CMS delays enforcing limits on SCHIP funding

Washington -- The Bush administration will not enforce a policy limiting State Children's Health Insurance Program federal funding to children in lower-income families -- at least for now.

The Centers for Medicare & Medicaid Services directive, announced last year, went into effect Aug. 17. It bars federal matching funds for SCHIP coverage of children whose families are at 250% of the federal poverty level or higher. States can get around the prohibition only if they already cover 95% of children in families at or below 200% of the poverty level and can document that private health insurance coverage for this income group has not declined by two or more percentage points in the previous five years. Any new enrollees at higher incomes must have been uninsured for at least one year.

But CMS spokesman Jeff Nelligan said the agency is "not taking compliance action" on the directive and declined to elaborate on whether the agency intends to enforce its requirements later. That means states can continue to cover higher-income groups under SCHIP and will continue to receive federal funds.

CMS will go forward with determining which states may have met the directive's standards and will work with those states on strategies to ensure lower-income kids do not drop private health coverage in favor of SCHIP, Nelligan said. CMS previously had announced that more than half of the 17 states subject to the directive may have met its requirements, and that the directive would not end federal funding of existing SCHIP enrollees at 250% of the poverty level or higher.

The directive attracted a significant amount of flak. Democrats in Congress offered legislation to block it, several states sued CMS to overturn the directive, and one state -- California -- announced Aug. 12 that it would not comply because the order violated state law. The American Medical Association also asked the Bush administration to rescind the directive.

At least six states adopted plans to expand SCHIP eligibility above 250% of poverty before CMS issued the directive in August 2007. All put the expansions on hold, reduced their scope or used state-only funding instead, says a May report by the Georgetown University Health Policy Institute's Center for Children and Families. More than 30,000 expanded-eligibility children have not been enrolled in SCHIP in these states because of the directive, the report estimates. SCHIP covers approximately 6 million children and parents.

Jim King, MD, president of the American Academy of Family Physicians, said the AAFP is pleased that CMS decided not to enforce the directive. He added, however, that working with CMS is frustrating because the agency sometimes issues such strict rules, holds them over the heads of those who would be affected, and later backs off.

"You just really don't know what you're supposed to do," Dr. King said.

Senate Finance Committee Chair Max Baucus (D, Mont.) said agency officials may have listened to reason. "This statement seems to show that CMS is finally making the connection between its misguided SCHIP directive and the real kids it could hurt."

Sen. John D. Rockefeller (D, W.Va.), who led an effort earlier this year to kill the directive, said it still needs to be rescinded. "Through this directive, they are still committed to denying children's access to health care. [It's] still on the books, and the damage has already been done."