As time passes, the questions surrounding SCHIP only seem to grow.

Perhaps the biggest is the question of reauthorization. Created in 1997, SCHIP was scheduled to be reauthorized in 2007. But Congress and the Bush administration failed to reach agreement on such issues as the amount of federal funds that would be available, and the president vetoed two bills. Ultimately, Congress passed and the president signed a bill that extends SCHIP unchanged through March 2009.

Some congressional leaders have been hoping to move the latest version of the SCHIP bill (H.R.3963) this September. But few expect Congress to take the bill up until next year. In part, that's because the Congressional Budget Office (CBO) recently estimated that H.R.3963 would increase the federal budget deficit by $1.6 billion over five years. That's a violation of congressional pay-as-you-go (PAYGO) rules, so the bill would have to be altered to either serve fewer children or raise more revenue. Both alternatives are polarizing.

Then there is the continuing question of what effect the Aug. 17, 2007 letter from the Centers for Medicare & Medicaid Services (CMS) will have on states. The letter set out specific conditions for states that want to enroll in SCHIP children whose family incomes are above 250 percent of the federal poverty level. "We expect affected states to amend their SCHIP state plan (or 1115 demonstration) in accordance with this review strategy within 12 months, or CMS may pursue corrective action," the letter said. However, CMS officials have repeatedly stated that they do not expect current enrollees to be affected by the directive.

In 2008, seven states set the SCHIP income eligibility limit at less than 200 percent of poverty, 23 states allow a maximum income equal to 200 percent of poverty, and 20 states set the limit above 200 percent of the poverty level.

As the one-year deadline for meeting the new conditions approached, many wondered whether CMS would pursue "corrective action" against states that enroll higher-income children.  

California—whose SCHIP is open to children with incomes above 250 percent of poverty—informed CMS in a letter that it would not change its SCHIP rules because the CMS directive contradicts state law, and California is "constitutionally obligated to follow state law." (A report commissioned by the state on its options is at: www.chcf.org/documents/policy/SCHIPAtTheCrossroads.pdf)

CMS declined to take any action. Instead, CMS spokesman Jeff Nelligan said CMS will “continue to work with states that are already providing coverage under the SCHIP program to children in families with effective family income levels above 250 percent of the federal poverty level. At this time, we are not taking compliance action."

Nevertheless, if it is not thrown out by a lawsuit brought by a handful of states, nor overturned by a new federal administration, the directive could have an enormous effect on state SCHIPs. According to the National Health Policy Forum, as of May 2008, eight states—Hawaii, Illinois, Maine, Massachusetts, New Jersey, Pennsylvania, Vermont, Washington and Wisconsin—have passed universal state universal coverage for children.

"Ultimately, the factor that could most affect the number of children in SCHIP could be decided by the amount of funding that Congress allots, when it reauthorizes the SCHIP program," Peter Orszag, director of the CBO, told Congress in April.

"The directive could have much greater impact on enrollment in SCHIP if the Congress

expanded the program significantly. Under its baseline projections for SCHIP, which assume continued allotments of about $5 billion per year, CBO estimates that enrollment of children in SCHIP will fall from 6.8 million in 2009 to 3.3 million in 2018, as the growth in health care costs per person diminishes the number of children states can cover with a fixed sum of money. However, if the Congress substantially increased SCHIP funding, additional states would probably wish to expand their programs to children in families with income above 250 percent of the poverty level. In that case, the August 17th directive would be a more significant constraint on enrollment," Orszag added.

Different Strokes
Another enormous question is the effect that the current economic slowdown will have on SCHIPs. Some of the states that have sought to expand their SCHIP programs to higher income levels have started running into difficulties not only from CMS but from budget deficits.

New York turned in a state plan amendment to CMS to expand SCHIP eligibility up to 400 percent of poverty. CMS rejected the proposal on the grounds that the state "has not demonstrated that its program operates in an effective and efficient manner with respect to the core population of targeted low-income children."

The state opted to cover the additional children using state-only funds, and in the face of a $5.4 billion budget shortfall, as well as cuts to many agency budgets, the state pressed ahead with its plans to expand coverage. "In the face of budget deficits and tough choices, New York stood behind its commitment to children's health insurance," said Judith Arnold, the director of Division of Coverage and Enrollment in the Office of Health Insurance Programs.

In 2007, the Louisiana Legislature enacted a law that expanded SCHIP eligibility from 200 percent of poverty, to 300 percent. That proposal was rejected by CMS, but after discussion, the agency decided to allow and accordingly fund expansion of the program up to 250 percent of poverty.

The program will give eligible children access to the state's Group Benefits insurance program, which covers state employees. A spokesperson for Louisiana's Department of Health and Hospitals said the expansion will save the state the hassle of a "request for proposal" process for a provider, and give families access to an already existing provider network. Parents pay a $50 monthly premium—regardless of the number of children being enrolled—and are responsible for co-payments and deductibles on an income-based sliding scale. The state expects about 6,500 children to qualify under the new income guidelines. Governor Bobby Jindal has also expressed the desire to pursue the 300 percent expansion in the near future.

The Ohio General Assembly in 2007 approved an expansion of SCHIP from 200 percent to 300 percent of poverty. The state had planned to achieve the expansion through a Medicaid state plan amendment, to which the August 17 letter would not apply. CMS ultimately rejected this plan, saying the state needed to use its remaining SCHIP funds before dipping into its Medicaid budget.

In response, Ohio decided to use state-only funds to cover the expansion in the short term.  “We don’t know what impact all of this will have in the future, but for now, Ohio’s program is in place and secure,” said Senator Joy Padgett in an op-ed piece. However, the long-term forecast is bleaker, with the governor predicting budget shortfalls in SCHIP of close to $100 million in FY 2009 unless the federal government approves a new match. Some say the legislature acted rashly by expanding SCHIP without federal approval in place. "This is the type of fiscal irresponsibility the president opposed," said Marc Kilmer of the Buckeye Institute, an Ohio-based think tank.