SCHIP: Summary of Proposed Changes

As the economy continues its downturn, the vulnerable populations of our society- homeless, working poor, disabled, and children in the foster care system are facing greater challenges in getting their basic needs met.  Furthermore, moderate to middle class families are experiencing job lay-offs, stagnant salaries, and increases in daily expenses at the gas station, grocery stores, and public transportation.  For social workers who work directly or advocate for families in need, it is clear that resources are not being allocated for those who are truly in need.

One apparent example is the Administration’s steadfast stand in preventing states’ longstanding flexibility to utilize SCHIP founds for uninsured children in more moderate-income families (i.e. those with a family income above 200 percent of the federal poverty level, or $34,340 a year for a family of three).  Despite the great disparities for those with adequate health care and those without coverage, the Administration has proposed significant changes for the FY 2009 Budget further limiting coverage for thousands of children.  The list below provides a summary of the changes to SCHIP as analyzed by the Center for Children and Families of the Georgetown University Health Policy Institute:

1. Funding Levels.
In its budget proposal, the Administration recommends increasing SCHIP funding by $19.7 billion over the next five years. Although an increase over last year’s proposal, the amount falls some $15 billion below the level that Congress twice approved for SCHIP reauthorization in recent months. Due to this gap, the President’s budget is estimated to cover 5.6 million children in 2012 and 2013, or some two million fewer children than would be enrolled in SCHIP under the congressional bills vetoed by President Bush.

2. New Restrictions on Eligibility.
In its budget, the Administration is proposing to scale back the flexibility that states long have had in SCHIP to decide which families need help purchasing affordable coverage for their children. The Administration already took a step in this direction in August of 2007 when it issued a letter to state health officials, known as “the August 17th directive.”  The directive requires states to meet a range of stringent criteria if they want to cover uninsured children above 250 percent of the Federal Poverty Level (FPL) with SCHIP funds. Most notably, a state must enroll 95 percent of eligible children below 200 percent of the FPL. No state seeking to expand its SCHIP program has yet been able to meet the directive criteria, and it is widely believed that none will be able to do so in the future. As a result, the directive has effectively created a gross income cap on SCHIP eligibility at 250 percent of the FPL.

In its budget, the Administration is proposing to further limit state flexibility to set
SCHIP eligibility rules in the following ways:

• Applying the August 17th directive to coverage above 200 percent of the FPL. The Administration has proposed lowering the income threshold in the August 17th directive from 250 percent to 200 percent of the FPL. In effect, such a policy would likely mean that few, if any, states can cover children above 200 percent of the FPL. If a state were able to meet the criteria of the August 17th directive, it still would be required to impose waiting periods of 12 months and significant cost sharing on children above 200 percent of the FPL.
• A “hard” gross income cap at 250 percent of the FPL. The Administration also is proposing a gross income cap on SCHIP eligibility at 250 percent of the 1 In briefings, the Administration has indicated that if a state with approval to cover children above 200 percent of the FPL is later found to no longer meet the 95 percent participation rate requirement, it will face a one to five percentage point reduction in its federal matching rate for children above 200 percent of the FPL.  In some respects, such a cap is potentially redundant. There is little prospect that states will be able to cover children above 200 percent of the FPL under the Administration’s proposed revisions to the August 17th directive. If, however, a state were able to comply with the revised directive, it would be allowed to cover children only up to 250 percent of the FPL.
• Grandfathering of currently enrolled children. States required scaling back their coverage initiatives by the proposal would be allowed to continue covering children currently enrolled in the program with income above 200 percent of the FPL. However, this “grandfathering” would delay only modestly the dismantling of coverage for children in the affected income range. In New Hampshire, for example, half of children above 250 percent of the FPL remain on the program for six months or less and three-quarters lose it within a year.
  
  In effect, the Administration is proposing to largely eliminate coverage for uninsured children in families with income above 200 percent of the FPL. The number of children served by SCHIP in this income range remains relatively modest – fewer than one in ten SCHIP children. But, with loss of coverage among families between 200 percent and 400 percent of the FPL driving close to half of the recent growth in uninsured children, states increasingly are seeking to do more – not less – to help moderate-income families purchase affordable coverage for their children.

3. No New Incentives to Enroll Lowest-Income Children.
Despite talking about the importance of “putting poor children first,” the Administration’s budget fails to include one of the most effective tools for doing so. It opted not to provide performance-based assistance to states that succeed in enrolling more of the lowest-income uninsured children. (The Administration’s budget only includes a modest amount of funding, $450 million over five years, for outreach grants.) In contrast, Congress included such a proposal in each of the SCHIP reauthorization bills it passed last year. CBO consistently scored it as driving significant enrollment gains among the lowest-income uninsured children with minimal crowd out.

Conclusion
In effect, the Administration’s budget proposal would entirely eliminate SCHIP coverage for children above 250 percent of the FPL and make it very difficult, if not impossible, for states to cover uninsured children between 200 percent and 250 percent of the federal poverty level. At a time when the economy is weakening and the number of uninsured children is growing, this proposal moves in the wrong direction for America’s families.

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