THE GUIDANCE ON SCHIP: STATES WAIT, WATCH AND HOPE

Volume 29, Issue 515 May 12, 2008

Christina Kent

A May 8 letter sent by the Centers for Medicare & Medicaid Services (CMS) to state health officials may have done little to dispel the current confusion and contention over the State Children's Health Insurance Program (SCHIP).

The controversy stems from an earlier letter sent by CMS to state health officials on Aug. 17, 2007. That guidance lists specific criteria that states must meet if they are to begin--or want to continue--providing SCHIP coverage to children in families with incomes of more than 250 percent of the federal poverty level (FPL). To do so, states must:

provide assurance to CMS that at least 95 percent of children with incomes under 200 percent of the FPL are covered by Medicaid, SCHIP or private policies;
establish cost-sharing that is almost equal to competing private plans; and
require that children have been uninsured for at least one year before being enrolled in SCHIP.

The standards are intended to prevent "crowd-out" (substitution of public for private coverage) in SCHIP, CMS said, adding that it does not expect the new criteria will concern current enrollees. However, the agency does expect affected states to amend their SCHIP plan (or 1115 Medicaid demonstration program) to meet the guidance by August 2008, or "CMS may pursue corrective action."

Can It Be Met?

Some state lawmakers and advocacy groups have reacted with concern, saying the standards--especially the 95 percent requirement--may be impossible to meet. Equally problematic, some state officials say, is that CMS has not indicated which statistics it will use to determine whether a state has met the 95 percent standard.

Will CMS use the Census Bureau's Current Population Survey numbers, which are generally recognized as undercounting Medicaid participation? Or will the agency use numbers based on a formula that show many states cover more than 100 percent of their low-income children? Or will CMS use different numbers for different states?

Washington enacted legislation (SB5093) in 2007 that authorizes the state to raise eligibility for SCHIP from 250 percent of poverty to 300 percent. "We think we’re pretty close to that 95 percent figure for children up to 200 percent of the FPL, if you use the state population survey which is done every two years," said a spokesman for the Washington Department of Health. "But it’s our expectation that CMS would use uniform data (such as the Census Bureau's). And we’re ranked lower on that. I think the expectation is that no state can match the 95 percent match drawn the way that CMS has indicated.”

In an effort to clarify the matter, Herb Kuhn, acting director of CMS's Center for Medicaid and State Operations, sent out a letter on May 7, saying that the 95 percent standard is "an achievable goal and based on conversations with states, we are convinced that a number of states have already reached this goal…We will continue to work individually with affected states on different approaches to document this assurance, including the use of state-specific survey data or other data sources to refine the underlying Current Population Survey data."

That clarification is not helpful, the Center for Families and Children (CCF) at Georgetown University says. If anything, the May 7 letter makes things murkier because it states that CMS is willing to use "different approaches" in determining whether a state meets the 95 percent standard. "Rather than providing new clarification, the letter emphasizes that the August 17 policy will be applied state by state," the CCF says in an opinion piece. "This leaves these important decisions about children's coverage to back-room discussions without the benefit of clear rules, standards and objective data."

An analysis of the issue by the CCF notes that at least 14 states already have approval from CMS to cover children with incomes of more than 250 percent of poverty. But in the eight months since the directive has been in effect, not one state seeking to expand coverage to children with family income above 250 percent of the FPL has had its plan approved by CMS.

One of those states was New York, which passed legislation that would allow its SCHIP to begin enrolling kids with incomes up to four times poverty. CMS denied New York’s request to do so on Sept. 7, 2007, partly on grounds that the state could not prove that 95 percent of its poorest children were already covered. The state plans to fund the expansion with state-only funds.

Louisiana, Ohio and Oklahoma each enacted legislation in 2007 to expand coverage to children with family incomes up to three times the poverty level, Cindy Mann, executive director of the CCF testified to Congress. “All three states have had to roll back their coverage plans as a result of the directive,” with the result that up to 44,000 children lost a chance to enroll in SCHIP, she said.

Maryland, for example, has long covered children with incomes up to 300 percent of the FPL, said John Folkemer, deputy secretary for Health Care Financing at the Maryland Department of Health and Mental Hygiene and Medicaid Director. “Everything we have in place has been approved by CMS.” He's worried that the 95 percent standard could prevent the state from being able to continue to cover kids at that level.

“But even if we somehow met that, we would have to meet the one-year crowd-out (standard) and charge a lot higher premiums and that would cut down the number of children in the program…In our state and in a number of others, it would obviously mean retrenching our coverage, going backwards, denying coverage for people that we currently cover," Folkemer said. He estimates that about 4,000 Maryland children who are in the 250 percent to 300 percent range of income would risk losing SCHIP coverage under the CMS guidance.

Arizona, California, Illinois, Maryland, New Hampshire, New Mexico, New Jersey and Washington all filed suit against the August 17 guidance saying that the letter is a regulation, and therefore illegal because it was issued without the notice and comment period required by federal law. The states' contention was supported by a report from the Government Accountability Office and by the Congressional Research Service.

As the lawsuit moves along and the Congress considers possible action, many state leaders are stalling for time. “At this point, we’re doing nothing,” Folkemer said. “We don’t want to take any premature action to actually start removing people or not allowing people to qualify for the program. We’ll wait to see what happens either legally or legislatively and hope for the best.”