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NOTE: As this article was being prepared for publication on October 3, President Bush carried out his threatened veto of the SCHIP bill passed by Congress. Supporters of the bill in the Senate appear to have enough votes to override the veto; however, in the House, about two dozen more votes must be found in order for an override effort to succeed. As the federal government begins fiscal year 2008, few budget issues have been resolved. Yet among all the fiscal matters that remain to be decided, funding for children’s health care has emerged as the highest profile domestic issue. The focal point in that debate is reauthorization of the State Children’s Health Insurance Program (SCHIP). Created in 1997, SCHIP has been a tremendous success. Even as the overall rate of uninsured people increased over the last decade, SCHIP succeeded in reducing the number of children lacking insurance. The percentage of uninsured kids fell by nearly a third during the program’s first eight years -- although the rate of insured children has rebounded a little over the last two years, as SCHIP spending leveled off. The SCHIP program must be reauthorized by Congress this year, and its future is uncertain because the federal funding level is no longer adequate to continue insurance coverage for all the kids who are currently being served, much less meet the needs of states that are expanding coverage. In addition, some of the SCHIP policy changes that are under consideration could be very detrimental for Wisconsin, while others could be very beneficial. Although the SCHIP bill has been the primary battleground in the fight over health insurance for kids, a number of other skirmishes have broken out. In this article we take a look at key aspects of the SCHIP bill and the peripheral issues that are particularly important to Wisconsin. Recent Congressional and Presidential Action In July of this year the U.S. Senate and House both passed strong, but different, versions of the SCHIP legislation. Most notably, the House bill increased SCHIP funding by $50 billion over the next five years, compared to a $35 billion increase approved by the Senate. After long negotiations, key House and Senate legislators from both parties developed a compromise that in most respects incorporates the more moderate provisions from the different bills, in order to try to attract enough Republican votes to make the President reconsider his threats to veto the bill. For example, the compromise makes these accommodations to broaden its appeal:
The Wisconsin Senate’s version of the biennial budget bill contains Governor Doyle’s BadgerCare Plus proposal, which would expand access to health insurance to all citizen kids (1), as well as covering more farmers and other self-employed parents, and pregnant women with incomes up to 300 percent of the federal poverty level. A second phase of BadgerCare Plus would provide a basic health insurance plan for childless adults with incomes below 200 percent of the poverty level. Decisions made in the SCHIP reauthorization bill could determine whether Wisconsin is able to proceed with the plan to expand coverage, which has yet to be approved by the Assembly. The BadgerCare Plus initiative relies on SCHIP funding for the coverage of children in families up to 250 percent of the poverty level, but not for the expansion of coverage to childless adults. The SCHIP Funding Level The SCHIP appropriation is currently about $5 billion per year, but states are planning to spend about $7.3 billion in FY 2008. In the early years of SCHIP, the annual allocations to each state were well above the spending level, but as states built up large surpluses of SCHIP dollars they increased enrollment and began spending more each year. That was especially true in Wisconsin after the state got approval in 2001 to use SCHIP funds for many of the parents participating in BadgerCare. The compromise SCHIP bill approved by Congress in late September would boost SCHIP and Medicaid funding by about $4 billion in FY 2008 and by $36 billion over 5 years, financed exclusively with a tobacco tax increase. It would reduce the estimated number of uninsured children from 8.7 million to about 4.7 million. President Bush has proposed raising SCHIP funding by just $1 billion per year. Although that increase may sound significant at first blush, it falls well short of the amount needed to maintain the current number of people who have SCHIP coverage. According to the Congressional Budget Office, the President’s proposal would result in the loss of coverage for about 840,000 children. The Governor’s BadgerCare Plus plan in the budget bill does not assume an increase in Wisconsin’s annual SCHIP spending, but does assume a steady level of SCHIP funds. If the current federal appropriation is continued, that assumption would be problematic because Wisconsin relies heavily on reallocation of unspent SCHIP funds from other states. As those states have gradually increased eligibility and enrollment of children, the amount of unspent funds to reallocate has been dwindling, which means that Wisconsin faces the prospect of having to use Medicaid dollars instead of SCHIP funds to cover parents enrolled in BadgerCare. Since the federal match rate is considerably higher for SCHIP funding, the current trends and flat federal funding for SCHIP would result in a significantly larger percentage of BadgerCare costs that are borne by the state. Wisconsin’s baseline SCHIP allotment is just $69.6 million per year, but the state anticipates spending $104 million of SCHIP funds in FY 2008. Under the bipartisan compromise, the Wisconsin allocation would increase to $123 million. Flexibility in Using SCHIP Funds Although the total funding level is a very important part of Congressional deliberations, the options states have in using their allocations are likely to be even more important in Wisconsin – particularly the option of continuing to use SCHIP funds for parents. As recently as 2006, Wisconsin was using SCHIP dollars for almost as many parents as children, and the parents cost much more per case. If the parent coverage option were ended abruptly, much of Wisconsin’s annual SCHIP funding allocation would probably be unused. The measure approved by Congress would not immediately preclude using SCHIP funds for parents, but would phase out the practice. Although a sudden halt to the use of SCHIP dollars for parent coverage would be very expensive for Wisconsin, and might require significant changes in state policy, making the change gradually will allow the state to adapt, particularly if states are given more flexibility in the children they can cover with SCHIP funds. When the SCHIP legislation was initially enacted a decade ago, it prohibited the use of SCHIP funds for categories of children who were already eligible for coverage. Since Wisconsin had previously expanded eligibility to 185 percent of the poverty level for all children below age 6, it was harder for our state to use its SCHIP dollars for children’s coverage – which was one of the reasons why Wisconsin applied for a waiver allowing the use of those funds for parent coverage. The new SCHIP bill approved by Congress would give more flexibility to states with pre-SCHIP expansions – thereby allowing Wisconsin to use SCHIP funds for the coverage of any children in families between 133 and 185 percent of the poverty level. By switching those children from Medicaid to SCHIP funding, Wisconsin could save a substantial amount of state matching funds, which would offset the cost of receiving less federal matching funds for the parents served by BadgerCare. Improving Coverage of Lower-Income Children One of the arguments the President has made against the compromise approved by the House and the Senate is that “their proposal would result in taking a program meant to help poor children and turn it into one that covers children in households with incomes of up to $83,000 a year.” Yet the fact of the matter is that the Congressional compromise would signifiantly improve access to coverage for lower-income families, while the Bush Administration supports barriers to their coverage. Currently, most of the uninsured children in the United States and in Wisconsin are in families below 200 percent of the poverty level. The bipartisan compromise approved by Congress contains numerous elements designed to reach those families:
The bill approved by Congress does nothing to expand eligibility for SCHIP. Instead, it provides new constraints on the existing state flexibility to serve higher income families. If a state decides in the future to cover children with family incomes above 300 percent of the poverty level, the state would only receive the lower Medicaid matching rate (rather than the SCHIP rate). In addition, by 2010 any state that covers children in that income range would have to implement “best practices” designed to improve coverage of low-income children and to reduce “crowd-out” of private insurance. Other Skirmishes over Children’s Health Coverage For most of this year, the health care debate has focused on SCHIP reauthorization and the President has been in a defensive posture, as he defends holding down spending for children’s health care. In recent months, however, the Bush Administration has started to go on the offensive – by advancing administrative measures designed to curtail SCHIP and Medicaid spending. In mid-August the Centers for Medicare and Medicaid Services (CMS) issued a policy memo that essentially prevents states from using SCHIP funding for coverage of kids in families above 250 percent of the federal poverty level (FPL). It does that by requiring states to meet three requirements if they are currently using or proposing to use SCHIP funds for families above that level. Those requirements are:
Advocates and independent observers have noted that the first standard, in particular, appears to be impossible for any state to meet. There are several problems. First, states simply don’t have good data on what percentage of eligible children they are serving. Second, the data on number of kids below 200 percent of FPL who are insured suggests that no state serves 95 percent of those children. Third, the biggest impediments to increasing enrollment of low-income children stem from the Bush Administration’s own policies, such as the citizenship and identity documentation requirements that have adversely affected more than 27,000 people in Wisconsin over the last year. In both the CMS memo and the President’s arguments against increasing SCHIP funding, the Bush Administration has contended that the emphasis should be on enrolling children in low-income families. That argument would be much more compelling if the Administration’s actions matched its rhetoric. However, CMS and the President continue to support policies that deny coverage to eligible low-income children. Thousands of low-income Wisconsin children have lost Medicaid or BadgerCare coverage solely because of the July 2006 CMS rule that requires them to produce a government-issued photo ID. On August 31, 2007, CMS proposed another rule that reinforces the perception that the Bush Administration’s professed concerns about serving lower income families are disingenuous. It issued a notice of proposed rule-making that would reverse longstanding policy by completely eliminating federal matching funds for Medicaid outreach and enrollment activities undertaken by school personnel.(2) The proposed rule would also end federal reimbursement for transporting students with disabilities – even though federal law requires schools to provide special services for disabled students. The bipartisan SCHIP compromise approved by Congress would preempt the proposal to limit SCHIP spending to families below 250 percent of FPL. The compromise emphasizes serving eligible, unenrolled low-income children, but it is far more flexible than the proposed CMS policy. The compromise legislation would also put a 6-month moratorium on CMS efforts to place new restrictions on how schools can use Medicaid funding. Implications for BadgerCare Plus If the State Assembly approves the BadgerCare Plus proposal, it appears that most scenarios for an SCHIP compromise would allow the Wisconsin initiative to proceed. Assuming SCHIP funding is increased and the ultimate agreement gives states flexibility in how they use their allocations, federal funding should not be an impediment to BadgerCare Plus implementation. On the other hand, if the current federal funding level is continued, or if states do not have flexibility in how they use the SCHIP funds, Wisconsin’s share of the cost of covering children and parents will increase, and implementing BadgerCare Plus could become more challenging for the state. One advantage Wisconsin had enjoyed is that the details for financing BadgerCare Plus were not already set in concrete, which has enabled the state to adjust to recent shifts in federal policy. After CMS issued the mid-August directive that appears to preclude the use of SCHIP funds for children in families above 250 percent of FPL, the Doyle Administration quickly adjusted the plan it is submitting for federal approval. Under the revised plan, the state would use its own money – without any federal match – to subsidize the coverage of kids in families between 250 and 300 percent of FPL. Since the proposed sliding scale premiums mean that those families will not receive much of a subsidy, the cost of giving up the federal share of the subsidy for those families is relatively small and is likely to be offset by other favorable components of the bill. The bipartisan Congressional compromise on SCHIP reauthorization contains a number of elements that would help Wisconsin come very close to the goals of covering all kids and providing quality care. Those measures include:
Of course, those details will be up in the air until Congress and the President complete action on SCHIP reauthorization. Conclusion The SCHIP program is a proven investment that serves taxpayers and families well. It gives Wisconsin families the health care they deserve and parents much greater peace of mind for the well-being of their children. SCHIP has enabled states to develop a wide range of innovative and successful programs for closing the gaps in insurance coverage, and these programs enjoy broad, bipartisan support. If federal funding is increased and states continue to have flexibility in how they use the funds, SCHIP will be a key part of Wisconsin’s efforts to provide health care coverage to all children. Because the majority of uninsured children are in families that meet existing income eligibility standards, it is extremely important for states and Congress to make policy changes that improve the enrollment of those children. A few general strategies can achieve that objective:
The enactment of BadgerCare Plus and a strong SCHIP reauthorization bill – such as the bipartisan compromise recently approve by Congress – would allow Wisconsin to implement each of those three strategies and would put our state on the road to ensuring that virtually all of our children have access to health insurance. (2) For more information about the CMS policy directive and its unfortunate ramifications, see the paper by the Center for Children and Families at the Georgetown University Health Policy Institute: http://ccf.georgetown.edu/pdfs/cmsdirective(exec).pdf
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