Congress plugs SCHIP funding gap but deficits still loom in 14 states

Washington -- Congress bought some time to figure out how to prevent massive shortfalls in the state-federal health program for low-income children.

Just before adjourning for 2006, lawmakers passed a provision that redistributes $271 million in State Children's Health Insurance Program dollars from 2004 and 2005 to the six states facing the most immediate funding holes. The money comes from states that didn't use all their program funding.

The cash infusion is expected to keep the programs in Georgia, Illinois, Maryland, Massachusetts, New Jersey and Rhode Island in the black until May. But those states and eight others face SCHIP deficits later in fiscal year 2007.

The measure, part of National Institutes of Health funding legislation signed into law last month, cut a chunk out of the $987 million in projected deficits faced by the 14 states. Combined, they have nearly 1 million SCHIP enrollees.

"It is a stopgap measure," said Jay Berkelhamer, MD, president of the American Academy of Pediatrics. "But it's doing the right things to make sure the kids are getting the services they need."

SCHIP is finishing its 10th year on Sept. 30 -- the end of fiscal 2007 -- and is up for reauthorization. The new Congress could address the remaining $716 million funding shortfall as part of the program's reauthorization or with separate legislation.

If Congress doesn't fix the problem, the affected states will have to limit SCHIP enrollment or reduce coverage or reimbursement rates.

"It just means there will be more uninsured patients coming to [doctors'] offices seeking care," Dr. Berkelhamer said.

Swapping SCHIP dollars

Illinois is facing the highest projected SCHIP deficit: $229 million, even after figuring in the $119 million in funding Congress is redistributing under the legislation. This is according to a Dec. 12, 2006, Congressional Research Service analysis. But the state isn't depending on any additional money, said Amy Rosenband, spokeswoman for the Illinois Dept. of Healthcare and Family Services. More important, Illinois will be able to cover all enrollees in its All Kids program -- which offers health insurance to every child in the state -- with no more federal money, she said.

Physicians are skeptical All Kids will be able to deliver on its promises, said Kathryn Stewart, MD, MPH, medical director of care management at Mount Sinai Hospital in Chicago. At least 60% of the hospital's patients are Medicaid or SCHIP enrollees.

The combination of Medicaid and SCHIP under All Kids means that the funding shortfall, if it stands, has the potential to delay physician reimbursements, she said.

In New Jersey, SCHIP routinely exceeds its budget and relies on annual program redistributions just to get by, said New Jersey Dept. of Human Services spokeswoman Suzanne Esterman. The state is projected to be $115 million short for 2007, even with about $59 million in funding coming from the recent legislation.

The funding gap is related to New Jersey's generous financial criteria for SCHIP enrollment. Children are eligible with family incomes up to 350% of the federal poverty level, Esterman said. Many states restrict eligibility to 200% of the federal poverty level. New Jersey's program has to be more open because the state's cost of living is so high, Esterman said.

Texas and Tennessee are two of the biggest SCHIP donors under the legislation. Each will give back $20 million, the maximum allowed.

Tennessee officials aren't surprised, said Bureau of TennCare spokeswoman Marilyn Wilson.

The state covers more than 650,000 children with TennCare, its Medicaid program. But TennCare isn't part of SCHIP, so the state doesn't use its program funds.

Texas, in contrast, expects to need all of its SCHIP funds in the future, said Ted Hughes, spokesman for the Texas Health and Human Services Commission.

In recent years, the state has been spending about $300 million annually and receiving a little less than $500 million. Before the legislation, Texas had $1.4 billion on hand from fiscal years 2004 to 2007.

This month the state will begin offering prenatal care to unborn children who are expected to be U.S. citizens, Hughes said.

"We expect spending to accelerate as a result of that," he said. By 2012, assuming SCHIP is reauthorized at the same levels, Texas could spend more than its allocation.

Better than nothing

AAP's Dr. Berkelhamer said Congress' last-minute bipartisan SCHIP legislation was inadequate but promising. "It is nothing more than a Band-Aid," he said. "It's a very encouraging Band-Aid."

Edward L. Langston, MD, chair-elect of the American Medical Association Board of Trustees, said the AMA looks forward to working with Congress on SCHIP reauthorization.

Some lawmakers, plus the AMA and the AAP, support expanding the program to cover all eligible children, but financing will be an issue.

Rising costs mean that reauthorizing SCHIP at the status quo amount of $5 billion a year would reduce national enrollment from 4.4 million in 2006 to 2.5 million by 2016, said Cindy Mann, a professor at Georgetown University's Health Policy Institute.

Expanding the program will be more difficult if Democrats follow through on pledges to restart a pay-as-you-go budget policy, which mandates that all new spending corresponds with equal cuts or new revenues.