RURAL HEALTH BRIEF

THE STATE CHILDREN'S HEALTH INSURANCE PROGRAM:
HOW WELL IS IT WORKING IN RURAL AREAS?

March 2000

About 15 percent of America's children are without health insurance, a proportion that rose dramatically during the 1990s. Over 40 percent of the 11 million uninsured children are eligible for but not enrolled in Medicaid. The creation of the State Children's Health Insurance Program (SCHIP) by Congress in 1997 is intended in part to address this circumstance. The purpose of SCHIP is to extend health insurance coverage and thus increase access to medical services for those uninsured children whom otherwise do not qualify for Medicaid. States can use SCHIP funds to expand coverage either through a separate state program or by broadening their Medicaid programs-or both. States establishing a separate (non-Medicaid) state program can determine eligibility based on age, income and resources, residency, disability status and geographic area. The Congressional Budget Office estimates that SCHIP will cover 2.8 million uninsured kids ineligible for Medicaid.

In general, states have considerable latitude in designing and operating their SCHIP programs. However, no more that 10 percent of federal SCHIP money can be used for outreach activity, administrative costs or direct service payments to clinics or hospitals. This percentage is calculated based on a state's SCHIP expenditures, not its allocation, which may create difficulties in conducting outreach and administration activities in states with little or no program expenditures.

IMPLEMENTATION OF SCHIP IN RURAL AREAS

High numbers of poor and uninsured abound in rural areas. Approximately 3.1 million rural children are uninsured. According to the Urban Institute, roughly 1.7 million of them live below 200 percent of the federal poverty level, making them likely to be eligible for SCHIP or Medicaid. Rural children are 25 to 50 percent more likely to be uninsured than urban children; generally, rural children have more multiple spells of uninsurance than urban kids do.

Implementation of SCHIP in rural areas (as elsewhere) is expected to increase the demand for health services. However, it is not clear that states have made the necessary assurances that provision of services to SCHIP-insured children will be sufficient to meet that demand. A recent NCSL survey of states with combination or state-designed SCHIP plans found that 18 of 26 1 states say they offer assurances that the health delivery needs of rural children will be adequately met; yet, "assurances" of access, and penalties for failing to offer access, vary greatly from state to state. (Henderson and Steinberg, 1999) Variations include the following:

Six states 2report that, by terms of their requests for proposals or private contracts, provider networks must offer care from a service provider located within a certain distance of the patient's home. In some cases, plans that cannot provide care at a location within 30 miles must pay for or provide transportation to the nearest network provider.

Other states with combination or state-designed plans examine the provider networks with which they contract to ensure broad coverage. Upon assessment of its provider networks, Alabama has begun a pilot program using federally qualified health centers (FQHCs)3 and other clinics in remote areas to improve rural care delivery. California's Healthy Families law authorizes the Department of Health Services (DHS) to operate up to five pilot programs in rural areas if current insurance programs prove insufficient to serve specific rural areas or populations.

Additional states have contract language requiring "network adequacy" (Montana) or the presence of a "statewide network of providers" (New Hampshire).

Many of these states are encouraging or requiring SCHIP participation by safety net providers that serve large numbers of Medicaid and uninsured people in rural areas (e.g., FQHCs, rural health clinics and local health departments). (See table 1)

In most states, the delivery system under SCHIP builds on the Medicaid delivery system, which has had many problems in the past, particularly in rural areas. Although dental care, for example, is a covered service under Medicaid, there are so few dental providers that most low-income children do not get served. Most states are using some form of managed care system (capitation or primary care case management) to deliver care to SCHIP kids. Yet, some commercial managed care organizations (MCOs) are not familiar with low-income populations or not adequately staffed with specialists or pediatric providers to serve children, particularly those with special health care needs. Lower population density in rural areas, for example, means fewer enrollees among whom to spread risk, which in turn means the commercial managed care market in those places is less developed. Nevada has set a target of raising managed care enrollment in rural areas by at least 100 percent in three years and 10 percent per year thereafter.

Rural areas also typically have fewer health care providers and little, if any, choice of providers when compared to urban areas. Most rural counties have low provider-to-population ratios (1 to 3,500 or worse; the federal government describes an adequately served population as 1 to 2,000). For example, many rural medical clinics often lack the resources available in urban areas, have lower revenues and smaller staffs.

Importance of Outreach

States have found that outreach is an important strategy for enrolling both SCHIP and Medicaid eligibles in rural and urban areas. Many states are utilizing both private and public support in this endeavor. Despite concern that welfare reform has limited Medicaid enrollment, the 1996 law actually provides states support for outreach and other enrollment activity to make Medicaid more widely available.4 Covering Kids, a Robert Wood Johnson Foundation initiative to increase the number of eligible children covered by health insurance, supports statewide and local coalitions to conduct outreach initiatives, simplify enrollment and improve coordination of health coverage programs for low-income children. Many experts feel that such outreach efforts specifically may help to increase SCHIP enrollment.

In many states, enrollment in rural areas can be the difference between meeting or falling short of stated enrollment goals. While a 1990 law mandated that federally funded health clinics maintain Medicaid eligibility outstation programs, a 1998 study found that small clinics in rural areas were not as likely to engage in outstationing activities as larger clinics which are mainly found in urban areas. When these smaller centers do undertake outreach activities, the study discovered the centers significantly increase the enrollment rate for Medicaid in their communities.

Outreach Examples

Kansas. Health Wave is a separate non-Medicaid CHIP program that extends coverage equivalent to Medicaid's Early Periodic Screening, Detection and Treatment (EPSDT) initiative. Eligible children are served through mandatory capitated managed care systems. The state has contracted with a firm to promote Health Wave statewide. Outreach workers are assigned to a particular region of the state, learn about their region and how best to tailor the outreach program in that area. Health Wave coordinates with various community programs and organizations to distribute SCHIP information and applications. A pilot program in two rural counties operated by Mercy Health Systems conducts outreach in frequented locations such as health care centers and department stores. A local department store in one of these counties hosted a health fair distributing applications with representatives from Mercy, a mental health program, police and fire departments, and other partners. (Walsh Center, 1999)

Oklahoma. SCHIP funding is used to expand SoonerCare, the state's Medicaid program. SoonerCare operates as a managed care system comprised of two programs, SoonerCare Plus and SoonerCare Choice. SoonerCare Choice provides rural beneficiaries with partially capitated coverage. If no provider is available within 45 miles, the beneficiary stays in fee for service Medicaid. Rural outreach efforts rely extensively on school-based dissemination of information and enrollment. Rural physicians and other health providers also are frequently used to distribute information about SCHIP and Medicaid and encourage enrollment. Moreover, rural employers paying minimum wage are targeted; company caseworkers work with outreach workers to enroll eligible children. (Walsh Center, 1999)

ISSUES FOR STATES

Non-Medicaid SCHIP programs have the option to determine eligibility based on geographic area. To address the needs of underserved areas, states have the option to design a plan amendment that allows them to use SCHIP funds to provide insurance for children using the "geographic area" eligibility criteria. Using that mechanism, states could institute a rural component of their SCHIP plan in order to provide additional services, different outreach and enrollment strategies, enhanced provider networks and contracts, or different fee schedules for rural areas. Other portions of the law-such as required benefits, avoiding substitution of private for public insurance and coverage of lower-income children before higher-income children-still must be followed. As yet, however, states have left untapped the flexibility to craft rural-only plans. States also can explore options with the federal government to address these issues through their existing plan without filing a formal plan amendment. In considering a rural option, examples of questions for states include:

Should most or all rural health care providers be considered "safety net providers?"
Should critical support services in rural areas such as transportation be covered?
Should higher rates of payment be granted to dentists and other health care providers in short supply in rural areas?

Beyond efforts to enhance SCHIP outreach in rural areas, states have the option to spend some administrative funds to contract directly for health services to SCHIP enrollees. Although most states are focusing their attention on initial program implementation and outreach efforts to increase SCHIP enrollment, many will need to address service delivery concerns of the newly enrolled. In many states, engaging certain providers in rural communities to participate in SCHIP will be challenging. Low payment rates and SCHIP's association with Medicaid are common provider concerns. There also may be a significant shortage of some providers (e.g., dentists) needed to serve low-income children in many rural areas.

Direct contracting for services with community-based providers such as FQHCs and "disproportionate share" hospitals (hospitals that serve large numbers of Medicaid patients) may be one vehicle for remedying provider shortages. States may also wish to use these funds to shore up safety net providers that historically have provided care to uninsured children and to ensure continuity of care for SCHIP-insured children in medically underserved areas. Should that strategy fill a key role over time, states also may want to seek a variance from the federal government allowing them to use some portion of SCHIP funds above the 10 percent cap to provide direct health services.

As more people realize the importance of targeting rural communities, states should consider gathering further information on various coverage and care delivery issues involving rural children. The collection and analysis of information on SCHIP implementation in rural areas will be important to state officials charged with evaluating the program. Critical data should include rates of insurance and SCHIP enrollment for rural children and rural rates of provider participation in SCHIP. Moreover, states may find it valuable to monitor and evaluate best outreach and care delivery practices that speak to the rural context. Overtime, states should also find it useful to identify and study differences in the number of visits by rural children to health care providers and any resulting changes in health status.

REFERENCES

T. Henderson and D. Steinberg, Implementing the State Children's Health Insurance Program: Will Service Delivery Needs Be Adequately Met? National Conference of State Legislatures: Washington, D.C., September 1999.

Walsh Center for Rural Health Analysis, Implementation of the State Children's Health Insurance Plan: Outreach, Enrollment, and Provider Participation in Rural Areas, Project HOPE: Bethesda, Maryland, November 1999.

Table 1.

Participation of Safety Net Providers in CHIP Non-Medicaid Expansion States

State*	Federally Qualified Health Centers	Rural Health Clinics	Public Hospitals	Local Health Departments	School-Based Health Centers
Alabama	Required	Required	Required	Required	No Policy
Arizona	Encouraged	Encouraged	Encouraged	Encouraged	No Policy5
California	Encouraged	Encouraged	Encouraged	Encouraged	Encouraged
Colorado6	No Policy	No Policy	No Policy	No Policy	No Policy
Connecticut	Required	No Policy	No Policy	Encouraged	Required
Delaware	Required	No Policy5	No Policy5	Required	No Policy
Florida6	No Policy	No Policy	No Policy	No Policy	No Policy
Georgia	Required	Required	Required	Required	No Policy
Kansas	Required	Encouraged	Encouraged	Encouraged	No Policy
Kentucky	Encouraged	Encouraged	No Policy	Encouraged	Encouraged
Maine7	No Policy	No Policy	No Policy	No Policy	No Policy
Massachusetts7	No Policy	No Policy	No Policy	No Policy	No Policy
Michigan6	No Policy	No Policy	No Policy	No Policy	No Policy
Mississippi6	No Policy	No Policy	No Policy	No Policy	No Policy
Montana 8	Required	Required	No Policy	No Policy	No Policy
Nevada	Required	No Policy	Required	Required	No Policy
New Hampshire	Encouraged	Encouraged	No Policy	Encouraged	No Policy
New Jersey	Encouraged	Encouraged	Encouraged	Encouraged	Encouraged
New York6	No Policy	No Policy	No Policy	No Policy	No Policy
North Carolina	Required	Encouraged	Required	Required	No Policy9
Oregon	Required	Required	Encouraged	Required	No Policy
Pennsylvania 6	No Policy	No Policy	No Policy	No Policy	No Policy
Utah	Encouraged	No Policy	Encouraged	Encouraged	Encouraged
Vermont 7	No Policy	No Policy	No Policy	No Policy	No Policy
Virginia	Encouraged	Encouraged	Encouraged	Encouraged	Encouraged
West Virginia	Required	Required	Required	Required	Required
Total Encouraged	7	8	7	9	5
Total Required	10	5	5	7	2
Total No Policy	9	13	14	10	19
GRAND TOTAL	26	26	26	26	26

Key:	Encouraged =	Participation of these providers is strongly encouraged.
	Required =	Participation of these providers is required.
	No Policy =	The state neither requires these providers to participate nor actively recruits their participation.

	* Arizona, Kansas, Michigan, Montana, North Carolina and Utah encourage or require providers of the Indian Health Service and/or other Indian councils to participate in their CHIP programs.
	* Connecticut and Nevada have attempted to enlist health care providers to offer volunteer services to CHIP recipients with little or no success.
	* Alabama requires community nursing service providers to participate in state CHIP plans. Arizona, Connecticut, New Jersey, Utah and Virginia strongly encourage them to do so.
Source:	T. Henderson and D. Steinberg, Implementing the State Children's Health Insurance Program: Will Service Delivery Needs Be Adequately Met?, National Conference of State Legislatures: Washington, D.C., September 1999.

For More Information:	Tim Henderson, NCSL @ 202/624-3573
	Jerry Coopey, Federal Office of Rural Health Policy @ 301/443-0835

Notes

1 Alabama, Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Kansas, Kentucky, Maine, Massachusetts, Michigan, Mississippi, Montana, Nevada, New Hampshire, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Utah, Vermont, Virginia and West Virginia.

2 Connecticut, Kansas, New York, Oregon, Pennsylvania, Utah and Vermont.

3 FQHCs are community health centers that receive federal operating grants and cost-based rates of reimbursement from Medicare and Medicaid.

4 In light of welfare reform, the law created a $500 million fund to help states improve Medicaid program enrollment and eligibility determination. In 1999, Congress removed expiration dates for the availability of allotments for state expenditures under the fund.

Notes-Table 1

5 This form of safety net provider does not exist in the state.

6These six states do not encourage or require the participation of safety net providers in CHIP, although many of these providers do, in fact, participate.

7 These three "Medicaid look-alike" states do not recruit safety net providers to CHIP, but expect those who are Medicaid providers to provide CHIP services as well.

8 Insurers are required to offer to contract with safety net providers.

9 School-based health centers were not allowed in participate in CHIP at the time of this survey.