Reforming the Children's Health Insurance Program: a proposal

As a modest expansion of public health insurance coverage that followed President Clinton’s failed comprehensive 1994 reform proposal, the Children’s Health Insurance Program (CHIP, formerly known as SCHIP) has led to substantial reductions in the percentage of uninsured, low-income children since its enactment in 1997. Due to aggressive CHIP outreach efforts, the percentage of eligible children who received Medicaid coverage also increased during this time period, a phenomenon known as the “spillover effect.” Compared to uninsured children, children covered by Medicaid and CHIP are more likely to have a usual source of care and fewer unmet health needs; there is also evidence that children with public insurance coverage receive higher quality care for chronic conditions such as asthma. The CHIP Reauthorization Act of 2009 continued federal funding of this successful program through 2013 and added dental benefits.

Despite CHIP’s accomplishments, the program still struggles to meet two critical challenges: ensuring that millions of eligible low-income children actually have coverage, and sustaining funding to support coverage for all eligible children during economic downturns. Nearly 3 in 4 children who were eligible for Medicaid or CHIP in 2005 were not enrolled in either program, a problem that has been attributed to both inadequate outreach and poor retention. Parents’ confusion about CHIP income eligibility thresholds in the state of Oregon produced what one researcher called a “gray zone” of uncertain insurance coverage that was associated with more unmet care needs. In addition, adequate state financing of CHIP is less assured during times of greatest need, as state tax revenues decline when more parents are unemployed and more children become eligible for public insurance. The end of the American Recovery and Reinvestment Act-enhanced Medicaid federal matching percentage (FMAP) rates in June 2011 is likely to place increased pressure on state budgets; indeed, many states have made deep cuts to Medicaid payments, potentially reducing access to providers for children who remain in the program.

My proposal to reform CHIP to meet the above challenges consists of three related components. First, in order to stabilize CHIP funding when state tax revenues fall, I propose legislation to tie the FMAP directly to state employment rates, so that the FMAP automatically increases when unemployment rises, and decreases when unemployment falls. This proposal resembles the ARRA’s temporary addition of 6.2 points to the FMAP during the 2009 economic recession, but by acknowledging that economic conditions vary from state to state, will target extra federal funding where it is needed most.

Second, to reduce confusion about CHIP eligibility status (and increase enrollment of eligible children), I propose standardizing eligibility criteria across states at 300% of the federal poverty level. The two states that currently provide CHIP coverage above 300% of FPL would have the option to maintain this higher coverage level or to scale it back in anticipation of state health insurance exchanges providing an alternate source of health insurance for these children and their families. Finally, given evidence that much of the gap between CHIP eligibility and coverage is the result of frequent and onerous reenrollment procedures, I propose to streamline this process by requiring that states re-enroll children no more often than an annual basis. I would also require that re-enrollment occur by sending preprinted forms that parents can simply sign and return if their financial circumstances have not changed.

Although this proposal represents a significant improvement over the status quo, it faces political and practical obstacles. Adjusting the FMAP automatically to compensate for economic downturns would change CHIP from a “capped” block grant program to an entitlement program with an essentially unrestrained budget. Requiring states to standardize eligibility criteria and re-enrollment processes would shift the balance of the program from state to federal control. Conservative legislators are likely to resist increased federal spending and centralized control on ideological grounds, much as the Bush Administration blocked CHIP reauthorization in 2007. In addition, even though the best available evidence suggests that few children become ineligible for public insurance due to increases in family income from year to year, critics may raise concerns that a streamlined re-enrollment process will lead to inappropriate continuation of coverage for some children.

Overcoming these obstacles will not be easy. On the other hand, a continuation of current CHIP policy is likely to leave several million eligible children uninsured, reduce program eligibility when state revenues are low, and increasingly limit access to care for children who obtain CHIP coverage, due to reductions in provider payments. Therefore, I recommend that this reform proposal be considered so that CHIP may fulfill its promise of ensuring health care coverage and access for some of America’s most vulnerable citizens.

References:
1. Oberlander JB, Lyons B. Beyond incrementalism? SCHIP and the politics of health reform. Health Affairs 2009;28:w399-w410.
2. Dubay L, Guyer J, Mann C, Odeh M. Medicaid at the ten-year anniversary of SCHIP: looking back and moving forward. Health Affairs 2007;26:370-81.
3. Kaiser Commission on Medicaid and the Uninsured. Policy brief: the impact of Medicaid and SCHIP on low-income children’s health. Pub. No. 7645-02. February 2009.
4. Sommers BD. Why millions of children eligible for Medicaid and SCHIP are uninsured: poor retention versus poor take-up. Health Affairs 2007;26:w560-w567.
5. DeVoe JE, Ray M, Krois L, Carlson MJ. Uncertain health insurance coverage and unmet children’s health care needs. Fam Med 2010;42:121-32.
6. Herring B. The Medicaid program (lecture slides). Introduction to the U.S. Healthcare System. 2011 Summer Institute, Johns Hopkins University Bloomberg School of Public Health.
7. Kaiser Commission on Medicaid and the Uninsured. Fact sheet: enhanced Medicaid match rates expire in June 2011. Pub. No. 8205. June 2011.
8. Galewitz P. A dozen states slice Medicaid payments to doctors, hospitals. Kaiser Health News July 6, 2011.