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Issues facing America: SCHIP

By Aaron Covey, MD; Samir Mehta, MD; Ryan Nunley, MD; and the Washington Health Policy Fellows

The State Children’s Health Insurance Program (SCHIP) was implemented as Title XXI of the Social Security Act in 1997. The bill was sponsored by Sen. Ted Kennedy, D-Mass., who proposed that the initiative be funded by an increase in the cigarette tax. Key to gaining bipartisan support was Kennedy’s enlisting of both Sen. Orrin Hatch, R-Utah, as a co-sponsor and then-First Lady Hillary Clinton, who was seeking support of a less ambitious healthcare program after the defeat of the 1993 Clinton healthcare plan.

SCHIP is a low-cost health insurance program designed for children of families whose income level was too high to qualify for Medicaid. As determined by the original legislation, this was at twice the federal poverty level. By federal law, a child who is eligible for Medicaid or who has any employer-sponsored health insurance coverage is ineligible for enrollment in SCHIP.

By 1999, 47 states offered SCHIP, but enrollment was still well below the initial goal of 5 million children. An aggressive advertisement campaign at both national and state levels successfully increased enrollment from 897,000 in 1999 to 3,437,000 in 2001 (Fig.1). Each state determines the name of its SCHIP plan, such as “Husky Healthcare” in Connecticut, “Healthy Families” in California, and Florida’s “KidCare.”

Current enrollment
Although SCHIP is jointly financed by federal and state governments, it is administered by each state under guidelines established by the Centers for Medicare and Medicaid Services (CMS). SCHIP provided a capped amount of funds to states on a matching basis from 1998 to 2007, under the terms of the original legislation.

Click here to view SCHIP Enrollment and Spending, 1998-2008 (PDF file)

Loose federal guidelines allow individual states to determine the organization of the program, eligibility criteria, benefit packages, payment levels for coverage, and administrative and operating procedures. States may use SCHIP funds to expand their Medicaid program or keep SCHIP as an independent program. Some states have used SCHIP funds to insure pregnant women and the parents of children receiving SCHIP benefits, while some have used the funds to offer dental benefits. In 2006, SCHIP had 670,000 adults enrolled nationwide.

Each state has an approved SCHIP plan with enrollment at 6.6 million children nationwide. For most states, the SCHIP program is available to beneficiaries in families at or below 200 percent of the federal poverty level (FPL), or about $41,000 in 2007. State-to-state and regional variations exist in the allowable maximum income to qualify. For example, Colorado’s maximum allowable income is set to 185 percent of FPL, while New Jersey’s is 350 percent.

Current issues
The SCHIP program was initially funded through 2007; heated debate surrounded its reauthorization. Congress passed two similar proposals to continue SCHIP, HR976 and HR3963; both were vetoed by President George W. Bush. The bills would have reauthorized and expanded SCHIP to grow from an average $5 billion per year to approximately $12 billion over the next 5 years.

Amid criticism that the changes to SCHIP would benefit non-U.S. citizens and contribute to the “federalization of health care,” President Bush opted to sign HR3584, the SCHIP Extension Act of 2007. The bill extends SCHIP to cover current enrollment through March 2009, when this issue will again take center stage.

Opposition to the SCHIP program and any further expansion has focused on the government’s role in overseeing and organizing health care. A related concern is the extent to which expansion of the SCHIP program will cause a “crowd-out” effect. The “crowd-out” effect suggests that as states attempt to cover more of the uninsured, many people will substitute one type of health insurance for another. In this scenario, the program would subsidize some families who already carry private insurance rather than supporting only the uninsured.

The Congressional Budget Office estimated that the defeated bipartisan bills would have had a one third crowd-out rate. A 2005 evaluation of the SCHIP program in 10 states, however, revealed that only about 14 percent of enrollees switched from being covered by private insurance to SCHIP; half of these individuals were from families who said that health insurance was unaffordable.

The same study concluded that the SCHIP program is successful in nearly all of the examined areas. States were seen as developing effective programs and outreach strategies to attract and enroll children. The study applauded the application process as well as the efficacy of and access to health care provided.

A recent fiscal rationale for the SCHIP program determined that a 10 percent disenrollment from the Phoenix metropolitan area’s Medicaid/SCHIP program would increase overall healthcare costs to the community by $3.5 million or $2,121 for each disenrolled child. The increase in estimated costs was mainly due to the shift from less expensive, preventive medicine and ambulatory care to more emergent and inpatient care.

Where the candidates stand
Sen. Barak Obama, the Democratic presidential hopeful, favors expanding SCHIP. Obama cosponsored HR976, the SCHIP Reauthorization Act of 2007, and has repeatedly given public support for allowing access to many parents.

Sen. John McCain, the Republican candidate, voted against HR976 and supported President Bush’s veto. According to Sen. McCain, “We will be spending billions and billions of dollars providing coverage for children who already have coverage, and I believe this is a dangerous step toward Government-run health care insurance.”

The next step
In the current economy—with increasing energy and fuel costs, a weak dollar, a declining housing market, and an increasing number of workers applying for unemployment—the number of families qualifying for the SCHIP program is likely to increase. During the coming months, health care will be a topic of debate by the presidential candidates. Expect to see SCHIP enrollment and financing as two of the main topics being discussed.

The Washington Health Policy Fellows include Aaron Covey, MD; Samir Mehta, MD; Ryan Nunley, MD; James Genuario, MD, MS; A. Alex Jahangir, MD; Sharat K. Kusuma, MD; Alok D. Sharan, MD; Anil Ranawat, MD; and John Flint, MD.

Did you know ?

  • 9.4 million: Total number of uninsured children in the United States in 2006
  • 6.6 million: Number of children enrolled in the State Children’s Health Insurance Program (SCHIP) in 2006
  • 12: Number of states providing coverage to some adults through the SCHIP program (typically parents of children enrolled in Medicaid or SCHIP)
  • 670,000: Number of adults who also received coverage at some point in 2006
  • $2,121: Estimated cost savings to society for each child enrolled in SCHIP
  • $8.35 billion: Estimated cost to fund SCHIP at its current level for fiscal year 2007-2008

References

  1. Mathematica Policy Research, Inc., Kenney GM, Dubay L, Hill I, Sommers AS, Zuckerman S: “Congresionally Mandated Evaluation of the State Children’s Health Insurance Program: Final Report to Congress.” Report prepared for the Assistant Secretary of Planning and Evaluation, DHHS. Washington D.C.: Mathematica Policy Research Inc. & The Urban Institute. October 2005.
  2. Rimsza EM, Butler RJ, Johnson WG: Impact of Medicaid disenrollment on health care use and cost. Pediatrics 2007;119:1026-1032.
  3. Rosenbaum S: The proxy war: SCHIP and the government’s role in health care reform. N Engl J Med 2008;358:869-872.

AAOS Now
July 2008 Issue
http://www.aaos.org/news/aaosnow/jul08/reimbursement3.asp