States sue federal government over tighter SCHIP limits

Washington -- Four states joined in a lawsuit and a fifth filed its own to block new rules limiting eligibility for the State Children's Health Insurance Program.

The group lawsuit, filed Oct. 4 in a federal court in New York, says the Dept. of Health and Human Services should have provided the public notice and comment period required by law for program changes as significant as those in its Aug. 17 guidance.

The new rules would strictly limit states' ability to get SCHIP matching funds for children in families earning more than 250% of the federal poverty level, or $42,925 for a family of three. States first would have to prove they have enrolled 95% of children at or below 200% of the poverty level in the program. They also would have to show that private health insurance enrollment had not declined more than two percentage points among targeted income groups and that new program enrollees had been uninsured for one year.

At least 16 states have SCHIP eligibility limits higher than 250% of poverty. They have until Aug. 17, 2008, to meet the new criteria or they will receive Medicaid-level federal matching funds, which are lower than those for SCHIP, for children in families above 250% of poverty.

Late last month, Congress adopted a compromise SCHIP reauthorization bill that would nullify the new rules, but President Bush vetoed it on Oct. 3. As of press time, bill supporters were trying to gather support for a veto override.

"If in fact these rules go into place, it will severely curtail the ability of the states to continue our programs to provide health care to low-income families," said Washington Gov. Chris Gregoire.

The lawsuit's plaintiffs are Illinois, Maryland, New York and Washington. Five other states plan to file supporting briefs. Of these nine states, at least seven have previously sought or are now seeking to expand their SCHIP eligibility limits, according to Georgetown University's Center for Children and Families. New York, for example, wanted to increase its eligibility from 250% to 400% of poverty, but HHS rejected the request last month based on the Aug. 17 rules.

New Jersey, whose SCHIP eligibility is 350% of poverty -- the highest in the U.S. -- filed a separate lawsuit based on similar grounds.

HHS had nine years of consenting to New Jersey's various SCHIP requests, said Heather Howard, health policy counsel for New Jersey Gov. Jon Corzine. "Now they have an entirely different interpretation of the statute," she said. HHS hadn't filed a response to the lawsuit as of press time.

Gregoire said it is impossible to meet the rule requiring enrollment of 95% of children in families earning 200% of poverty or less. No state has enrolled more than 92% of that demographic. "This is not a secret to HHS," she said.

Centers for Medicare & Medicaid Services spokesman Jeff Nelligan said the administration just wants to make sure the truly uninsured and low income are first in line for SCHIP. "We are confident that our requirements are appropriate and will be sustained in a court of law."

Gregoire said the four states will withdraw their lawsuits if Congress adopts legislation nullifying the Aug. 17 guidance. "Our priority No. 1 is the [veto] override. But we felt it was important that we move forward with the lawsuit at this point," she said.

New York Gov. Elliot Spitzer said, "It is a tragic day when we have to sue our own president for denying health care coverage to children who cannot afford it."