Medical Child Support

By Teresa Myers, Leah Oliver, and HyGia Park

September 2004

EXECUTIVE SUMMARY

After 20 years of federal and state legislation and policy, medical child support has remained a small part of the public policy arena. This publication addresses the questions policymakers have concerning medical child support: What is it? Why should we care? What can we do about it?

What Is It?

Medical child support is the required provision of health care coverage as part of a legal child support order. This policy reflects the presumption that part of a parent’s support obligation includes providing minimum basic medical care for his or her child. The nation’s child support enforcement program entered the health care arena through a gradual process of legislative mandates that culminated with the welfare reform movement of the 1990s and its aftereffects.

Why Should We Care?

Three important considerations encourage state legislators and administrators to contemplate their medical support strategies and programs:

1.    the opportunity to extend the benefits of basic health care to more children
2.    the potential to maximize the amount of federal funds available to the state, and
3.    the likelihood of offsetting or recouping some expenses for state public health care programs.

Together, these rationales create a powerful incentive to devote time and resources to creating an effective and beneficial medical support system. Children residing in divorced, separated or never-married families are at an increased risk of lacking health care coverage. Of the 8.5 million children without health insurance coverage, experts estimate that approximately 2.6 million of those children—nearly one-third—are eligible for or are receiving child support services through state agencies. Experts estimate that medical child support orders could provide health insurance coverage to nearly 86 percent of child support eligible children.

Maximizing Federal Funds

The federal government currently contributes to funding state child support programs through a state-federal cost-sharing system with a federal financial participation (FFP) rate of 66 percent for most administrative and operational functions, and through incentive-based payments. The 66 percent FFP rate applies to medical child support functions; therefore, states can make improvements to their medical child support systems and bear only one-third of the cost. The second direct federal funding stream is based on a state’s performance in five areas. Some critics of the measures have pointed out that the measures do not capture any of the medical support functions required under federal law. The federal Office of Child Support Enforcement (OCSE) has announced its intention to develop a new federal incentive measure for medical support, creating a new urgency among child support administrators to craft better medical support systems.

Shifting Coverage from Public to Private Plans

Child support-eligible children tend to rely more heavily on public health care than do other children. One of the original premises of medical child support was the idea that parents— not the state—should be responsible for providing health care insurance for their children. Because of this, medical support has traditionally emphasized reliance on employer-sponsored insurance (ESI). Recent research indicates that many more child support-eligible children could be covered under private insurance plans, but achieving such coverage requires a shift in how medical support is awarded. Two states recent experiences support the assumption that greater enrollment of children in their parents’ ESI plans can directly result in state health care savings. In Congressional testimony, a Massachusetts child support official reported that the state had saved $43.5 million in FY 2002 in Medicaid cost avoidance through improved medical support enforcement efforts. Texas achieves considerable savings in Medicaid premiums by enrolling eligible children in their parents’ private health plans—in state FY 2000, total savings to the Medicaid program, including third-party recoveries, cash medical collections, and premium savings, totaled $165,000,000.

Extending Health Care to More Children

Rising health care costs and the economic downturn have resulted in fewer companies offering ESI plans. Many private ESI plans are becoming too expensive for low-income and even middle-income families to afford. In recognition of this, many child support officials have begun to analyze the potential for public health programs to provide coverage through a medical support order. Sick children accumulate significant indirect costs to society. More directly, they also tax state coffers. Many commentators and researchers have argued that in order to ensure appropriate and continuous health care coverage for child support-eligible children, the medical support system must consider public health programs as potential coverage options when private options do not exist or are not appropriate. One study reported that two-thirds of uninsured child support-eligible children living with their mothers are likely eligible for Medicaid and another 15 percent are eligible for SCHIP. The author estimates that after enrolling all these children in either Medicaid or SCHIP, only three percent of child support-eligible children living with their mothers would remain uninsured. Several states have incorporated public programs into their medical support decision matrix.

Cost Recovery for Public Health Plans

The Office of the Inspector General (OIG) of the U.S. Department of Health and Human Services has studied eight states to evaluate the potential for using medical support approaches to recoup some of the states’ Medicaid costs for children in single-parent families. The reports found that each state could realize potential cost savings by requiring noncustodial parents with adequate financial means to contribute toward the cost of public health program coverage for their children. According to the OIG studies, the sample states could recover between 21 percent and 76 percent of the total cost for covering child support-eligible children in public health programs.

Incorporation of Medicaid and SCHIP into the medical support equation does not come without controversy. Proponents of this approach argue that uninsured children cost the state and society fare more than insured children, thereby reducing or negating whatever costs the state incurs to insure them. Other policymakers argue that state budgets, despite federal matching funds, simply cannot withstand any major increases in health care costs.

What Can We Do About It?

For state legislators who want to improve their state’s medical support system, it can be difficult to know where to start. Even child support experts and federal administrators have struggled with untangling the various concepts and concerns that comprise the medical support problem. In 1998, congress mandated the creation of a national Medical Support Working Group (“Working Group”) to offer guidance to the country’s state and federal child support programs. In 2000, the Working Group released a report containing 76 recommendations broken into five categories: needed federal statutes/legislation, needed federal regulation/guidance, best practices, needed technical assistance and education, and opportunities for research, evaluation and demonstration.

Discard Outdated Assumptions and Create New Assumption

The Working Group began by identifying five outmoded assumptions about private dependent health coverage that “appear[ed] to limit the development of a system that can ensure health care coverage for all child support-eligible children.”

Custodial parents are not employed; therefore, only noncustodial parents can provide employer-based health care coverage.
Noncustodial parents are employed at the same job for most of their working lives; therefore, once established, health care coverage will be stable.
Employer-provided dependent health care coverage is available and is free or nearly free to employees; therefore, the cost of employer-provided dependent health care is reasonable.
Private, family health coverage is fully portable, that is, it can provide health care coverage for the children even when the children and the parents live far apart.
The majority of children who receive publicly-funded health care (Medicaid and SCHIP) have noncustodial parents who could provide private health care coverage as an alternative to public funded care; therefore, pursuit of private health care coverage will reduce the number of children on Medicaid and SCHIP.

As the Working Group deconstructed these assumptions, they created a completely new framework for thinking about and creating medical support policy, adopting new assumptions with which policymakers should frame their consideration of medical support systems.

Both parents should be considered as options for health care coverage.
Stability of employment should be a factor in considering whether private health care coverage is appropriate.
Unless coverage is offered at no or very low cost, neither custodial nor noncustodial parents whose income is at or near the poverty line should be required to provide health care coverage.
Accessibility to coverage should be a factor in considering whether private health care coverage is appropriate.
When private coverage is not available or not appropriate, other means of coverage, such as Medicaid and SCHIP or other groups plans, should be considered.

Create a New Medical Child Support Model

Substitution of the new assumptions for the old created an opportunity to review and revise the formulas used by tribunals to set medical support orders. Several states are crafting wholly new approaches to drafting medical support orders. The new models evaluate coverage options more closely—”appropriate coverage” is defined as comprehensive, accessible, affordable, and stable. Other aspects of the new model include:

Private Health Care Insurance Should Be the Preferred Coverage Option, all other Considerations Being Equal
Both Parents, as well as Resident Stepparents, Should Be Considered as Potential Sources for Health Insurance Coverage

Identify and Address Limitation and Challenges

Creating a new model for medical support orders does not come without its challenges. A broad variety of issues must be addressed. Some significant issues that policymakers will want to consider include:

Children with Special Health Needs
Collecting Medical Support Contributions
Withholding Limitation—The Consumer Credit Protection Act
Sum Certain vs. Coverage Specific Orders
Enforcing a Medical Support Order Against a Custodial Parent
Priority of Withholding
Multiple Noncustodial Parents Per Custodial Parent Household
Noncustodial Parents with Multiple Orders
Institutional Barriers to Collaboration
Issues Governed by Federal Law

Conclusion

Creation of an effective state medical child support system requires significant dedication from policymakers who are willing to examine old assumptions, craft new approaches, and require collaboration from their state administrators. Many states already have begun to experiment with different approaches; their experiences can inform and educate the next round of states that chose to tackle this important and complex issue. Ultimately, through the work of these policymakers, the nation’s medical child support system may provide the needed health care safety net for millions of uninsured, vulnerable children.