SCHIP Limits: Who Holds the Cards?

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Senate Democrats last month tried new legislation and nasty words (“fatwah”) to stop the White House from limiting enrollment in the federal health insurance program for poor kids, but the administration replied that it can do what it wants.

The debate at a Senate Finance Committee hearing involved a bureaucratic move with big real-life impact: an administration directive that says states must enroll 95 percent of their poorest youth – those in households with incomes below 200 percent of the federal poverty level – before letting other youth enroll in their State Children’s Health Insurance Programs (SCHIP). The directive from the Centers for Medicare and Medicaid Services (CMS), issued last August and set to take effect this August, would halt state efforts to enroll children from households that earn above 250 percent of the poverty level, which 16 states have done and others want to.

At an April 9 hearing, Sen. Jay Rockefeller (D-W.Va.), chairman of the Senate Finance subcommittee on health care, called the guidance a “fatwah,” “repugnant” and “flat-out unattainable. … No other means-tested program has an enrollment test of 95 percent.” Youth Today last year assessed the potential impact of the directive and found state SCHIP administrators skeptical of any state’s ability to meet that enrollment percentage.

CMS Director Dennis Smith told the committee that the rules were not intended to prevent expansion, but to establish “reasonable criteria to protect who [SCHIP] was intended for,” meaning the neediest youth.

The hearing made clear that there is bipartisan support for expanding SCHIP, but not at any cost. Two powerful Finance Committee Republicans – Sens. Orrin Hatch (Utah) and Chuck Grassley (Iowa) – expressed a sentiment that other Republicans might echo as debate on the directive picks up: If the specifics of the CMS guidance aren’t perfect, its intentions are good.

“I agree with the thrust of the letter,” said Hatch, who helped to draft the SCHIP law in 1997 and to develop a bipartisan reauthorization bill last year. “In 1997, we all agreed that the point was covering the poorest children.”

The question most discussed was whether it’s possible to cover 95 percent of eligible youth under 200 percent of the poverty level.

Nine states already meet those criteria, Smith said.

That’s true, confirmed Chris Peterson, a health care financing expert for the Congressional Research Service. But he told the committee that the calculations used to establish those numbers also put many states above 100 percent enrollment of that population, which is impossible. “There’s no way on Earth of getting 95 percent … enrolled,” said Rockefeller. “It just can’t happen.”

Even if states meet that mark, the directive says that children from the higher income levels would have to go a year without insurance before enrolling.

Rockefeller and Sens. Olympia Snowe (R-Maine) and Ted Kennedy (D-Mass.) last month introduced the Economic Recovery in Health Care Act of 2008, which would place a moratorium on the directive’s standards until next April. Another moratorium in their legislation would stop the directive’s limitations on Medicaid funds for juvenile justice and child welfare systems.

Even if the bill becomes law, Smith suggested that the administration can use the directive’s standards to limit SCHIP expansion. “We believe we have the authority” to reject expansion plans from states, “even without the letter,” Smith said. “We could have just rejected the proposals. This is guidance … how we will act when plans come before us.”