without coverage, according to various estimates.

"This means that, despite our best efforts, we have taken a step backwards in terms of covering children," said Sen. John D. Rockefeller IV (D, W.Va.).

Some 6 million eligible children are not enrolled in SCHIP, which covers children in families with incomes too high for Medicaid but too low for private insurance. Some Democrats want to shore up the program to bring these children into the fold.

"It is essential to build on the promise of SCHIP by not only extending the program, but strengthening it as well," wrote Sen. Edward Kennedy (D, Mass.), the incoming chair of the Senate Health, Education, Labor and Pensions Committee, in a press release outlining his priorities.

But the budget could be a problem. If federal SCHIP funding remains at $5 billion, the amount allotted for fiscal 2007, states could face a cumulative shortfall of $12 billion by 2012 because of cost increases, notes a July analysis by the Center for Budget and Policy Priorities. The group focuses on the effects fiscal policy and public programs have on low- and moderate-income Americans. That means states would not have the resources to cover the children already in the program, much less those who are eligible but not enrolled, the center found.

"Level funding is going to cut some of the health care for children out," agreed Mary Anne McCaffree, MD, an Oklahoma City pediatrician and chair of the American Academy of Pediatrics' Committee on Federal Government Affairs.

The AAP and the American Medical Association support expanding SCHIP to cover all uninsured children. Spending money on primary care and prevention makes more sense than society paying for their care in emergency departments, the groups say.

Before Congress can set about finding the funds to expand the program, money must be found to shore up SCHIP in the 17 states that expect to run out of dollars in mid-2007. Estimates of the total shortfall range from $888 million to $920 million. Rockefeller introduced a bill in September that would fill the gap with a combination of unspent state SCHIP funds from fiscal 2004 and program-related Medicaid savings.

Sen. Charles Grassley (R, Iowa) has a bill that would use only the unspent state SCHIP money to fill the funding hole. Either bill could be passed before the end of 2006, although at press time, only Rockefeller's bill had a companion House bill.

State flexibility an issue

Although SCHIP is popular, not everyone is satisfied with how states have handled their programs.

States were given flexibility to design programs -- so much that no two are alike. States could operate their systems independently or as an extension of Medicaid. They could ask for co-payments from enrollees and decide income criteria for eligibility. New Jersey, for example, offers some benefits to families with incomes up to 350% of the federal poverty level, the highest limit in the nation.

Some states have not spent all of their SCHIP funding for the last few years. Others have planned to spend more than their federal allotments knowing that SCHIP money not spent by other states after three years is redistributed to those in need.

During a November Senate Finance panel hearing, Sen. Orrin Hatch (R, Utah) questioned the $50 million in fiscal 2007 SCHIP money New Jersey is using to cover adults and its projected $283 million overall program budget -- 2.5 times its allotment.

What is the responsibility of other states to help pay for the shortfall resulting from New Jersey's choices, Hatch asked.

Ann Kohler, director of New Jersey's Division of Medical Assistance and Health Services, said the state was trying to draw unspent dollars from other states that haven't developed their programs as much. "New Jersey has made a commitment that our children and our pregnant women are not going to go without health insurance," she said.

At a November conference, state SCHIP directors said the federal formula -- which gives matching funds based on the number of low-income children and the number of uninsured children in each state -- actually penalizes states that succeed in enrolling children.

State program directors want to keep their power to design their programs as needed rather than have Congress set strict parameters, such as federal poverty limit guidelines.

Flexibility has been a key feature that helped states serve their populations, said Gayle Sandlin, director of Alabama's program.

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Falling short

Seventeen states will have almost $890 million less in federal State Children's Health Insurance Program funds than needed in fiscal year 2007 to maintain existing enrollment. Without such funds, these states will have to increase SCHIP funding or scale back by reducing eligibility, eliminating benefits, increasing cost sharing or cutting payments to doctors and others.

Estimated shortfall
Alaska $8.93 million
Georgia $113 million
Illinois $234 million
Iowa $15.4 million
Louisiana $3.75 million
Maine $550,000
Maryland $64.6 million
Massachusetts $124 million
Minnesota $30.3 million
Mississippi $37.5 million
Missouri $26.7 million
Nebraska $11 million
New Jersey $150 million
North Carolina $17 million
Rhode Island $41.5 million
South Dakota $2.48 million
Wisconsin $6.72 million
Total $888 million

Note: Numbers have been rounded. Source: Center on Budget and Policy Priorities

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