Health Care Economics
Children's Health Care Threatened By States' Budget Woes
Psychiatric News
Volume 39 Number 17 page 1-8

One bright spot in the bleak picture of the growing number of uninsured Americans has been the State Children's Health Insurance Program (SCHIP).

That program, enacted as part of the Balanced Budget Act of 1997, helped reduce the national percentage of poor children without insurance from 22.4 percent in 1997 to 15.4 percent in 2003.

SCHIP is targeted to families with incomes between 100 percent and 200 percent of the poverty level and was designed to build on the Medicaid program.

For the SCHIP-eligible population, the decline in the number of uninsured was even more dramatic than for all low-income children. While 22.8 percent were uninsured in 1997, only 14.7 percent were in 2003.

As of December 2003, more than 3,927,000 children were enrolled in the program.

Data for the six-month period prior to that date, however, show that enrollment declined for the first time in the program's history.

In late July, the Kaiser Commission on Medicaid and the Uninsured sponsored a briefing to discuss issues related to that decline and a commissioned paper," SCHIP Program Enrollment: December 2003 Update," prepared by Vernon K. Smith, Ph.D., of Health Management Associates.

Smith told the audience that "SCHIP had enjoyed great support among state policy makers, hospitals, doctors, and among families who see the program as very mainstream health care coverage for their children."

"The program with its enhanced matching rate [70 percent federal funds], relatively low cost per enrollee, and its success in lowering the number of uninsured children, was largely spared during early [state] budget cuts," he noted in his paper.

But, he pointed out, beginning with the states' FY 2003, officials began using a variety of strategies to save money and limit growth. They included reduced spending on outreach, enrollment caps, increased premiums and cost sharing, changes in eligibility, intensified eligibility verification, and changes in enrollment procedures, such as a move to allow enrollment only at specified times of the year.

He told the audience that despite those changes, "the story of 2003 is really a story of two different groups of states."

In 41 states, enrollment increased. Texas, Maryland, and New York accounted for almost all of the decline in enrollment, with more than half of the decline attributable to Texas enrollment figures (see related story on page 6).

The story is also about the complicated and often unintended consequences of policy decisions and about the effects of administrative procedures and planning.

Conni Wells, director of the Florida Institute for Family Involvement, told the audience that Florida had realized an "incredible success" in its SCHIP program, called Kid Care. But the success "imposed an incredible burden upon the state, which has been transcended down into an incredible impact on the families we serve."

As a result of state budget problems, officials established a waiting list for enrollment. That list ultimately grew to 90,000 children and "became an embarrassment." Program officials recorded a 40 percent increase in the number of calls from families wanting help.

"Families were confused, and families were scared," said Wells.

The legislature decided to get rid of the waiting list by allowing enrollment only twice a year and by tightening procedures for eligibility verification.

Federal law stipulates that a child can not be enrolled in SCHIP if he or she is eligible for Medicaid or employer-sponsored insurance. Florida passed legislation making it a felony if a person applied for Kid Care on behalf of a child who was eligible for employer-sponsored insurance.


The legislature also established new requirements for income verification, such as the submission of W-2 forms and payroll stubs for every member of the family over age 17, as well as income-tax records.

Wells said, "The closed enrollment remains a real mystery to families. How is it going to happen? When is it going to happen? We're talking massive pieces of paper and marketing that are going to have to go on in order to educate families and get them prepared for what they have to do."

The result has been an increase in calls from families wanting help of 20 percent over the initial 40 percent. "The only change we saw," said Wells, "is that there is no longer a wait list."


Katie Humphreys, former secretary of Indiana's Family and Social Services Administration, said that Hoosier Healthwise combines SCHIP and Medicaid programs in Indiana producing one program with different income eligibility standards.

The major policy shift in response to budgetary problems was the decision to stop continuous enrollment and to require that families reapply for coverage when information becomes available to the state that their employment status has changed.

Some families mistakenly were dropped from coverage, Humphreys said, because of rigid application of policies related to welfare reform.

Outreach efforts were also curtailed.

After the shift, growth in enrollment occurred in counties and communities with higher socioeconomic demographics, while declining in counties with high rates of unemployment.

Texas also reported that the greatest declines in SCHIP enrollment occurred among the poorest families after officials instituted a number of changes.

In Oregon, when premiums were added for the Oregon Health Plan, the poorest beneficiaries were most likely to lose coverage (Psychiatric News, July 16).

Humphries told the audience that evaluation will be required to learn" which children are most impacted by the policy changes.. .and the long-term consequences."

John Folkemer, M.P.A., executive director of the Office of Planning and Finance in the Maryland Department of Health and Mental Hygiene and Medicaid Director, said that Maryland's decrease in enrollment was "more illusion than reality." (The data show a 21 percent decrease from June to December, 2003.)

In 2003, the legislature imposed a $37 month premium for families with incomes between 185 percent and 200 percent of the FPL. Those with higher incomes always had a premium charge. Legislators also froze enrollment for those between 200 percent and 300 percent of FPL.

In the course of checking eligibility, the state moved 15,000 children from SCHIP to Medicaid. Only a quarter of the children in the group with the new premium dropped coverage. State officials worked closely with the managed care companies administering the program to persuade parents of the importance of paying the premium.

A survey revealed that "most" of those who disenrolled found other insurance programs.

A transcript of the briefing on SCHIP and related materials are posted online at<www.kaisernetwork.org/health—cast/hcastindex.cfm?display=detail&hc=1226>.

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