States finding way to SCHIP coverage despite obstacles: 'detours' bypass vetoes and economic woes.

Even though the Bush administration has made it nearly impossible to expand the State Children's Health Insurance Program, and the economic downturn has put a squeeze on Medicaid budgets, many states are keeping children covered and some are even expanding eligibility, according to two new studies by Families USA.

Officials at the advocacy organization, based in Washington, said that at the end of 2007, 17 states were considering expanding coverage for children under SCHIP and Medicaid. But those plans were largely put on hold or scaled back because of President Bush's vetoes of the original SCHIP reauthorization package. A law authorizing the program at 2007 levels expires in March 2009.

Another setback for states came last August, when the Bush administration issued a directive that limited the SCHIP eligibility, going forward, of families with incomes at or below 250% of the federal poverty level.

That directive has remained essentially unchanged, although the Centers for Medicare and Medicaid Services announced in May that it would look at expansion programs on a case-by-case basis.

Expansion plans by New York and Ohio were rejected by CMS, but New York used state funds to expand coverage to children living in families with incomes up to 400% of the poverty level. Ohio is using state money to cover children who can't get private health coverage, but the expansion is not through Medicaid or SCHIP, according to the Families USA report, "Detour on the Road to Kids Coverage: Administration Creates Roadblocks, So States Seek Alternative Routes."

Ohio also raised eligibility to the federal ceiling (250% of the poverty level).

Indiana, Louisiana, Oklahoma, and Wisconsin had planned to raise eligibility for their programs to 300% of the poverty level, but have now scaled that back to 250%, according to the Detour report. Finally, North Carolina, Washington state, and West Virginia also had expansion plans, but have not yet submitted them to CMS, according to the report. It is not clear yet how those states will proceed.

Despite the CMS directive and the bleak economic outlook, some states--including Colorado, Florida, Iowa, and Kansas--are planning to expand coverage next year. The expansions in Iowa and Kansas, however, depend on a reauthorization of the SCHIP program, according to the Detour report.

There also may be a ballot measure in Montana in the fall aimed at increasing eligibility from 175% to 250% of the poverty level.

California is currently wrangling over the state's budget, which included an increase in cost sharing for SCHIP (which is called "Healthy Families" in California) as well as reduced Medicaid coverage for parents. Rhode Island is also looking at paring back its SCHIP coverage in fiscal 2009 and increasing cost sharing for families.

"States are committed to covering kids, but they are clearly hampered by the roadblocks the administration has put up," said Families USA senior policy analyst Jenny Sullivan in a briefing with reporters.

Most states are also feeling the pinch as tax revenues recede while Medicaid costs--increasingly a larger proportion of most state budgets--continue to rise, according to the second Families USA report, "Precarious Position: States Must Balance Declining Revenues With a Growing Need for Medicaid." The report found that 16 states and Puerto Rico are looking at budget deficits in fiscal year 2008, and 29 states and the District of Columbia are looking at shortfalls in fiscal 2009.

Increasing unemployment means that more Americans will turn to Medicaid for health coverage for themselves and their children, said the organization. The Medicaid report cited a study by the Kaiser Family Foundation showing that each 1% rise in unemployment increased Medicaid and SCHIP enrollment by 1 million, leaving states with an additional $1.4 billion obligation.

In California, Gov. Arnold Schwarzenegger (R) has proposed $1 billion in Medicaid and SCHIP cuts. That means the state would lose an additional $1 billion in federal matching funds--a danger that all states face as they look to balance their budgets through Medicaid cuts, according to the Medicaid report.

Mississippi is also considering Medicaid cuts in a special legislative session. Maine instituted some cost-sharing measures; New Jersey is considering shifting more of the burden onto Medicaid recipients. In Rhode Island's 2008 budget, eligibility was reduced for parents and cost sharing was increased; premium payments based on income are required, and the state is looking at further cuts in 2009, according to the report.

Families USA is pushing for federal relief, such as a temporary increase in the matching rate given to states for Medicaid. Congress passed such a temporary fix in 2003, and several bills have been introduced in this congressional session. But it is unclear whether a proposed fix could make it out of Congress this year, said a Families USA staffer during the briefing.

BY ALICIA AULT

Associate Editor, Practice Trends