Bush Chips Away At Youth Health Insurance, GAO Says

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Congress should stop the Bush administration from letting states use funds from a children’s health program to insure needy adults, says a new report from Congress’ investigative office.

In response, the administration did it again.

At issue: the administration’s decision last year to grant waivers for states to use unspent funds from the State Children’s Health Insurance Program (S-CHIP) to provide health insurance to adults. The U.S. Department of Health and Human Services (HHS) has granted the waivers to Arizona, California, New Mexico and – weeks after the critical report was issued – Illinois.

Congress created S-CHIP in 1997 to provide health insurance coverage to low-income children whose families are not poor enough to qualify for Medicaid. The law provided $40 billion over 10 years.

The Senate Finance Committee asked the General Accounting Office (GAO) to review the waivers and determine the impact on the S-CHIP program. The GAO reported in August that waivers that allow Arizona to use S-CHIP money to cover childless adults “is not authorized.”

“Allowing the expenditure of unspent S-CHIP funds on childless adults could prevent the reallocation of these funds to states that have already exhausted their allocations, as required by the Congress,” the GAO report says.

Waivers for states to cover uninsured parents with children who qualify for S-CHIP also violate the intent of the program, GAO said, because those waivers would probably require additional federal funds.

“The federal government is at risk to spend more than it would have had the waivers not been approved,” in violation of the law that established the S-CHIP program, the report says.

The report urges Congress to consider legislation specifying that S-CHIP money cannot be used to cover childless adults and providing clear guidelines for covering parents of eligible children.

States receive funds annually but have three years to use the annual allotment. A slow start and low participation rates have left most states with an S-CHIP surplus – despite a projected shortage in the next couple of years. State surpluses are supposed to be reallocated to states that exhaust their funds.

About 5 million eligible children are not enrolled in programs, according to Senate Finance Committee Chairman Max Baucus (D-Mont.) and ranking Republican member Charles E. Grassley (R-Iowa). They said they worried that waivers would divert money from eligible children.

“These children should never have to compete with childless adults for the use of remaining S-CHIP funds,” they said in a statement.

HHS Secretary Tommy Thompson replied in an August letter that nearly all states have unspent S-CHIP funds, and that waivers would not leave eligible children uncovered.

“The suggestion that this waiver [for Arizona] is a threat to funding for children in Arizona or other states is not credible when states have $10 billion in unspent funds,” Thompson wrote.

He chastised Congress for its inaction on health coverage for the poor. “One year ago this month I announced our policy to use flexibility … to allow states to use S-CHIP funds to serve poor, uninsured adults,” Thompson wrote. “It is troubling and disappointing that 12 months after the policy was announced, leaving ample time for congressional action, you are now characterizing approval of waivers as ‘defiance of congressional intent.’ ”

He also called the GAO report “flawed.”

Families USA, a nonprofit group that advocates affordable health care, reported in September that 1 million children in S-CHIP programs could lose their insurance because of two funding provisions in the enacting legislation: Federal funding will decline for several years at the same time states are expected to return surplus funds from previous years.

It’s unclear whether anything will come of this disagreement. Sens. Grassley and Baucus are waiting for a more complete explanation from Thompson before deciding what step to take, a Grassley spokeswoman said.

Illinois received its waiver Sept. 12, weeks after the GAO released its report. New Mexico received its waiver Aug. 23, 11 days after Thompson replied in writing to the Senate committee.