Children’s Health Insurance Coverage: Medicaid and the State Children’s Health Insurance Program

Children’s Health Insurance Coverage

Medicaid and the State Children’s Health Insurance Program

Kathleen M. White

“It was once said that the moral test of government is how that government treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; and those who are in the shadows of life—the sick, the needy, and the handicapped.”

—Hubert H. Humphrey

Health Insurance Coverage for Low-Income Children

Health insurance coverage for the children of the United States (U.S.) has improved over the last 30 years. In 2009, twenty-nine million children were enrolled in Medicaid and 7 million in the Children’s Health Insurance Program (CHIP), yet many children remain uninsured and eligible for Medicaid or CHIP, but are not enrolled. Since 2008, the U.S. has experienced a severe economic recession with unemployment levels greater than 10% resulting in a decline in employer-sponsored health insurance; yet the numbers of uninsured children dropped from 9 million in 2005 to 8.1 million in 2009 due to increasing public insurance coverage for children. However, nearly 72% of the uninsured children live in families with household incomes below 200% of the federal poverty level (FPL) or about $44,000 for a family of four (Kaiser Commission on Medicaid and the Uninsured, 2010a). This trend began in the early 1980s as the country saw an increase in child poverty resulting from the stagnating economic situation and an increase in single-parent families. The uninsurance rates increased from 20.9% to a high of 30.8% between 1977 and 1987 (Cunningham & Kirby, 2004; Selden, Hudson, & Banthin, 2004). During the same period, there was also a steady decline in the percentage of private insurance coverage for children. The Medicaid program was not able to address this worsening situation, as many of the children came from homes that did not meet Medicaid eligibility criteria. An expansion of public coverage was needed, and the State Children’s Health Insurance Program (now referred to as CHIP, not SCHIP) was developed.

Public Health Insurance Coverage for Children


Medicaid is a federal entitlement program enacted in 1965 that guarantees eligible children access to a health care benefit package with little or no cost to them or their families. It is jointly financed and administered by the federal and state governments. The federal government has established minimum standards for the Medicaid program, including eligibility requirements and the minimum benefit package, and the states administer the program within those parameters. The states may vary their programs if they receive permission in the form of a “waiver” to depart from the federal standards, which has resulted in significant variation among the states.

Because of the increasing uninsurance rates between 1984 and 1990, which reached a high of 30%, the Medicaid program implemented several poverty-related expansions to include many poor and near-poor children who were not eligible for welfare, the traditional pathway to receive Medicaid coverage (Selden et al., 2004). States were required to cover children 6 years of age and under from families earning up to 133% of the FPL and were allowed to expand coverage to include families earning up to 185% of the FPL and still receive federal matching funds (Sasso & Buchmueller, 2004). “From 1988 to 1998, the proportion of children insured through Medicaid increased from 15.6% to 19.8%. At the same time, the percentage of children without health insurance increased from 13.1% to 15.4%, mostly as a result of fewer children being covered by employer-sponsored health insurance” (Centers for Medicare and Medicaid Services [CMS], 2005). However, many low-income children who were above the poverty level were still not eligible for these Medicaid expansion programs, and it was widely recognized that something else was needed to address the coverage gap for low-income children not eligible for Medicaid.

Children’s Health Insurance Program

After the defeat of President Clinton’s universal health insurance plan, many in Congress felt that it was time to expand health care coverage to the most vulnerable in the population; children became a likely choice. In 1997, the State Children’s Health Insurance Program (SCHIP) was enacted as part of Title XXI of the Social Security Act (Balanced Budget Act of 1997, PL 105-33). This legislation provided health insurance coverage to children, up to age 19, in low-income families that were not eligible for Medicaid. This included families whose income was too high to qualify for Medicaid or that were not covered by private health insurance, often because the family income was too low for them to afford the private coverage. The original SCHIP legislation apportioned $40 billion in federal matching funds over a 10-year period to allow participating states to receive federal contributions to expand Medicaid eligibility, to create a new health care coverage program under the SCHIP legislation, or to develop a program that combined Medicaid with a new program. The SCHIP program provided the funds to the states, not to the individual as in Medicaid, and the states could design the program to meet their own needs. Under this program, the states could provide health care coverage to children in families earning up to 200% of the FPL.

The procedure for the development of the SCHIP programs was similar to that of Medicaid. The state had to develop a program plan and submit it to CMS for approval. CMS then had to approve or disapprove the plan within 90 days of submission. States were allowed to modify the state plan by again submitting it to CMS for approval. The amount of federal funding for each state participating in SCHIP is defined in the statute appropriation, with annual allotments determined by a statutory formula based on the number of children and the state cost factor. The state cost factor is a geographic factor based on the annual wages in the health care industry for that state. The state plan must address eligibility standards, enrollment caps, disenrollment policies, type of health benefits covered, basic delivery system approach, cost sharing, and screening and enrollment procedures.

The original SCHIP legislation had several important goals: to expand health insurance for children whose families earn too much money to be eligible for Medicaid but not enough money to purchase private health insurance; to provide access to quality medical care without dependence on cost; to develop a system that establishes a medical home for clients; to simplify the enrollment process for a public insurance program; and finally, to provide flexibility and innovation for the states to design a program that met the needs of their population, such as cost sharing different benefit packages in order to cover a wider segment of the population.

The states were allowed to develop different eligibility criteria and coverage. Eligibility in most states began for uninsured children whose family income was at 185% to 200% of the FPL. Generally, all plans were required to cover well-baby and well-child care, immunizations, hospitalization, and emergency room visits. For states that opted for a Medicaid expansion, the services provided under SCHIP needed to mirror the Medicaid services provided by that state. For states that opted for a separate child health program, there were four options for determining coverage:

1. Benchmark coverage: This coverage package is substantially equal to either the Federal Employee Health Benefits Program Blue Cross/Blue Shield Standard Option Service Benefit Plan; a health benefits plan that the state offers and makes generally available to its own employees; or a plan offered by a Health Maintenance Organization that has the largest insured commercial, non-Medicaid enrollment of any such organization in the state.

2. Benchmark equivalent coverage: In this instance, the state must provide coverage with an aggregate actuarial value at least equal to that of one of the benchmark plans. States must cover inpatient and outpatient hospital services, physicians’ surgical and medical services, laboratory and x-ray services, and well-baby and well-child care, including age-appropriate immunizations.

3. Existing state-based comprehensive coverage: In the states where existing state-based comprehensive coverage existed before the enactment of SCHIP (i.e., New York, Pennsylvania, and Florida), the existing health benefits package was deemed to be meeting the coverage requirements of the SCHIP program.

4. Secretary of HHS approved coverage: This includes a provision for coverage that is the same as the state’s Medicaid program; comprehensive coverage for children offered by the state under a Medicaid demonstration project approved by the Secretary; coverage that either includes full Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) benefits or has been extended by the state to the entire Medicaid population in the state; coverage that includes benchmark coverage plus any additional coverage; coverage that is the same as the coverage provided by New York, Florida, or Pennsylvania; or coverage purchased by the state that is substantially equal to coverage under one of the benchmark plans through the use of benefit-by-benefit comparison.

By fall 1999, all states had adopted some type of SCHIP program. Initially, in all but 12 states the coverage was given to children in families with incomes of at least 200% of the FPL, allowing more near-poor families to meet the states’ eligibility criteria. By 2001, 19 states had expanded Medicaid, 15 states had created a separate SCHIP program, and 17 states had implemented some type of combination program (Sasso & Buchmueller, 2004) (Box 18-1). The Kaiser Commission on Medicaid and the Uninsured (2004) found that between 1997 and 2003, the percentage of poor children who were uninsured declined from 22.4% to 15.4% and that uninsurance rates have declined even more dramatically for the group of slightly higher income children who were the main target of SCHIP: those with family incomes of 100% to 200% of the FPL. Uninsurance rates for that group fell from 22.8% to 14.7% in 2003, a decline of more than one third (36%). However, the number of children eligible for public coverage who remain uninsured was still estimated to be about 21%, and an estimated 5.6 million children were eligible but not enrolled.

BOX 18-1

Comparison of CHIP to Medicaid

Medicaid and CHIP are both joint federal- and state-funded programs. The Medicaid program is an open-ended entitlement program to the individual. Under CHIP, each state is funded by a capped grant to the state, with the amount of funding determined by a formula set by Congress. Federal matching money is about 30% higher under SCHIP than under Medicaid.

Medicaid provides a full range of health care services for children, including screening and treatment, preventive checkups, physician and hospital services, and vision and dental care. At a minimum, state Medicaid eligibility is given to children under 6 years of age who live in families at or below 133% of the FPL ($29,327 for a family of 4 in 2009) and to children 6 to 18 years of age in families at or below 100% of the poverty level.

The original SCHIP legislation prevented children who were already enrolled in Medicaid from enrolling in the SCHIP program, preventing the states from shifting children from Medicaid to SCHIP and taking advantage of the more generous matching funds under SCHIP. The legislation set up a procedure that required all SCHIP applicants to be screened for Medicaid eligibility as part of the SCHIP application process. It has been noted that this screening requirement has had an indirect effect on increasing the numbers eligible for and enrolled in Medicaid (Government Accountability Office [GAO], 2000). The increased number of children covered by Medicaid because of SCHIP has been important in reducing the total number of uninsured children in the U.S. The innovation allowed in the application procedures for the SCHIP program has also been credited for better enrollment and reenrollment procedures for Medicaid. With the implementation of SCHIP in 1997, innovations in outreach and enrollment have been the hallmark of the program’s success. SCHIP also offers states more flexibility in designing the program that meets their needs, including eligibility criteria and benefits. Income eligibility levels have remained relatively stable over recent years (Kaiser Commission on Medicaid and the Uninsured, 2005). Unlike Medicaid, SCHIP required states to include outreach efforts as part of their expansion program. The outreach campaigns were designed to get the word out to eligible families and have included mass media campaigns and community-based efforts. Many states created television, radio, and print media campaigns to educate the public and increase awareness of the new program. Toll-free numbers were used; the public could call in to get enrollment information.

The SCHIP programs have also included reforms to the application process, making it simpler. The most important enrollment innovation has been the adoption of an electronic submission application that is a short, joint application for both Medicaid and SCHIP, eliminating the face-to-face interviews that had previously been required of all Medicaid applications. In addition, the resource and asset tests were also eliminated, which allowed applicants to self-declare their income. The final innovation relies on passive renewal so that 12-month continuous eligibility for SCHIP has been established.

The CHIPRA legislation continues these program requirements and puts in place additional innovations to create “Express Lane Eligibility” through “Express Lane Agencies” that are used by both Medicaid and CHIP for enrollment and eases up on citizenship documentation procedures.

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Mar 18, 2017 | Posted by in NURSING | Comments Off on Children’s Health Insurance Coverage: Medicaid and the State Children’s Health Insurance Program

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