Wednesday, October 24, 2007

How did those adults get on the State Children's Health Insurance Program?

I want to tell you a startling statistic, that based on their own states' projections -- in other words, this isn't a federal projection, it's the states saying this is what's happening -- states like New Jersey, Michigan, Minnesota, Rhode Island, Illinois and New Mexico spend more money on adults in the S-CHIP program than they do on children. In other words, the initial intent of the program is not being recognized, is not being met.

G. W. Bush, Oct. 3, 2007.

Last week, President Bush vetoed bipartisan legislation that would have reauthorized and expanded the State Children's Health Insurance Program (SCHIP). SCHIP is a federal-state partnership, in which the federal government provides capped grants to states who in turn offer free or subsidized health insurance to children and pregnant women in families whose incomes are too high to qualify for Medicaid. The legislation would have doubled funding for SCHIP and increased coverage substantially among the nearly 9 million uninsured children in the U.S.

One reason the President gave for vetoing the expansion--and that his supporters have seized on--was that SCHIP funds were being diverted from their original purpose of covering low-income children and were instead being spent on adults. Indeed, the Center for Medicare and Medicaid Services (CMS, the federal agency that administers SCHIP) reports that in FY 2006 just over 700,000 adults in 12 states were receiving coverage through either SCHIP or a related Medicaid expansion program; this compares to more than 6.6 million children who were served by the program.

So how did those adults get on the children's health insurance program? (Those of you who like your hypocrisy served up big are really going to like the answer to this one). The "startling" fact is that those adults are included in the federally-funded portion of the programs because of the administration's own 2001 Health Insurance Flexibility and Accountability Initiative (HIFA). HIFA encouraged states to apply for waivers to the statutory regulations for SCHIP programs to make a number of changes, including adding parents and childless adults who were not otherwise eligible to participate in SCHIP or Medicaid (the Robert Wood Johnson foundation summarized the provisions of HIFA); all waivers were subject to approval by the Secretary of Health and Human Services.

Prior to HIFA, some states covered adults in their SCHIP programs through their own funds; waivers approved under HIFA allowed them to use federal funds. As of September 2007, the President's own Secretary had approved adult-related waivers for 17 states. Of the states that the President now criticizes, New Mexico, New Jersey, Minnesota, and Rhode Island have had extensions or amendments of their adult programs approved since 2005 (corrected Oct. 24, 2007, please see #1 below). So absent the administration's own initiative and absent its approvals of individual state plans, there would be no adults other than pregnant women receiving federally subsidized SCHIP benefits.

What about the costs of these waivers? All of the applications require the states to provide detailed cost projections (even if the states gave faulty projections, you would think that cost experiences would be considered when states like New Jersey and New Mexico renewed their programs). Also, state plans can only be approved if the overall impact of the waiver is budget neutral (i.e., it results in offsetting cost savings elsewhere) or if it relies on unspent federal funds. How could extending coverage to adults possibly be budget neutral? In some cases, states have used funds to subsidize employer plans that cover whole families or purchase entire family plans that cost the same as "child-only" plans.

Through the 2005 Deficit Reduction Act, one group of adults--childless adults--can no longer be included in any new waivers (when the current waivers expire, the childless adults will lose coverage). Thus, existing legislation already partly addresses this problem.

In a final hypocritical twist, it turns out that the President's own preferred legislation, "states can continue to cover parents up to existing eligibility levels".

If adult coverage is such an awful problem, why did this administration encourage it, approve it, and propose continuing it?

  1. The post originally stated that "New Mexico had an extension of its adult program approved just last month, and New Jersey had its plan reapproved last year." Actually, the last amendment to the adult (HIFA) component of New Mexico's program was approved in June 2005. A different non-FIFA waiver component was renewed last month.


Bubba said...

You're right Dave.

Maybe we shouldn't have given the states the right to make decisions like certain states have chosen.

Here's what GAO said in 2004:

"Despite SCHIP's statutory objective of expanding coverage to low-income children, HHS has continued to approve HIFA waivers that allow states to use SCHIP funds to cover childless adults. From July 2002 through December 2003, HHS approved three states' proposals to use SCHIP funds for childless adults.

Without requiring the states to meet the statutory cost-effectiveness test, the agency also approved four states' proposals to use SCHIP funds to cover parents or guardians of SCHIP- or Medicaid-eligible children.

Unless Congress and HHS take actions in response to the matters for congressional consideration and recommendations to HHS presented in our July 2002 report, it appears likely that HHS will continue to allow states to use SCHIP funds for childless adults, and for parents and guardians, without regard to whether this use is cost-effective."

The coverage is optional by each state, not mandated by the federal program. If you want to complain about the waivers, look into who greased the skids for each waiver. Chances are you find a congressperson, and chances are that congressperson is a Democrat.

Coverage of adults is NOT the main focus of SCHIP. The vetoed legislation was an EXTREME EXPANSION BEYOND the current program.

Try again, Dave.

Dave Ribar said...


Congress did change one thing after the 2004 GAO report. The 2005 Deficit Reduction Act prohibited the Secretary of HHS from authorizing new waivers for childless adults.

One other group of adults, pregnant women, should definitely keep coverage (the Bush administration expanded eligibility for them).

That just leaves parents. I personally favor keeping federally-subsidized parental coverage if it is cost-neutral. In other cases, let the states cover parents with either their own funds or by charging parents an amount at least equal to the federal share.

FYI, there is a more recent GAO report that makes similar conclusions.

Regarding who "greased the skids," Republicans opened the door on this one. Participating HIFA states include Idaho and Utah (Texas currently has a HIFA waiver under review).

Bubba said...

From your GAO link:

".......As Congress addresses reauthorization, issues to consider include (1) maintaining flexibility within the program without compromising the primary goal to cover children, (2) considering the program’s financing strategy, including the financial sustainability of public commitments, and (3) assessing issues associated with equity, including better targeting SCHIP."

Why are ANY adults covered when (supposedly) 2/3 of eligible children are NOT covered?

Dave Ribar said...


Pregnant women are covered because the administration made a determination that unborn children were eligible for medical services (see the Federal Register for Oct. 2, 2002).

If we keep the focus on kids, the main argument that can be made for covering parents is that it leads to increased coverage for kids. There is less hassle working with one insurance plan than two. Also, kids and parents would be covered in the same network. Finally, joint coverage provides an additional incentive for parents to sign their kids up. It's not clear that this is the most cost-effective way to increase kids' health insurance. It's also not clear how large the federal contribution towards the costs is. Notice that President Bush said that "states like New Jersey ... spend more money on adults;" he didn't say that the federal government spent more on adults than children through SCHIP in these states.